USAA BrandVoice: How To Manage Money When You Lose Your Job (2024)

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No matter how well the U.S. economy performs, downsizing, layoffs and restructuring are a part of 21st-century working life.

Naturally, a job loss, whether sudden or anticipated, can be a major blow to your finances. USAA financial professionals suggest considering these tips to stay afloat as you seek new employment:

Decide how to collect your final pay. If you’re laid off, your employer may provide a severance package. If given a choice of a lump sum or a stream of payments, weigh the advantages of each. A series of payouts can prolong benefits like health care and life insurance, and it also might help you budget better. If your employer is having financial problems and possibly facing bankruptcy or closure, a lump sum might be a safer bet. Additionally, weigh the tax consequences of each option.

File for unemployment benefits. Many who find themselves out of a job qualify for unemployment benefits. Because programs vary by state, check with your state’s labor department for the details.

Reduce your spending. Preserve your cash while you're out of work by making some lifestyle changes. Put off big-ticket purchases and cut discretionary expenses such as eating out, entertainment and cable television. Consider carpooling, couponing and adjusting your thermostat to stretch your dollars. If need be, adjust your fixed necessities. Selling your car or moving to less expensive housing could save significant cash.

Avoid cleaning your financial slate. While you may be tempted to use your severance or other assets to pay off debt, making only the minimum payment may be a better option. You might need to stretch your cash in case a new job isn't right around the corner.

Review health insurance options. Most companies and the military will continue to provide health care coverage for a time after an employee’s departure. But look for an alternative quickly, since medical care can be pricey.

Protect your retirement. If you have a 401(k) or other employer retirement plan, avoid the temptation to cash out when you leave. In addition to jeopardizing your financial security when you retire, you’ll likely face income taxes and penalties. Instead, roll the money over to an IRA or leave it in the employer plan¹. Only crack open your nest egg as a last resort.

The USAAVoice Teamis committed to providing information that helps to facilitate the financialsecurityof the military community. The advice in our content is grounded in the principles of sound money managementand covers a range of topics, including personal finance, retirement, investments, auto, home, life, health and other areas relevant to our business and the audience we serve.

¹Beginning January 1, 2015, you may do only one IRA rollover during any 12-month period regardless of how many IRAs you own.

Prior to requesting an IRA rollover from a qualified retirement plan account, consider whether such rollover is appropriate for you. Although IRA rollovers may have certain advantages, qualified retirement plan accounts have advantages you should consider before proceeding which may include, but are not limited to, low administrative and investment expenses and, if you separate from service at age 55 or older, you have penalty-free access to your qualified retirement plan account funds. Additionally, you may want to consider maintaining at least a minimal qualified retirement plan account balance because, in the event you want to transfer or rollover qualified assets to your qualified retirement plan account in the future, to the extent it is allowed by your plan, your plan may require you to have an open account with a balance when your request is received by that plan. You should consult your tax advisor regarding your specific situation to determine whether a qualified retirement plan account rollover to an IRA would be suitable for you.