BY JULIA ANDERSON
PART I: Are they cutting your job? What to do.
Despite a robust economy with low unemployment rates, layoffs are again in the news. In the Portland-Vancouver area where I live job cuts have been announced at Tektronix, Nestles food distribution center, Symantec and Norpac. There has been a rash of grocery store closures as that industry continues to struggle with razor-thin profit margins, the impact of home-delivery services and self-check outs.
When employers look for ways to reduce operating expenses, cutting labor costs is often the only option….painful but in many cases a matter of survival.
Here’s what to do if you think you will be laid off or have been laid off from your job.
Prepare: If you’re working in a place where a layoff are on the horizon prepare by creating an emergency fund to get you through at least six months of household expenses. Credit cards are the last resort.
Quietly start looking for another job. Use your network of friends and family to find job leads. If something clicks, take it.
Get everything that’s due you in the current job, if you receive a layoff notice. Everything includes vacation time in the form of cash, health insurance coverage, life insurance premium payments.
Negotiate a benefits package: The package would include career coaching, resume writing, LinkedIn profile. Online support.
Immediately get a letter from your HR department saying you are being laid off (not fired). Bring this letter to new job interviews. At least get an email saying you’ve been laid off or both.
Immediately arrange continuing health care insurance coverage through COBRA (the Consolidated Omnibus Budget Reconciliation Act that allows an eligible employee and his or her dependents continued benefits of health insurance coverage). You get 18 months of coverage purchased at the rate paid by your employer, which will be much less expensive than buying coverage on the individual open market.
Immediately register with your state unemployment agency to receive jobless benefits while you look for a new job. Start your new job search, right away. To qualify for unemployment benefits, you must be actively contacting three potential employers or more a week.
Have personal business cards made up with your name and contact information. Use LinkedIn to network for employment opportunities. Be prepared to apply for new jobs online.
Good news: The job market is strong right now. Employers are looking for people with work experience, skills and a reliable track record of employment.
Part II: Are you losing your job because of an early retirement buyout? Here’s how to evaluate an offer.
Despite a growing economy, employers in certain industries continue to look for ways to cut costs by laying off workers. In offering early retirement packages or job buyouts, employers are careful to avoid age discrimination pitfalls. There are proven legal ways to do that.
The early retirement package or buyout must be voluntary based on tenure or other neutral criteria. A worker must get at least 21 days to consider the offer. Employees accepting an early retirement or buyout will be asked to sign a carefully drafted “release agreement” explaining their rights under federal law as they walk out the door. That makes it hard to later sue for discrimination.
How do you evaluate an early retirement package if you find yourself in the cross hairs your employer’s cost reduction/buyout program?
There is a lot to consider: Health insurance coverage after you leave the job, how close you are to age 65 when Medicare health insurance coverage kicks in and how and when to take federal Social Security benefits. Does the buyout package, for instance, offer “bridge money” to get you to Social Security?
How does losing this job change your timetable for retirement? What does this do to your investment nest egg? Will you lose 401(k) matching money? Will you need to roll your 401(k) into a rollover Individual Retirement Account? Talk to your tax accountant. Is there another job out there that will get you through to your original retirement goal so that your tax-deferred savings can continue to grow?
The biggest decision comes first. What are the consequences of turning down the buyout offer, dodging the layoff bullet and keeping the job? Only your gut can answer that one. Your employer won’t and legally can’t tell you.
A few positives
A layoff qualifies you for state unemployment benefits if you sign up and look for a new job through your local employment agency. Human resource administrators can explain how this works, what the job search requirements are and how many weeks you might be eligible for unemployment benefits.
Secondly, you can buy health insurance coverage through your former employer’s insurance plan for at least 18 months, thanks to COBRA, a federal law passed by Congress in 1985. Some employers let you stay with the company health insurance plan until you reach 65. Negotiate that.
Some employers might offer “bridging money” to financially bridge the period between early retirement and when you are eligible for Social Security benefits. But who wants to take reduced Social Security benefits at 62 when full benefits only kick in at age 66 or 67?
The biggest negative of taking an early retirement offer is that you no longer will have the job and its income and matching money through the company-sponsored 401(k). If there’s a pension, it will likely be smaller than if you had kept the job longer. That means less money to live on in real retirement. TAke a look at what that future might look like.
Some people reinvent themselves after an early buyout by starting their own business, by finding another job or by working part-time. How long you have to figure that out depends on how much you employer offers in your severance pay. Severance usually consists of your current salary plus addition money for the number of years you’ve worked for the company.
