What should you do if you are laid off? The top seven steps are: exit gracefully; secure whatever additional pay and benefits you can; apply for unemployment; get health coverage if possible; get real about your expenses; roll over your 401(k); and start your search. A few details
1) Exit gracefully — no drama. Your old boss might become the link to a new job.
2) Secure whatever you can. It depends on your level in the company, but try for an extension of your salary, health benefits or life insurance benefits; a positive letter of recommendation from your supervisor, use of your office for a a period to search for another position or use of an outplacement firm; even your laptop or other equipment that will help you get a new job. (If you get severance, take advantage of the health benefits – get physicals, dental checkups, fill prescriptions.)
3) Apply for unemployment immediately: Typically, you can still collect unemployment even if you receive a severance, and if you take a part-time job while you are looking for a new position, you may be eligible for partial benefits. Regular benefits are paid for 26 weeks in most states and some will extend that under certain circumstances.
4) Protect your health benefits: Enroll in Cobra if your employer is required to have it. (Companies with 18 or fewer employees are not.) Complete the forms to continue your health insurance; you’ll have to pay a monthly fee, but it’s worth it — don’t leave a gap in your coverage. If you can’t get insurance through your company, call a health insurance broker and see what plans you can qualify for.
5) Get real about your expenses immediately. You have to know what you are spending monthly so you know where you can cut costs to avoid getting into debt while you’re laid off. Search “track your spending” on this site to get tips on how to control your costs
6) Roll over your 401(k) plan directly to an individual retirement account. Do not cash it out, or take a check from the company with the intention of opening an IRA. You have a limited time to get it into that new account or the government will consider it a withdrawal and if you’re under 59-1/2 you’ll pay a 10 percent penalty, and no matter what your age you’ll pay income tax. Sadly, 80 percent of people with $10,000 or less in a 401(k) cash it out when they leave the job – but in reality, after taxes and penalties, that $10,000 is closer to $6,000 if you’re in the 28 percent tax bracket. Go to the websites of Fidelity, Vanguard, Schwab or T. Rowe Price, where you can find the forms that allow you to roll the money over directly.
7) Start your search. Take one or two days to regroup, and then schedule at least 3 to 6 hours a day to work on your job search. Refresh your resume and join an online social network if you don’t belong to one. Linked In is a great network for professionals – you basically fill out a form that lists the schools you attended and the companies where you previously worked and the network shows you everyone from those affiliations so you can start networking. Network through whatever other affiliations you have – religious and volunteer organizations, sports clubs, alumni groups, etc. Call headhunters in your industry – don’t assume that they are overwhelmed with people contacting them.
Last Saturday on the Today Show, I provided a few more tips on finding a new job. Here’s the video: