It is a complex set of logistics that build up when you lose your job or are being made redundant. There is a grim emotional stand-still feeling on one hand. On the other hand, there is the anxiety to claim all benefits. While there is the fear of the unknown about what will happen in future, how bills and debts will be paid, how budget will be rescheduled, reallocated and managed and how much time will elapse before you get a new job, whether the new job will demand some ugly adjustments, etc.
Importance of exploring insurance and other benefits, and any other assistance:
Apart from getting mental respite, arrangement of finances is the biggest concern when you lose your job. All your efforts should be concentrated in this direction. For this it is in your interest to know all available options to garner finances, benefits, insurance and other assistance. These options include:
I. Exploring and making optimum utilization of unemployment benefits
Unemployment benefits are available to almost all employees. In fact, if you have lost your job for no fault of your own, you qualify to get unemployment benefits. This is as per the federal/ state unemployment compensation program. As per this program all employees or workers with salary or wages are eligible to get unemployment benefits if their job loss is not attributable to any of their faults. There may be difference in the amount from state to state. But basically, your unemployment benefit is determined based on your last earned salaries.
The duration of unemployment benefits in most states is 26 weeks. However, to deal with economic and financial crises, these benefits have been enhanced under the Emergency Unemployment Compensation (EUC) and the Extended Benefits (EB). You need to know all these provisions to make the best out of them.
II. Retirement savings utilization; Cashing out on 401(k) account- risks involved and options available
On being rendered jobless, the most irresistible first option to get a financial padding is the ever tempting 401(k) account. In dire circumstances, you may opt for cashing out your 401 (k). But critics and experts say this should not be your first option because of the taxes and penalties involved. Your employer will withhold 20% of the amount for tax payments. Not just this, you also have to pay a 10% penalty on early distribution unless you are of the age of 55 years or more. This 10% is calculated on the entire withdrawal amount before deducting taxes. Also, your unemployment benefits will be reduced in proportion to retirement account withdrawals. So, you may end up getting much less than what you expected.
III. Other options available on retirement account
To avoid the series of taxes and penalties which will anyway be a huge drain in your finances, especially when you have lost your job, one option is to plan a rollover to an IRA or any other qualified retirement benefit plan.
IV. Other forms of assistance to aid you post job loss
These may be in the form of tax benefits which can vary from tax credits to qualified dividends rate, etc.
In this way, post losing your job, each penny should be taken care of and garnered from as many resources following intelligent research.