Home About Archives RSS Feed

The Independent Investor: If You Are Laid Off, Read This

By Bill SchmickiBerkshires columnist
As of the end of April, more than 30 million Americans have joined the ranks of the unemployed. Companies have closed, while the pandemic has forced many employees to remain at home. If you are one of the jobless victims of this pandemic, here is some advice on your next steps you might take.
 
First off, do not panic. If there was ever a time for this to happen, it is now. The federal government has provided you with a list of additional benefits that can help you through this unfortunate period. But the first things you want to know is will there be a severance package? If there is, the amount of  money you receive will most likely be determined on your length of employment. It may also come with other benefits.
 
You may be owed for accrued sick time, vacations, overtime, or back pay. The most important item on your list, however, is continued health-care insurance, especially during this pandemic. COBRA (Consolidated Omnibus Budget Reconciliation Act) gives you the option to continue on your company's health care plan for a limited period of time.
 
Your next step is to determine the guidelines in any tax-deferred savings or pension plans you may have contributed to through the years. If, for example, you are a member of a defined benefit plan, your benefits probably begin at retirement age. In the meantime, you might be able to roll that plan over into another.
 
Most companies offer a 401(k) plan, profit-sharing plan or something similar. In which case you can keep it there, at least until you find a new job and then you can roll it over to your new company's plan. You can cash out, but that is something I do not recommend without discussing with an investment advisor. You can also roll your plan into another tax-deferred vehicle, like an Individual Retirement Account.  
 
Your next step is to file for unemployment. The good news is that the government has added an additional $600 to your weekly compensation up until the end of July 2020. They also extended the number of weeks you are eligible for unemployment from 26 weeks to 39 weeks.
 
If your company shuts down unexpectedly, it may be that some employees will need to tap their savings plans in order to cover expenses while they seek new employment. That kind of disaster has hit home to me personally this week. Our firm is fairly close to a beautiful little town called North Adams in Massachusetts. North Adams' claim to fame is that it is the home to the Crane Stationery Company, established in 1801 by the Crane family. The Crane Family later moved into printing currency for the U.S. mint.
 
This week Crane Stationery announced that they will be laying off 85 percent of their workforce. The company promised to pay its employees up until June 19 and will continue to cover its share of group health care benefits through to the end of June.  The news was a devastating blow to both the workers and the community. Crane was one of the top employers in the town.
 
We at Berkshire Money Management will be opening our doors to all and any of the company's employees who are in need of financial advice for the foreseeable future. So, if you are an employee or know of one, please contact me and our team will do all we can to help. 
 
In the meantime, I thought it might be appropriate as the national employment rate tops 20 percent, to once again review the elements provided by the CARE Act as it relates to withdrawals from your 401(k). Normally, if you need money from a retirement account, and you are under 59 1/2 years old, you are required to pay a 10 percent penalty, plus the income tax owed on your withdrawal. There are some exceptions to the rule and the CARES Act just added a big one. The federal government just eliminated that 10 percent penalty for any distributions from IRAs, employer-sponsored retirement plans, or a combination of both.
 
Individuals can withdraw up to $100,000 in 2020, as long as the withdrawal is "Coronavirus-related." That definition leaves plenty of room for interpretation. If you or a spouse or dependent have been diagnosed with the virus, you qualify. If you or your family have been hurt financially by COVID-19 as a result of being laid off, quarantined, or having reduced working hours, you qualify.
 
There is even better news. Let's say you take out the money, which you will need to tide you over for the next nine months. After that, the economy begins to revive. You get your old job back. If so, the government is allowing you to repay or roll the money you borrowed back into your retirement account. You will have three years to do so. You can return all, or part of what you took out and repay it in a single lump sum, or in multiple repayments. You will still need to pay regular taxes on whatever you take out this year, but the entire tax bill does not have to be paid in 2020.
 
Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.
     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Students Named to Simon's Rock Fall 2023 Dean's List
Clark Art Free Gallery Tours for Parents and Infants
Berkshire Adult Baseball League Welcomes Players for 13th Season
EPA Lays Out Draft Plan for PCB Remediation in Pittsfield
Williamstown Select Board Awards ARPA Funds to Remedy Hall
North Adams Regional Reopens With Ribbon-Cutting Celebration
Clarksburg Sees Race for Select Board Seat
Crosby/Conte Statement of Interest Gets OK From Council
WCMA: 'Cracking the Code on Numerology'
BCC Wins Grant for New Automatic External Defibrillator
 
 


Categories:
@theMarket (480)
Independent Investor (451)
Retired Investor (184)
Archives:
March 2024 (6)
March 2023 (2)
February 2024 (8)
January 2024 (8)
December 2023 (9)
November 2023 (5)
October 2023 (7)
September 2023 (8)
August 2023 (7)
July 2023 (7)
June 2023 (8)
May 2023 (8)
April 2023 (8)
Tags:
Debt Ceiling Greece Banks Retirement Stimulus Employment Federal Reserve Stocks Deficit Debt Interest Rates Selloff Crisis Energy Congress Euro Banking Japan Recession Jobs Pullback Election Fiscal Cliff Rally Economy Metals Europe Taxes Europe Commodities Markets Oil Currency Bailout Stock Market
Popular Entries:
The Independent Investor: Don't Fight the Fed
Independent Investor: Europe's Banking Crisis
@theMarket: Let the Good Times Roll
The Independent Investor: Japan — The Sun Is Beginning to Rise
Independent Investor: Enough Already!
@theMarket: Let Silver Be A Lesson
Independent Investor: What To Expect After a Waterfall Decline
@theMarket: One Down, One to Go
@theMarket: 707 Days
The Independent Investor: And Now For That Deficit
Recent Entries:
The Retired Investor: Immigrants Getting Bad Rap on the Economic Front
@theMarket: Sticky Inflation Slows Market Advance
The Retired Investor: Eating Out Not What It Used to Be
@theMarket: Markets March to New Highs (Again)
The Retired Investor: Companies Dropping Degree Requirements
@theMarket: Tech Takes Break as Other Sectors Play Catch-up
The Retired Investor: The Economics of Taylor Swift
@theMarket: Nvidia Leads Markets to Record Highs
The Retired Investor: The Chocolate Crisis, or Where Is Willie Wonka When You Need Him
The Retired Investor: Auto Insurance Premiums Keep Rising