What to do after losing a job: How to navigate job loss

If you’re newly unemployed, consider these actions to help address short-term income needs, while also staying on track to your long-term financial goals.

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Losing a job can be an overwhelming and stressful life event. Not only do you have to deal with the emotional toll that job loss may take, but also the financial strain that comes with a disruption to your income.

However, it’s important to remember that this period is temporary and there are steps you can take now to help mitigate adverse financial impacts.

Your Ameriprise financial advisor is here to help you navigate life’s many transitions and periods of uncertainty. If you are newly unemployed and are wondering what to do when you lose a job, here are seven actions you should consider:

1. File for unemployment benefits        

Unemployment benefits (also known as unemployment insurance) can help ease the financial burden in the interim as you seek out a new opportunity. These benefits vary by state, but they are generally available for up to 26 weeks and can be applied for online. Before you apply, know that taking severance pay, temporary work or retirement payouts may disqualify you from receiving benefits, so make sure you carefully consider your options. But don’t wait too long — it may take a while for the government to process your application and issue your benefits.

2. Weigh your severance options

If your former employer offers a severance package, it can help soften the financial blow of job loss while you search for a new position. However, you’ll want to understand the implications of the different severance structures. For example, taking severance pay in a lump sum may give you control over your money, but you may lose some employee benefits, such as group health insurance. The timing of a lump-sum payout can also have tax implications if your severance income pushes you into a new tax backet. If you take your severance as a continuation of salary, it’s common to be able to keep your benefits.

3. Secure health insurance

Bridging the health care gap during job transitions can be a challenging process, as most Americans get medical insurance through their employer. But you have options: If you want to continue your employer-sponsored health care, a federal law, known as COBRA, entitles you to continue receiving that coverage at your own expense for up to 18 months at group rates upon termination of employment. A COBRA policy, however, is typically more costly as your employer no longer subsidizes your insurance.

Beyond COBRA, you can always purchase insurance through the Health Insurance Marketplace or consider private or short-term health insurance. If your spouse or partner has employer-sponsored health insurance, explore getting coverage through joining their plan. The latter option is typically the most cost-effective route, and you may be entitled to enroll immediately, as a loss of coverage is considered a qualifying life event.

How to prepare for job loss

If you’re concerned about the possibility of losing your job, consider these proactive steps to prepare for a potential loss of income.

4. Create a budget and find ways to cut back

Building a budget can help give you a feeling of control over your financial situation during this period of uncertainty. If you’re concerned about expense management, start by listing out all your current bills and obligations, and then consider reducing unnecessary costs. You may naturally spend less by not commuting and eating fewer lunches out, and you could also consider reducing cable TV and internet services, switching to a less expensive grocery store or obtaining better rates on your auto and homeowners insurance coverage. You may also want to consider temporarily pausing, or reducing, your savings rate as you navigate this temporary disruption to your income.

5. Plan for your short-term income needs

Creating a plan to bridge the income gap during this period is critical when navigating a job loss. Will your severance pay adequately cover your expenses in the interim? Do you plan to draw from your cash reserve instead? Or maybe you’re considering tapping into investments housed in a brokerage account? Take inventory of all the potential income streams available to you and determine how you want to address your short-term liquidity needs. Your Ameriprise financial advisor is here to help you evaluate your financial situation considering this unexpected event and identify short-term income solutions that make sense for you.  

Advice spotlight

If you need liquidity during a period of unemployment, but don’t want to tap into your investments or cash stores, securities-based lending may help provide short-term relief. Securities-based lending is a flexible lending solution that uses eligible non-retirement investments as collateral. It allows you to deal with job loss by establishing a line of credit you can use at any time to cover unplanned expenses or bridge financing needs — without selling securities.1

6. Avoid tapping into your retirement savings

When facing uncertainty around income, it may be tempting to draw from your retirement savings to help alleviate the immediate financial pressure. But drawing from your retirement accounts should be a last resort. Not only will you likely incur penalties and taxes if you prematurely withdraw funds from your IRA or 401(k), but you’ll also lose out on the power of compounding returns.

7. Contact your lenders and investigate hardship programs

Many debtors offer hardship programs or other temporary accommodations in the event of job loss. If you’re concerned that you may not be able to meet your debt obligations, try negotiating with your creditors to lower interest rates on your credit cards, defer a payment on your car loan or reduce your monthly payments temporarily. You also may be able to lower your home mortgage monthly payments by refinancing to a lower rate (if you can qualify despite your job loss), or by negotiating a longer repayment period.

Let’s make a plan

Your Ameriprise financial advisor is here to help you navigate any short-term financial needs while helping to keep you on track to your long-term financial goals.

Which accounts should I draw from to fund my living expenses during a period of unemployment? How may securities-based lending help bridge the gap during a period of unemployment? What steps can I take, during this period of uncertainty, to stay on track to my long-term financial goals?

When you’re ready to reach out to an Ameriprise financial advisor for a complimentary initial consultation, consider bringing these questions to your meeting. 

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At Ameriprise, the financial advice we give each of our clients is personalized, based on your goals and no one else's. 

If you know someone who could benefit from a conversation, please refer me.

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1 A draw taken on a securities-based line of credit is a loan backed by your assets as collateral and will need to be repaid with interest. Securities-based lending carries risks that should be considered, and may not be appropriate for all parties. The recommendation of securities-based lending should always be based on a borrower’s individual needs and circumstances.
This information is being provided only as a general source of information and is not a solicitation to buy or sell any securities, accounts or strategies mentioned.  The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as a recommendation or advice designed to meet the particular needs of an individual investor.  Please seek the advice of a financial advisor regarding your particular financial situation.
Ameriprise Financial cannot guarantee future financial results.
The initial consultation provides an overview of financial planning concepts.  You will not receive written analysis and/or recommendations.
Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.
Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.
Securities offered by Ameriprise Financial Services, LLC. Member FINRA and SIPC.

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