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Losing your job is one of the most stressful events in life because it brings about many unwelcome changes all at once.
Financial concerns tend to be the first things that preoccupy your mind. The imminent loss of income can trigger a great deal of anxiety and worries about how you will take care of yourself and your family.
Unemployment is incredibly challenging even under normal circumstances. But when a job loss happens during a global health crisis, the personal struggles can seem that much more daunting and disorienting.
For those who’ve lost their jobs or are anticipating a layoff due to the coronavirus pandemic, here are some steps to consider that could help relieve some of the financial pressures you and your family might be facing right now.
The loss of income is one of the first things you want to tackle. To receive unemployment benefits, you have to first file an unemployment claim with your state’s unemployment agency. Claims can usually be filed online or by phone.
Each state manages its own unemployment insurance program, so eligibility requirements, benefit amounts and the duration of those benefits can vary state by state. Many state programs can provide benefits for up to 26 weeks for the unemployed, providing, on average, half of an individual’s previous wages.
In response to the coronavirus, the federal government has expanded unemployment benefits under the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 to help Americans who are out of work as a direct result of Covid-19. Of note, you don’t necessarily have to be unemployed to qualify for benefits: The CARES Act provides assistance to furloughed workers as well.
The law aims to help Americans facing unemployment in three key ways:
Good to know: Your eligibility for unemployment benefits under the CARES Act depends, in part, on how your state chooses to implement the law and on your personal circumstances. To find out more about the eligibility rules and how you can file for unemployment benefits, visit the US Department of Labor’s Unemployment Insurance Relief webpage.
If you’re planning to apply for unemployment, try to do it as soon as you can. Traditionally, it would take up to two or three weeks after you file to receive your first benefits payment. But due to the overwhelming number of people filing for unemployment, the application process may take longer than usual. For questions regarding the unemployment insurance program in your state, the DOL recommends visiting this website for the most up-to-date information.
For many Americans, losing a job means losing health insurance coverage as well. According to the US Census Bureau, as of 2018, approximately 55% of people get their insurance through an employer.
If you were covered by a workplace health insurance plan and recently lost your job, reach out to your HR department to see if there are any options for continuing coverage through COBRA, a federal law that may allow you to stay on your employer’s plan for a limited time. If you’re married and your spouse is still working, you may want to see what the coverage options are through their employer.
Beyond workplace options, there is also the possibility of purchasing a new policy through your state’s health insurance marketplace if you qualify for a Special Enrollment Period. If you meet certain qualifying life events – such as losing coverage because you’ve been laid off – you can qualify for a Special Enrollment Period, which allows you to sign up for health insurance outside of the yearly open enrollment period.
For more information on how you may qualify and enroll, visit Healthcare.gov.
If you qualify for unemployment benefits, the weekly payments can help cover some of your essential expenses (e.g., rent, groceries, utilities, etc.). But it may not completely make up for the loss of your old paycheck. This means it’s time to tighten that budget belt. The goal here is to make your money last for as long as possible.
Look at your monthly expenses and see what discretionary items you can cut out – for example, any subscription services, takeout deliveries, new clothes or cable packages. There may be expenses that you could simply cut back without eliminating them altogether. Phone and internet services are a good example of this – see if you could sign up for a cheaper data or service plan.
Basically, identify the items that you can do without for now, so that you can shift your money towards paying for things you need.
Because of the unprecedented nature of this crisis, many banks, financial services institutions and other service providers are stepping up to help their customers.
Banks. Contact your bank and see how they can help. Here are some questions you might want to ask: Are they able to waive certain fees or other account requirements? If you have loans, are there options to suspend your payments temporarily? If you have a credit card account, is there any way to negotiate a lower interest rate? And if you need it, ask about what short-term loan or personal loan options are available.
