| What you do immediately after receiving word | | | | appropriate. |
| that your current job is gone can make a big | | | | Leave your account with your former employer. |
| difference in how you will be able to support | | | | If the balance in your employer's plan is above |
| yourself and your family. Making the wrong | | | | $5,000, you will have the option of leaving your |
| decisions can have dire consequences over the | | | | retirement assets in that plan. Each employer has |
| long term. Employees leaving their employers, | | | | different rules for the management of funds left |
| either on their own terms or on the terms | | | | behind by former employees. You may find that |
| handed to them, can greatly benefit from | | | | your employer may not offer the same range of |
| professional help to sort out the options they | | | | services that you had while you were employed. |
| have available. A financial advisor can help you to | | | | Be sure to get a copy of your former employer's |
| both take control of your financial life and define | | | | retirement plan document so that you can review |
| your goals so that you achieve the security you | | | | the terms that impact the management of your |
| need. | | | | investments. |
| Contact your state unemployment insurance | | | | Take the money out of the plan by having it sent |
| agency as soon as possible after losing your job. | | | | to you. If you receive the proceeds from your |
| UNDERSTAND THE COMPONENTS OF YOUR | | | | company retirement plan directly, it is considered |
| SEVERANCE PACKAGE | | | | taxable and 20 percent will be withheld for |
| You will likely get a package of information when | | | | anticipated taxes. You have 60 days to add back |
| you leave your employer. Included will be an | | | | the withheld 20 percent from your own funds and |
| explanation of what you will receive financially and | | | | roll over the entire amount into an IRA or other |
| what options you have to keep in force your | | | | tax-deferred retirement plan. The 20 percent that |
| health, life, disability and long-term care insurance. | | | | your company withheld will be refunded to you |
| To the extent that any of the following plans | | | | when you file your income taxes for that year. If |
| apply, you will also receive a final accounting of | | | | you are planning to roll over your company |
| your deferred compensation, stock options, | | | | retirement plan, the easier course of action is to |
| pension plans, company retirement accounts, | | | | have your company transfer the funds directly to |
| amount of severance pay and terms for | | | | your new plan. |
| collecting, and unused vacation time. Other | | | | Roll the money over to a new employer's plan. |
| benefits and sources of income also may be | | | | Do you have another job that offers an |
| pertinent to your situation. | | | | attractive retirement plan? Will your employer |
| Make sure you study the documents in the | | | | allow outside retirement funds to be transferred |
| package before signing anything and then ask as | | | | into this plan? As with your former employer's |
| many questions as necessary to fully understand | | | | plan, any subsequent employer's plan will lack the |
| what is being presented. Check your employee | | | | flexibility you could gain with your own IRA. |
| handbook to make sure your severance matched | | | | Therefore, consider rolling your former employer's |
| or exceeded the standard formula and that all | | | | funds into an IRA. By doing so, your funds remain |
| your benefits were accounted for. Negotiating | | | | tax-deferred and are positioned for future growth |
| better terms may or may not be possible. | | | | potential. If your future employer accepts |
| However, it's reasonable to ask for time to | | | | rollovers into the company retirement plan, this |
| review all the documents before signing anything | | | | option would still remain open for you to exercise |
| that may result in a permanent decision. | | | | in the future. |
| Depending on the contents and terms of your | | | | KEEP UP YOUR INSURANCE COVERAGE |
| severance package and the reasons given for | | | | If you were covered by your employer's |
| your layoff, you may want to consult with your | | | | insurance plans, you need to determine whether |
| tax advisor, attorney and/or a financial | | | | your employer is continuing to pay for these |
| professional. | | | | benefits or if you will have to pick up coverage |
| ASSESS YOUR FINANCES - Obtain a Cash Flow | | | | on your own. Most likely, it will be up to you to |
| Analysis | | | | provide coverage for yourself and your family. |
| Your first step is to take stock of where you | | | | You will have to act quickly to prevent a lapse in |
| stand financially. Where will your income come | | | | coverage. |