Keep in mind that experts say that the amount of money you need to live on in retirement should by about eight times your income. So, if your household income is $100,000 a year, you will likely need $1 million (or more) in retirement savings to enjoy a modest retirement at a withdrawal rate of 4 percent a year.
Don’t take money from your 401(k) to buy groceries.
Meanwhile, when leaving the job, do NOT make early withdrawals from your 401(k)-retirement savings plan. Hopefully, you've got an emergency fund to get you through at least six months. Avoid piling on credit card debt.
Carefully move the money to a self-directed Individual Retirement Account with an online brokerage or a trusted local firm. Money withdrawn from a company-sponsored 401(k) or IRA is subject to a 10 percent “premature distribution” penalty before age 59 ½. Plus, you will pay federal income tax on the withdrawal. And you won’t be growing that money for your real retirement.
Those who have been through an early retirement buyout will tell you that it is a stressful time with lots of ups and downs. It feels bad to be asked to leave a place where you like the job, like the contribution you make and enjoy the people you work with.
Financial planner Jim Blankenship writing in US News & World Report warns that some companies “make an early retirement package seem more attractive than it really is.” He said that you may want to consult an independent professional adviser who “will work for your best interests” in negotiating a buyout.
Saying yes to a buyout may mean retraining for something new or doing something else that you’ve felt passionate about. Whatever, it will be a roller coaster ride.
By Julia Anderson
Smart Money is a show that I co-host with Pat Boyle at TVCTV public television in Beaverton, Oregon. Here are links to the latest episodes:
Values-based investing with Mike Penfield with Key Private Bank in Portland, Ore.
Once known as socially responsible investing, values-based investing means that you let your values be part of your investment strategy. If you’re concerned about climate change or don’t want to own any tobacco stocks or private jails there are funds that keep your money out of those investments. If you support non-genetically modified food businesses, you can go in that direction. But do you sacrifice investment returns when your values guide your strategy? Penfield says, no.
Resources for Women Investors Who Want to be More Confident Investors
Women are good at paying the bills, good at saving, managing household budgets. An area where women say they are less confident is with investing. Putting money in a bank savings account does not cut it. Women need to embrace investing as part of their money life. There’s no big mystery to investing. Here are resources that show the way:
Oregon state Treasurer Tobias Reads shares an update on OregonSaves after a year of operation. The program is allowing people who do not have an opportunity to invest in a tax-deferred retirement plan to take control of their financial future. It’s a 5 percent automatic payroll withholding tax-deferred program. In two years, savers have collectively saved $22 million. The money is managed through a state-sponsored program.
Bottom line: Saving even a little bit is important. About 3500 employers are registered with the program.
Tech Resources for Seniors
Tech guru, Bill Sikkens, tells viewers how seniors can use online services and get tech help with online issues. OHSU offers classes designed to help seniors with tech issues. How to build confidence, get online, what to be afraid. How to use Facetime and other video calling services. There’s a whole industry around telemedicine on an ipad. Prescription refills. Medical consultation. Look for colleges, senior centers, churches that offer classes in online technology. Costs should be minimal (less than $100).
Hoarding: What families need to know and how to help
Clutter that renders living spaces uninhabitable. To a hoarder, everything they own is important. Companies specialize in cleaning out hoarder homes. There’s usually an underlying psychological issue. It’s not a single fixed thing and requires counseling. It’s a complicated. Books: “Dirty Secret: A Daughter Comes Clean about Her mother’s Hoarding, by Jessie Sholl; “Und issue for families, many give up.
Bookerstanding Hoarding,” by Jo Cook, “Overcoming Hoarding,” by Colin Jones.
By JULIA ANDERSON
A friend asked me last week if I thought there would be a recession and when would it happen.
The answer to the first question is easy …yes, there will be a recession. Like the ebb and flow of tides, recessions come and go. The last one in 2007-2009 was a doozy. Housing values cratered, stock markets fell and as Warren Buffett says, we found out “who was swimming naked.”
Those who had jumped into the house bubble were burned. It took years for values to recover. Those who panicked and sold stock holdings lived to regret their decision because they’ve missed the bull market rebound.
People without cash emergency funds were hurt, especially if they lost a job.
But look at the recovery --- 10 years later, housing values are back, markets are at record highs and consumers are confidently spending. Record high employment and low interest rates continue to juice the economy.
Recessions are a natural part of the economic cycle. Let’s hope our next one will be mild compared to the financial crisis of ten years ago.
