Hello SOTGC community,
Qualcomm, a high-tech company known for its generous employee benefits, recently announced a huge layoff that could eliminate more than 4,000 jobs. Whether you work at Qualcomm or another company, there are at least five important financial steps you should take after being laid off, in addition to polishing up your resume.
Meet with a financial adviser. Unless you love math and accounting, now is as good a time as any in your life to meet with a financial adviser. You are going to need a calm, objective, and expert perspective on your personal financial situation. As a SOTGC reader, you may relate best to a financial adviser who is a woman and falls within the “Gen X” or millennial age brackets. During a time of crisis, you’ll want to find a financial adviser who can empathize with your anxiety and fear of the unknown.
- Determine your net worth. If your main source of income is going away, you need to map out your secondary income sources, expenses, assets, and liabilities. Before you decide where you need to go, you need to know where you are.
• How many months of severance are you receiving?
• How much will COBRA cost you after paid health insurance runs out?
• How much do you need for non-discretionary expenses such as mortgage/rent, student loan/credit card payments, and utilities?
• Do you have any other income sources such as investment, rental or side-gig income?
- Leverage employer-provided stock. Employees at publicly-traded companies may receive restricted stock grants or participate in employee stock purchase plans. If you are terminated and have stock that has vested, that is a valuable asset.
• Do you sell shares for quick cash?
• How do you determine the tax implications of selling?
• Should you hold the stock even if you think the stock price might fall?
• Can you generate monthly income from the stock in the form of dividends and call option premium by writing covered calls? (I specialize in this strategy – click here for more information.)
- Be smart about your 401(k).
• I know it’s tempting to cash out your 401(k) for quick cash but avoid doing so at all costs! If you live in a high-tax state like California, depending on your income level and marital situation you might have to pay a combined federal and state tax rate of more than 40% on that money, in addition to a 10% penalty. If your 401(k) is worth $100K, do you really want to be left with only $50K after taxes and a depleted nest egg?
• If you have borrowed from your 401(k) for any reason, such as to make a down payment on a home, you might be required to pay it back within 60 days in order to avoid paying income tax and penalties.
• Consider rolling your 401(k) into a Rollover IRA. You’ll pay no immediate taxes or penalty and have more flexibility regarding investment choices…even real estate! You can hire a financial advisor to manage it for you or manage it yourself.
- Start exploring health care insurance options. Last I heard, Qualcomm employees in the U.S. pay nothing for health insurance premiums. They are fully subsidized by the company. The price you have to pay for COBRA will knock your socks off and you might have better luck finding health care insurance through a broker or via the Affordable Care Act exchanges.
If you have a friend or family member who has recently lost his or her job, please share this article by posting on Facebook, Linked In or Twitter.