Mortgage lenders and servicers. If you own a home, get in touch with your mortgage lenders and servicers to see if they can offer any flexibility when it comes to your mortgage. The federal government has introduced several relief programs for homeowners. For instance, if your mortgage is owned by Freddie Mac or Fannie Mae, you may be eligible for mortgage forbearance for up to 12 months. Visit the Federal Housing Finance Agency for more information on other types of relief that may be available for both homeowners and renters.
Other service providers. Some utilities, phone and insurance companies are also offering their own financial assistance programs. Communicate any financial hardships you may be experiencing with your service providers and see what they can do to help. Some companies are waiving late fees, suspending any policy cancellations for nonpayment and even offering credits to certain accounts. Even if you’re not sure if your service providers are participating, ask. Every little bit you can save can help in the long run.
A word of caution: Money in your IRAs or 401(k) plan is for your retirement days, so you should not tap into those savings unless you really need it. Taking money out early may take you farther away from your retirement goals. Also, keep in mind that withdrawals and loans from your retirement accounts can come with many tax considerations. Even though the CARES Act provides some flexibility in accessing your retirement money in 2020, it’s still a good idea to talk to your financial advisor first if you must reach into your retirement savings for emergency money.
That being said, the CARES Act allows for penalty-free hardship withdrawals – up to $100,000 – from qualified retirement accounts (e.g., a 401(k) plan or IRA) if you have been impacted by the coronavirus and can meet certain requirements.
While the typical 10% early distribution penalty is waived for coronavirus-related distributions in 2020, the distributions are subject to federal income tax, which can be paid (spread evenly) over a three-year period. Generally, taxpayers have the option to repay (or recontribute) such distributions within three years, which will not be counted towards the annual plan contribution limit. If the distributions are repaid within three years, they will not be subject to federal income tax.
In addition to the hardship withdrawal, if you have a qualified retirement plan that allows you to borrow against the account, such as a 401(k) plan, the CARES Act doubles the general loan limit to $100,000 or 100% of your vested account balance, whichever is lesser.
To read more about these two options, check out our CARES Act article.
Local volunteers and organizations are coming together to offer various types of assistance in their communities – whether it’s filling food pantries, ensuring daily access to meals for those in need, providing aid to seniors who might be stuck at home or directing individuals to mental health resources.
These local community programs can make all the difference for those who are struggling through these difficult times. To get information on what all is available in your area, visit 211.org, a resource center supported by United Way that can help connect you to the social services available in your neighborhood.
If you’re interested in taking on a temporary job, look at the types of opportunities that might be available in your area. While much of the economy is at a standstill, select industries (e.g., on-demand services, grocery stores, etc.) are hiring due to consumer demands for delivery services.
If you’ve lost your job recently, your family, friends and former colleagues are probably worried about you. Take a moment to check in with them to see how they’re doing and let them know how you’re holding up.
Don’t be shy about asking for assistance if you need it. In one way or another, the coronavirus pandemic has impacted everyone. Your loved ones and those in your professional network may want to help however they can. Being able to lean on and support one another will help us get through this crisis. Hey, it really does take a village.
As you navigate through this challenging period, don’t forget to be kind to yourself.
For many of us, our job is a part of our identity: It helps to define who we are and gives purpose, structure and routine to our day-to-day life. So when you lose a job, it can be hard to cope with all the changes and to stay optimistic about what lies ahead. That’s normal – give yourself some time to adjust.
Going through some of these steps might be frustrating and demoralizing. But you can get through this difficult time with patience, self-care and the support of your loved ones.
This article is for informational purposes only and is not a substitute for individualized professional advice. Individuals should consult their own tax advisor for matters specific to their own taxes and nothing communicated to you herein should be considered tax advice. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of Goldman Sachs Bank USA, Goldman Sachs Group, Inc. or any of their affiliates, subsidiaries or division. Goldman Sachs Bank USA does not provide any financial, economic, legal, accounting, tax or other recommendation in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA or any its affiliates. Neither Goldman Sachs Bank USA nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.