My @%!%@ Company just laid me off!!

Being laid off really sucks, let’s admit it.  You take pride in your company and really try to help them succeed and they just drop you when the going gets tough.  So, after the choice words at the company or the CEO’s bonus, you need to figure out what next. 

1. For Californians’, file for unemployment payments at https://eapply4ui.edd.ca.gov/  Get something for not working at least.
2. Check to see if you have a loan on your 401k.  If not, you’re fine.  If you do, you typically have only 10 days after you are officially terminated to repay that loan or it is an early withdrawal that is taxable and has a 10% fed – 2.5% state penalty.  Note, you are typically not “really” terminated until your severance package is over.  That is when the 10 days would start.
3. Update www.linkedin.com and www.facebook.com and other social sites you use to let your friends help look for new jobs for you.
4. One month before your package is over, start shopping for medical insurance.  A gap of more than 63 days now is a very bad thing.  To get a quote, checkout www.bayareainsuranceservices.com  A high deductible plan may save you some money.  If you are married, compare the cost of a plan for you versus going onto your spouses’ coverage.
5. Roll over your 401k or retirement plan to an IRA.  Once laid off, you can no longer borrow from the 401k so you should roll it over.  IRA’s have a lot more options and with the stock market so bad, you may want more options.  Also, there is no mandatory withholding on an IRA but there is on a 401k.  So, if you end up needing some money from the plan you can take some out.  Penalties before 59 ½ and taxes are still due but you can wait to pay them.  If you are out of work for a while, those taxes may not be as big as other years would have been.
6. Start putting your resume on all the job sites out there like www.monster.com Don’t forget www.craigslist.com as a great source for jobs also.  These tend to be smaller companies. 
7. Equity lines of credit.  If you have one, you may want to take the balance out and move it to a savings account.  This will force you to lose money on the interest, but if you bank freezes the line like so many have done, at least you now have the money. 

I hope you don’t need to use this info but with the economy getting worse, you may.  I was having about one client a week being laid off and right now it is getting closer to one a day.  So, be prepared.  If you need more help, email Eric at The@WealthCreator.com or visit www.wealthcreator.com

OMG My investment accounts dropped how much last year?

If you just got Statement Shock on your investment statements, you are probably saying I need to stop the losses.   Is that the right thing to do???  It actually may be right, but there are other options.  First, before you go through options, you need to start at the beginning. 

 

Why did you investment your money when you could have left it in an insured bank account?  Most likely to have it grow more.  You decided to trade safety for the potential of higher returns which also have risk to your principal.  Well, as long as everything goes up, no one cares about risk.  When things go bad, no one ever wanted risk all of a sudden.  So, the next 2 questions are: when do you need the money and can you earn more in a “safe” account?

 

When do you need the money?  If within 5 years, the money should not be at risk.  If you have 5-10 years, a reallocation may in order.  Can you earn more in a “safe” account?  Well if that account is at a bank, then 0-2% is not that motivating to move.  This then goes back to the original question of should you get out of the market. 

 

We have been telling clients for years to follow the rule of 100.  100 – your age = how much money you should have at risk.  So a 30 year old can risk 70% but a 65 year old should only risk 35%.  Risk meaning loss of the money you invested, so a bond fund is still at risk.  So, where can you earn money in other ways.  Fixed annuity rates are around 5% and non-traded commercial Real Estate Trusts are paying 6%.  Those are two options to be non-market related.  If you want downside protection but an account that will pay a higher rate if the market does well, you can look into index annuities and indexed CD’s. 

 

Should I move all my money?  Rarely that makes sense.  Adding more assets classes that are not all stock & bond funds can lower your risk and add more chances to make more money.  So, what should I do?  Diversify some out of the market is a good first step.