Should we worry about a recession coming soon? Worry is the wrong word.
Let’s just be prepared for one when it happens. There are signs that our beloved bull market is getting tired. Manufacturing activity is slowing, housing prices are flattening as supply begins to catch up with demand, and home-building is slipping. Wage growth has improved but still lags rising costs, especially for housing. First-time homebuyers are priced out in many of our major cities.
Farm income is in the tank. Boeing’s 737 Max problems are a national economic negative and banks continue to struggle to generate robust profit. There’s a lot to weigh about the economy -- pro and con.
To answer my friend’s second question about timing, I told her I did not think we would see anything like a real recession until after the 2020 Presidential election. History backs me up. The S&P 500 Index of the 500 largest publicly traded American-based companies has only had three negative years out of the past 21 election years since 1928. (Just for the record, I don’t believe in betting on cycles or trying to jump in and out of markets).
Meanwhile, market and money managers (Federal Reserve Bank) try to stay out of the political fray, to hold an even keel. No dramatic ups or downs, so no, a recession is likely at least 18-months to two years away.
Of course, there’s always the unexpected: The trade dispute with China could continue, North Korea could do something stupid, the United Kingdom is being rocked by Brexit. The Russians, the Syrians, Iran. There could be trouble on many fronts. But has the world been much different in the past 50 years? I don’t think so even though some of my friends think the world is ending.
U.S. markets and monetary system have survived. The entire American free-enterprise economy is not going to go out of business overnight. So, I told her to stay positive. A recent Bloomberg News analysts’ survey has the spread is the widest in years between those who are pessimistic about the economy and those who are positive. That confirms my view: hang in there but be prepared for what hopefully will be a mild recession.
Years from retirement? Stay the course.
For those who are working and managing their tax-deferred investments but are years away from retirement --- Stay the course, remain invested in stocks, let markets drop in a recession whenever it arrives. Don’t panic, don’t jump, don’t sell. This is a buying opportunity to reinvest your quarterly stock dividend earnings at a cheaper price. Your dividends buy more stock, they in turn buy more stock.
Already in retirement and managing your nest egg, now?
If you already are living on income from your investments, create a cash fund to draw from during a recession. That’s so that you don’t have to sell your investment principal at a discount to buy groceries if share values decline.
Draw out of your cash fund to get through the market downturn. Keep the rest of your portfolio in the market, continue reinvesting at a discount. How much cash should you have on hand? How about 12 and 18 months, worth? More if our government goes back to the Democrats and taxes go higher.
It’s been so long since we’ve had a recession, we might be a little out of practice. The next one hopefully will not be as bad as the one we remember so well.
"Better to trust the man who is frequently in error than the one who is never in doubt."
-- Eric Sevareid, New York Times commentator and reporter, (1912-1992)
By JULIA ANDERSON
Let’s say you are leaving your full-time job and taking your 401(k) nest egg with you. Are you going to manage it yourself or will you turn to an investment professional?
If you think you need professional advice, here are questions to ask a financial planner/adviser before giving them your life savings. Treat this process like a research project. Take your time. Don’t be uncomfortable asking the uncomfortable questions. It’s your money, your future and your retirement.
Nine questions to ask when choosing or re-evaluating a financial adviser
- How do you get paid? A commission on product sales, fee per transaction, or both? Ask for details.
- Can you manage my assets for a 1 percent or less management fee?
- What’s your background and experience?
- What’s the strength of the company you work for or with?
- What do your clients say about you? Ask for references.
- What are your checks and balances regarding risk vs. earnings reward?
- Will you put your investment proposals in writing?
- What are the potential pitfalls of the investment products you are offering?
- What do other professionals say about you?
Ask yourself what your gut-level comfort is with this adviser. Do you come away feeling good about what you’ve learned, where you’re headed when you meet with him/her?
Don’t hire or continue to use a financial adviser just because they are nice. Do the math at least a couple of times a year. How are your investments doing in comparison to the performance of the S&P 500 (the 500 largest publicly traded U.S.-based companies)?
If the S&P is up by 15 percent year-over-year but your holdings are up only 7 percent in the same time frame then you need to be asking some tough questions. You might do better on your own or by switching advisers.
Studies show that women, while good at budgeting, bill paying and saving, may be less confident when it comes to investing and managing long-term savings. Get in the game, learn the basics. Make sure you are getting the best performance from your investments --- with or without an advisor.
I meet women all the time who face job and money transitions and who want to do them right. It’s about building confidence and taking charge of the future. This is your money. No one cares more than you do!
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