Two of the Biggest Mistakes Employees Make After Being Laid Off

Unfortunately, lay-off announcements are becoming more common. While mass layoffs may not be happening everywhere, if you lose your job, it feels just as significant.  

When that happens, a series of events begins to unfold, and it is time to get busy looking for your next career opportunity. I will cover that in my next Prudent Perspective. I will also write about the steps to take before a layoff occurs. It is prudent stewardship to be prepared rather than trying to get prepared after the fact.  

Today, I wanted to focus on the two mistakes I see employees make after a layoff.

 Here is what not to do: 

Leaving Your 401(k) Plan at Your Former Employer 

When emotions run high, this happens all the time. If you are laid off, they ask you to box up your belongings and exit the building. You are going to take all your personal belongings, anything that is yours basically, and move on to the next phase of your career.  

You will make sure you take everything with you. Yet, many employees leave behind one of the most important things they own: their 401(k) plan. 

If you are going to take the stapler, take the 401(k) plan. 

An abandoned 401(k) plan can easily be forgotten. You may move or change your email address and forget to notify the investment company. They could make changes to the plan or investment options, causing your portfolio to shift without you realizing it. 

What Should You Do? 

Call your financial advisor and let them know you would like to transfer your 401(k) plan into your current IRA accounts. If you do not have an advisor, consider finding one. 

If you need help, call us at 972-386-0384 or email info@prudentmoney.com.

You may also contact the investment company currently holding your 401(k), request a rollover to your IRA, and follow their instructions. This can serve as a temporary solution until you secure an advisor. 

Investing Your 401(k) Plan Money and Tying It Up 

Oftentimes, financial advisors may aggressively recommend reinvesting your 401(k) into another program. When you do this, you may turn a once-liquid account into one that now charges fees that might not be suitable for your specific time of your life, or limits access to your money. 

Until you get another job or put together a solid short-term plan, you do not want to tie that money up. 

That long-term 401(k) plan may have just become a short-term resource. You need to be careful with risk and maintain liquidity. 

What do I mean by liquidity? 

It means you can access your money if needed. Hopefully, you will never need to use those funds for living expenses. However, if the need arose, you would know the money is available. 

Needless to say, it should be the last place you turn for income. 

If you have further questions for Bob, please visit the Ask a Question page on www.prudentmoney.com. You can also call our office at 972-386-0384 or email info@prudentmoney.com.

 Bob Brooks

Bob Brooks is a Financial Advisor and host of the Prudent Money Radio Show, heard every weekday from 4:30 PM - 5:00 PM on FM Radio 91.3 KDKR.