I posted previously about some things to consider before a layoff hits. The first of four installments discussed saving vital information and the second installment discussed work-related expenses. This third installment discusses items to consider as it relates to your retirement and savings accounts. Decisions you make in your final few months of employment could make a difference of thousands of dollars.
- Pay back any loans taken on your 401(k). In almost all cases any loans taken from your 401(k) are immediately due when you leave your employer. If you can’t pay it back, you will owe income taxes and penalties on the unpaid amount.
- Consider accelerating your 401(k) contributions. If you otherwise have a sufficient emergency fund to cover your expenses for an extended period, consider accelerating your 401(k) contributions ahead of your layoff. You have to be actively employed to contribute to your current employer’s plan, and you may be delayed in your ability to contribute to a new employer’s plan, even if you find a new job relatively quickly.
- Consider accelerating contributions to your Employee Stock Purchase Plan. This will depend on the terms of your plan, but if you participate in an ESPP and leave your employer during the year, you may still be eligible to purchase discounted shares with whatever money you have deposited in the plan up to the date of your termination. I did this several years ago when leaving the big evil oil company I worked for. I knew I was leaving (voluntarily in this instance), so I accelerated by ESPP contributions to the highest percentage possible so I would be maxed out when I left the company. Then at the beginning of the next year I got to purchase shares at a hefty discount with the money I had contributed.
Part 4 about preparations for the next step comes tomorrow…