Let’s face it: most employees who are terminated by their company know in advance they are going to lose their jobs. Whether you’ve been placed on a performance improvement plan (PIP), have recently been part of a merger, or just have “that feeling” that things aren’t working out, there are always warning signs that telegraph the likelihood that you’ll be fired, laid off, or forced out.
If you suspect you may lose your job soon, there are some critical steps that you should take as “insurance” in case the pink slip comes your way. Note that most of these steps require you to still HAVE a job, so don’t waste time if you are feeling the heat at work!
1. Research Affordable Care Act (ACA, or “Obamacare”) health insurance plans. Although you may be able to continue you current company health insurance under COBRA, it will be extremely expensive, as you will be paying the entire premium costs every month. Finding an affordable, high-deductible plan under the ACA is a great alternative to continuing your company coverage under COBRA. Or, if your spouse has a medical insurance plan at his/her company, see if you can join that plan as a family member.
2. If you are a veteran, you may be eligible for health insurance coverage under the Veterans Administration. Check with your local V.A. Hospital to see if you are eligible for this type of coverage (eligibility is normally based on income level, and before you can get treatment you will need to complete an income assessment). This might be a good option if you are a veteran and have already lost your job and cannot afford other types of medical insurance.
3. Apply for a Home Equity Line of Credit (HELOC) loan if you own a home. If you lose your job, having access to cash is extremely important: you might have a medical emergency, a major car or house repair, or simply an extended job search. Getting the loan approved while you are still actively employed is critical, whether you actually use the funds or not. Similar to a home purchase loan, a HELOC lender will verify your income and employment with your current employer. Most HELOC’s are structured where you have an amount available (say $25,000 or $50,000) and when you want to withdraw money you simply write a check or use the credit card provided for the HELOC account. You don’t start repaying the HELOC until you draw funds from it, and after you withdraw funds, you will usually be required to make monthly interest-only payments for a specified time period. Similarly, if your car is paid for, or even if you have a few years remaining on a car loan, you may be able to re-finance your car loan at a cheaper rate, to free up cash that you might need for an extended job search. Again, do this before your employment ends.
4. Consider a getting a credit card (like American Express or Chase Sapphire) that has a very high credit allowance. Generally speaking, credit cards are not the best way to fund major purchase expenses because of the high interest rates they charge on unpaid balances. But if you have a major medical procedure or unexpected home/car repair you need to pay, having a high credit allowance card can come in handy. Similar to buying a house or getting a car loan, getting a credit card will require you to fill out an application that lists your income, so it’s essential to do this before you are terminated and not after the fact.
5. Make some tweaks to your current paycheck. If you know you are going to get fired or laid off, you should focus on getting as much cash in the bank as you can now, to support you in the event you experience an extended job search. For example, if you are contributing to a company 401(k) account, you could stop your paycheck deductions and re-direct that money to a savings account, or if your company offers an Employee Stock Purchase Plan (ESPP), you can withdraw from the plan and request a refund of any money already deducted from your paycheck.
6. Start networking NOW. The worst time to start networking is when you need a job, because people will immediately sense that you need help, and may be turned off if they feel they can’t help you. While most people want to help, they don’t always know what to do. People want the EASY solution, so give them that: start meeting with people in your network while you still have a job, and simply tell them that you are interested in a job change, tell them what kind of a job you want, and ask them to recommend 1-2 people in their network that might be willing to talk with you. This approach takes the pressure off people to “solve your problem,” but also gives them a way to feel like they are helping. Just be sure you actually follow-through and contact the people you are referred to. As a side note, if you can locate friends or colleagues in your network that have recently lost their job, or spent some time looking for a new job, connect with them. People who have recently gone through the difficult process of looking for a new job generally “get it” and understand how challenging job hunting can be. Thus, they are much more prone to help you, whether through networking or sending you job leads that might not be a fit for them, but might be a great fit for you.
7. Use the money you have in your Flexible Spending Account (FSA). If you have an FSA health account with your current employer, start using the funds before you lose your job. Some FSA plans will only reimburse expenses that were incurred BEFORE your last day of employment. Check with your benefits department about this program if you are in doubt.
8. Get that knee replacement now! If you are facing some kind of major surgery, whether knee replacement, hip replacement, back surgery, or even major dental work, try to get it done while you are still working, and have your current insurance providers and doctor network in place (which you may lose if you change insurance plans after being terminated). Also, if you get major surgery while you are still working, you may be able to take time off under the Family and Medical Leave Act (FMLA). While many leaves of absence are unpaid, you may be able to claim partial disability payments during your FMLA from state insurance programs. Some employers “top up” payments to employees so that they continue getting paid while on leaves of absence. If you qualify, a Family Medical Leave will provide up to 12 weeks of job-protected leave (there are some circumstances where you can be terminated while on a job-protected leave, but they tend to be rare). Leaves of absence can be complex, so be sure to research your company employee handbook and benefits plan documents to understand eligibility requirements.
9. Have a plan for your retirement account or 401(k). If you are 55 or older in the year in which you leave your company, you may be able to start taking penalty-free 401(k) distributions (vs. Individual Retirement Account (IRA) distributions subject to a penalty if taken before the age of 59 ½). Also, be sure you know whether you can leave your current 401(k) in the custodian account or will have to roll it over into a rollover IRA. Also, you should research the whether or not you are eligible for a “hardship” distribution from your 401(k) plan. See the IRS website for more information on 401(k)’s, IRA’s, and hardship distributions:
IRA FAQ: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals
Hardship Distributions: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-hardship-distributions
Do you have a story or comment about losing your job? If so, we’d love to hear about it.