Broker Check

Layoff alert-What do I do now?

| January 22, 2023

Don't panic!

Critical category: Married or Single?

Better question: Does anyone you care about depend on you - even partially - for anything financial?

For the purpose of this writing, the importance of the question is really whether or not any Loved One is depending on you for any kind of financial arrangement? Said differently, are your finances even somewhat integrated with another person?? Great New Yorker cartoon: Little girl looking at two adults. "Of course they love me. I'm their beneficiary!"

Things to look at immediately ... or soon.

Single (no "beneficiaries")

Disability Income Insurance (Preferably LTD - "Long-term disability income insurance." e.g. "To Age 65")

Yes, this is obscure for many people. But critical unless you already have an 8 figure (maybe 7 figure) net worth. Speaking of which, your net worth would include company stock or any kind of asset related to company stock, e.g. rights, options etc.

Back to LTD. If you DO happen to have an 8 figure net worth, 

1. You don't "need" LTD.

2. Very low probability that any LTD insurance carrier would sell you LTD due to "adverse selection." (Not covered in this writing.)

LTD is complicated - more complicated than life insurance. Also, if you happen to have any life insurance as part of your (former) company benefits, it's worth checking on if, how, and how long you can hang on to some or all of your life insurance benefit. Your HR or benefits contact should be able to point you in the right direction. See below for more.

While it may not be unheard of, I'm saying it is VERY rare to be able to hang onto your LTD-Long-term disability income insurance. (Also not covered here.)

However, with the possible cancellation / end of your company LTD, a real opportunity (if you're in good health) probably emerges. You could have the opportunity to buy your own individual (NOT company-owned) LTD. Typically "non-cancellable." i.e, once your policy is underwritten, approved and the first payment is made, the carrier can not legally cancel your policy OR raise your premium as long as you have kept your premium payments up to date. 

Unlike e.g. other forms of health insurance (LTD is a form of health insurance, categorically ...) wherein, typically, your health insurance is renewable annually and the health insurance carrier can (and often does) raise premiums at this time AND potentially can decline to renew your policy if you have had a change in health. (Doesn't typically happen in large company plans but ...)

Buy LTD-Long Term disability income insurance while you can!

Catch 22: Buying your own LTD might possibly be easier said than done. You must qualify. You must qualify medically (medical exam and / or health questionnaire) and you must qualify financially. Carrier might typically offer you a maximum benefit of 2/3 of your base salary. So, if your base salary is $180,000, carrier might offer you a max benefit of $10,000 per month. But, you just got laid off buying any LTD could be challenging.

If you can do some consulting or have a side gig, a carrier might offer you some LTD based on that income. Like I said above, it's complicated.

The good news combined with the bad news you already know: Even if you knew all the above, if you already had been covered by the max available LTD at your former employer, it's unlikely any carrier would have offered you any more.

But ... the good news. If you are able to buy LTD on your own - even, for example, $5000 a month of LTD income benefit (tax-free, BTW when you buy it and pay for it on your own - not through the employer) ... once you DO get a new salaried position with a new employer LTD plan, you can (and almost always it is a good idea) you can keep your own individually bought and owned - LTD insurance along with any new LTD supplied by your new employer.

Single or Married - i.e. you DO have "beneficiaries"

Possibly convert existing or buy new life insurance

If you and a spouse / another person are living your financial lives partially or totally combined, there may be a life insurance need. You might have very inexpensive group life insurance, perhaps in a nice amount - e.g. $2 million or more. Your carrier might be happy to "convert" your group term policy to some kind of individual "permanent" policy - possibly the (unnecessarily dreaded) "whole" life or maybe the less expensive but maybe OK "universal life. But it is likely to cost you considerably more.

If your health is still good, you can potentially shop around and save. If you have contracted an unfortunate medical condition, you might be somewhat over a barrel. But it is worth checking. You can typically apply for new life insurance at no up-front cost and get an underwriting decision to find out if, and how much your premiums will ultimately be.

Back to LTD

Also see discussion above. If you do have an 8 figure net worth, the LTD carrier does not consider you a good LTD candidate. But if such is not your situation, bite the bullet and buy the LTD that you can get.

Bonus: Some LTD might have an optional choice of buying more benefit down the road. Grab it, even though that rider will cost a little extra, it could be well worth it!

Review your retirement benefits - Single or Married - beneficiaries or not

Your retirement benefits at your former employer need a close look. Your 401(k) - 403b - TSP etc. might be perfect for you just as it is and you might be able to leave it alone. Or not. On both accounts. It's likely worth it to get a more detailed understanding of your choices. 

Similarly with other more complex benefits. Stock Options and pension come to mind. Sooner or later, if you haven't received any documentation on your choices. you probably will. Or, these days, electronic documentation / posted on a website. Somewhat of an issue since you probably can not log in to your former employer website. Ask your HR contact where that info is if it hasn't yet been provided to you.

Health insurance choices - including COBRA

Health insurance after a lay off is typically challenging and stressful. If you do happen to be married and your spouse has access to employer health insurance for one or both of you, that employer health insurance is probably better than what you can get on the open market for an individual or married couple. A spouse suffering a lay off might well be an acceptable "trigger" event to change the coverage for one or both of you. Gather your facts.

All other

If you have been a salaried employee your whole career or for quite some time, the process of looking at all this would rarely be considered pleasant. But it might be critical. Talk to some experienced and knowledgeable financial "folks."


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