What To Do If You Are Laid Off Or Are Facing A Layoff
No company is immune from corporate challenges regardless of past success or long term prospects. Even very stable companies can face unexpected losses due to unforeseen events such as competitive pressures, mergers & acquisitions, legal issues, management turnover, disruptive technology, etc.
For example, in January, Qualcomm announced to investors a new cost-reduction plan totaling $1 billion dollars. Currently, the company is facing difficulties due to trade tensions between the United States and China. The Chinese government has stopped Qualcomm from buying NXP Semiconductors and the US government is stopping the Chinese tech company ZTE from buying technology from American companies for seven years. In addition, the company is facing increased competitive pressures from Intel and Samsung.
As a result, Qualcomm’s profits are dropping and they are laying off 15% of it’s full and part-time employees, many of which are in San Jose and San Diego. If you’re facing being laid off or have already been laid off, you’re likely under a significant amount of frustration and are considering the financial impacts of such an event on your near-term needs and long-term goals. To help navigate this delicate situation of a current or pending layoff, I want to provide some guidance and steps you can take to ease some of the financial stress. We can use the current situation at Qualcomm as an example.
What Should You Do?
The first thing you should do if you have been laid off or are facing a potential lay off is remain as calm as possible and remember you are not in this alone. Don’t be afraid or too proud to seek some help. You will also want to map out a systematic approach to address your financial concerns. Talking to a qualified financial professional can be a big help if you find yourself in this situation. Many people are devastated when they’re laid off and it can be a very emotional time. Making important financial decisions under heightened emotional stress can be a very dangerous combination. In addition to any concrete financial advice they might provide, an outside financial professional can help alleviate some stress and help you avoid making poor decisions. In addition, they can take some of the financial planning burden off your shoulders so you can focus on finding a new job.
The first step in any systematic approach to this kind of challenge is to have a clear understanding of your current financial situation. This will involve an “inventory” of your current assets, debts, near-term needs, long term goals, and retirement outlook. In order to properly evaluate where you’re currently at financially, you will also need to consider any severance package you may have been offered as well as the options for your 401(k) and any company stock you may have accumulated. Once you have a clear picture of where you are currently, you will be able to map out how far your current savings will get you in the event you experience an extended job hunt. Just knowing what you have, where it all is, and how to access these financial resources to best meet your living expenses during the job hunt can help reduce overall stress levels.
While stressful and unpleasant, dealing with a current or pending layoff serves as a great “wake up call,” and can inspire a much needed focus on reassessing your goals, adjusting your investment risk tolerance, and updating your retirement planning. A financial advisor can be of assistance by offering their step-by-step approach to accomplish this initial analysis and provide some recommendations going forward.
Create A Plan To Move Forward
Once you have completed the initial inventory of your financial assets and have a clear understanding of what you have, where it is and how to access it, it is time to focus on liquid emergency funds and medical benefits to provide for your family during the job hunt. This will also be balanced out based on any severance package you may have received. How long will your existing benefits be in effect? Will you need to turn to COBRA? What other medical benefits options might be available?
Your plan should also look at a projected time frame for your job hunt so you can map out and track expenses against liquid emergency funds. You will also likely need to implement an adjusted household budget. If you are lucky enough to have accumulated significant shares of company stock, if, when and how to access these funds is also an important aspect to plan for, especially with regard to potential tax consequences.
You will also want to look at future job criteria. If you have multiple job opportunities, it’s worth your time to project out how the difference between company matches, profit sharing, pensions, and other benefits will affect your near-term and long-term financial future.
Consider Your Retirement Planning Options
When you change jobs, you have the unique opportunity to reevaluate different options for the money you’ve acquired and saved. For example, Qualcomm has a very generous benefits package and those leaving the company will likely need to consider what to do with their 401(k), employee stock options, as well as any vested company stock shares. If you’re close to retirement age, it may be helpful to review your social security benefits, personal retirement savings, and consider how all this might integrate with the benefits package being offered at your next potential job before you accept it.
During a job transition, there are a variety of options available to you regarding your 401(k). A few more common strategies are rolling over into your new employers retirement plan, or rolling it over into a personal IRA. When rolling over your 401(k), pay special attention to the different treatment of Roth and Traditional funds. Whatever you do with your 401(k) after you have separated from your previous employer will have different pros and cons, different age-based options if you are under or over age 59.5, as well as potential tax consequences. You will want to carefully address all these concerns with a financial professional who can help you choose the best decision for your specific situation.
These same concerns will apply to any company stock options and any vested company shares you may be able to take with you.
Depending on the next job you choose and the benefits offered, you may also need to adjust your retirement plan. For example, the difference in benefits offered by Qualcomm as compared to your next company could have a positive or negative effect on your ability to retire on time.
Review Your Investments And Risk
Many people separating from a company like Qualcomm may find themselves in the fortunate situation of having accumulated significant amount of company stock. While this can afford employees and retirees incredible opportunities to improve their financial standing and supplement their retirement assets, it can also greatly impact overall investment risk. It is not uncommon to see households with 70% or more of their entire net worth in one company stock.
While this may have been a fun ride on the way up, now would be an excellent time to reassess your situation and your risk tolerance, as well as finding smart ways to diversify into a more risk appropriate portfolio. Many people have not taken the time to assess their portfolio in years, so reviewing your assets and your financial plan and making adjustments can help lower your overall financial risk. This can not only improve your chances for long term investment success, but can also improve your chances for reaching your long term retirement goals.
Take Action Today
If you or someone you know was laid off from Qualcomm, or any company for that matter, we’d be happy to discuss your situation and help you understand your options going forward. To take the first step and schedule a complimentary 30-minute phone consultation, call 858-255-6703 or email email@example.com.
Ian Maxwell is a financial advisor and the president and CEO of Reviresco Wealth Advisory, an independent, fee-based firm dedicated to providing investment management and strategic wealth planning based on fiduciary standards. Providing comprehensive financial planning and asset management, Ian focuses on serving successful pre-retirees who want to ensure the assets they’ve worked hard to build work for them in return during retirement. He is passionate about improving the quality of life for his clients and developing innovative solutions that help people reconsider how to best achieve their financial goals. Based in San Diego, California, he works with clients locally, as well as in Northern California in the San Francisco area. To learn more, connect with Ian on LinkedIn, or send him an email at firstname.lastname@example.org.
Investment Advisory Services offered through Retirement Wealth Advisors, (RWA) a Registered Investment Advisor. Reviresco Wealth Advisory and RWA are not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.