Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, September 27, 1993 TAG: 9309240420
SECTION: MONEY PAGE: A-8 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
Or maybe you've already been told your position is about to be axed.
The day is gone when a good worker could count on a lifetime career with a single employer. Now many people must carve out their own track among several companies, perhaps with abrupt career shifts.
The problem is how to avert financial disaster while looking for a new position.
The Virginia Society of Certified Public Accountants offers these tips to minimize the damage:
Unemployment insurance benefits are for everyone. Don't pass up public support out of pride or neglect. Taxpayers and companies pay for the benefits intended to help the temporarily unemployed.
As a rule, the CPAs said, you are entitled to unemployment benefits if you have lost your job through no fault of your own and you are actively seeking another job.
Check with a local Virginia Employment Commission office to determine if you are eligible and what you must do to maintain the eligibility.
Make the most of your severance pay.
If your current or former employer offers a package or payment to ease the job cut, you may have to choose between taking the funds in one lump sum or stretching them out over several weeks or months.
The society said CPAs generally recommend that you opt for the lump sum. That allows you to invest the money and start earning interest right away.
What's more, the society said, taking a lump sum gives you one less thing to worry about if your former employer's financial stability is questionable.
Protect your 401(k) and pension funds.
When you leave a job, you may receive a sizable sum from your tax-deferred 401(k) retirement plan or other pension plan.
Because this money is earmarked for retirement, the CPAs said, an early withdrawal "could trigger trouble."
To avoid paying heavy taxes and penalties, they said, people should roll over the proceeds of the 401(k) or other pension plans into a special Individual Retirement Account.
Any money that is not rolled over directly from one trustee or fund manager to another will be subject to tax withholding, then taxed as ordinary income. Anyone under the age of 59 1/2 will be hit with a 10 percent penalty as well.
If you believe that you may be forced to use some of your retirement savings to meet living expenses, invest your funds in a liquid account, making sure it's readily accessible. Some examples of such an investment are money market accounts or mutual funds.
If you do that, your money will not be tied up in a long-term investment, while taxes and penalties will be due only on the amount withdrawn.
Stay insured.
Employers with 20 or more people on the payroll are required by law to offer medical insurance to departing employees.
That means that regardless of whether you are laid off or leave voluntarily, you and your dependents can continue to receive health coverage for up to 18 months through your former employer's insurer - provided you pay for it yourself.
If your spouse works, it may be cheaper to get family coverage under your spouse's plan. But find out if your spouse's coverage will last for the duration of your likely period of joblessness.
You should also consider picking up life insurance coverage if you have a family to protect, especially if most of your life insurance came from an employer's policy.
The society said term life insurance generally is the least costly way to buy that protection. Rates will vary based on your age and terms of the policy.
Manage your debts carefully.
Talk to your creditors if you can't meet your monthly payments after losing your regular income. Most are willing to work with responsible creditors. Explain your situation and offer to send smaller payments.
For many families, the home mortgage is the largest of those debts. If that's likely to be a problem, make formal arrangements with the mortgage lender to lower or delay monthly payments.
Some mortgage lenders may agree to rewrite your loan to lower your monthly payments. Others may even offer a "forebearance agreement" that allows you to pay nothing or just the interest for a few months. In either case, it's a good idea to get such terms in writing so there's no misunderstanding that could put your home in jeopardy.
For more advice on coping in troubled economic times or a looming layoff, contact the Virginia Society of CPAs for a copy of a free brochure, "Managing Through an Economic Downturn."
To order, send a self-addressed, stamped envelope to the VSCPA, P.O. Box 31635, Richmond 23294-1635.
by CNB