Were you recently laid off?

Are you being offered an early retirement package?

Here is a list of actionable steps to help you navigate this period of uncertainty.

Review your Insurance

Health Insurance

If you were receiving health insurance through work, determine your options with the Human Resources Department. The Consolidated Omnibus Budget Reconciliation Act (COBRA) may give you the right to continue your group coverage for a period of time, but it is not necessarily the cheapest or best option. Go to Healthcare.gov to view an alternative - a Marketplace Plan. ‘Job loss’ is one of the exceptions that qualifies you for a special enrollment period. You have 60 days to select a plan or you will have to wait for the next open enrollment period (November 1 - January 15).

Life Insurance

Life Insurance is not part of COBRA. If you lose your job, you lose your group coverage. Determine the amount of coverage you need and look into obtaining a private policy if necessary.

Be Ready to do a Roth Conversion if you Have a Low-Income Tax Year

A Roth Conversion is when you take a portion of your pre-tax money (money in a 401k, 403b, or IRA) and convert it to tax-free (Roth) money. The amount you convert is taxable.

For people with high income, a Roth conversion is not very appealing because they are already in a high tax bracket and a Roth conversion can bump them into an even higher one. However, a low-income year may present the opportunity to pay only 10% or 12% on the converted amounts versus 35% in a normal year.

Here is an example - I had a new client that left her job and decided to go back to school. We did a tax projection and she was on track to have negative taxable income with her deductions. It was a no-brainer to convert at least enough to get her taxable income to zero (free conversion), but we kept going and converted enough to fill up the 10% bracket.

Evaluate What to do with your Old 401k

I get this question all the time and the answer is - maybe nothing. You don’t have to move your 401k unless it does not meet certain balance requirements, typically around $5K. When I left my first job, Fidelity hounded me with notifications about rolling my 401k into an IRA, so I did. I didn’t know:

(1) My balance was higher than the required amount and I could have left it where it was.

(2) You may lose creditor protection by moving your 401k to an IRA. This varies by state, but in general, 401k plans are shielded from creditors in the event you file for bankruptcy while IRAs may not be.

(3) Many 401ks give you the option of taking penalty-free distributions if you leave your employer at age 55. With an IRA, in general, you cannot distribute funds penalty free until age 59 ½.

(4) You may be able to take advantage of net unrealized appreciation (NUA) when you hold company stock in your 401k. This does not apply to IRAs.

(5) If you have a TSP (the government’s version of a 401k), you have access to the G Fund. This fund is unlike any other fund, and having access to it may be reason enough to keep your money in the TSP. What’s unique about the TSPs G Fund?

Get a Financial Plan in Place

If you are going through a job transition right now, talk to your Advisor. It is worth having a fresh perspective on something as stressful and emotional as an unexpected job loss. A good Advisor will help you get organized and confirm that you are taking advantage of any planning opportunities.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.