By Financial Planning Standards Council
Job loss is one of those life events that packs a whammy, both financially and emotionally. Often it happens unexpectedly, with many ill-prepared for the sudden changes that it brings. Whether you are laid off from your job, find yourself facing an unexpected “early retirement”, or suddenly find yourself unable to work because of a serious accident or injury, the financial impact can seem overwhelming—sometimes even devastating.
As you consider your options, you’ll want to ask yourself some key questions.
- Is the layoff a short-term phenomenon, seasonal or permanent?
- Have you been offered a severance package? If so, should you try to negotiate for more?
- Once you receive the money, what is the best way to use the money?
- What should you do with your existing pension plan (commute, move, or leave the plan where it is)?
- Are there opportunities around pension splitting that may benefit you at tax time?
Dedousis also cautions against making common mistakes. “Often, individuals want to immediately eliminate debt by withdrawing investment savings, but this can bring both tax ramifications and the prospect of leaving too little for retirement,” says Dedousis. There are alternatives to liquidating everything right away, he says, and these options need to be explored with a professional who is qualified in financial planning before embarking on any emotionally-charged decision.