| from and what are your daily, short-term and | | | | Construct a safety net for you and your family |
| long-term expenses? The budget and cash flow | | | | with life and disability insurance. You may be able |
| that served you well while you were working and | | | | to convert your employer's group life insurance or |
| collecting a regular paycheck will have to be | | | | disability policy to individual coverage. If so, you'll |
| redone to reflect your new situation. Your financial | | | | have to pay the premiums on your own. Explore |
| advisor may offer a complementary cash flow | | | | other options for insurance available to you, but |
| analysis that will help you to: | | | | you may find it difficult, if not possible, to get |
| Piece together your sources of income; | | | | insurance coverage if you are not working. You |
| - Prioritize your expenditures as essential or | | | | may also find that your former employer's |
| discretionary and categorize each according to | | | | coverage is more reasonably priced than anything |
| your need to pay daily, monthly and longer term; | | | | you can find on your own. |
| - Examine the full range of your investments, | | | | Information about your insurance plans should be |
| including the cushion of cash you have for | | | | included in the severance package you received. |
| emergencies; | | | | You should carefully study these documents to |
| - Determine your insurance needs with options | | | | determine the options available to you. |
| available to you for securing coverage; | | | | Don't let health insurance lapse. |
| - Make sure you are aware of your long- term | | | | If your employer is providing insurance benefits, |
| health care needs and those of close family | | | | determine if the coverage is the same as you |
| members; | | | | had while you were employed. You may find that |
| - Pull together information about your liabilities, | | | | you are now being offered a basic policy, which |
| including your mortgage, credit card debt, personal | | | | may not fit your needs. |
| loans and others so you can get a complete | | | | - If your company employs more than 20 people, |
| picture of what and when items need to be paid; | | | | you have the right, under a government law |
| and | | | | known as COBRA, to continue employer group |
| - Take into consideration any other information | | | | coverage. You have up to 60 days to make |
| that might affect your ability to live comfortably | | | | arrangements to accept the terms of your |
| today while planning for tomorrow. | | | | employer's health coverage plan. Responsibility for |
| | | | | paying the full health insurance premium, not just |
| APPLY FOR UNEMPLOYMENT BENEFITS | | | | the employee portion, will fall to you-but at a |
| The number of layoffs continues to trend upward | | | | group rate, which may be lower than what you |
| with unemployed persons exceeding 10 million and | | | | can get on your own. A 2 percent administrative |
| the unemployment rate nearing 7% in November | | | | fee also may be added. Carefully compare the |
| 2008, according to the Department of Labor. The | | | | terms of COBRA coverage with other |
| Federal-State Unemployment Insurance Program | | | | alternatives to determine which option is less |
| provides unemployment benefits to eligible | | | | expensive and/or best fits your needs. |
| workers. You shouldn't hesitate to take advantage | | | | - Switching to your spouse's plan may be your |
| of this benefit if you meet the criteria for | | | | most economical choice. Losing a job is considered |
| collecting. Contact your state unemployment | | | | a "qualifying event" for a change in coverage |
| insurance agency as soon as possible after losing | | | | under a company insurance plan that is outside |
| your job. It generally takes two to three weeks | | | | the open enrollment period. You usually have 30 |
| after you file your claim to receive your first | | | | days to make changes in coverage under another |
| check. Some states impose a waiting period | | | | company's plan that is available to a spouse or |
| before your first check arrives, and if you | | | | domestic partner. |
| received severance pay, it may be considered as | | | | - Explore your options for private coverage |
| part of your compensation, which could further | | | | through fraternal or industry organizations. If you |
| delay your beginning date. Currently, benefit | | | | are a veteran, consider those benefits as well. |
| checks average about half your weekly pay, up | | | | Medicare is the federal medical insurance program |
| to approximately $300 per week nationwide. | | | | for those who are age 65 or older. Still, you may |
| Regular benefits extend for 26 weeks and are | | | | need supplemental insurance to cover costs, such |
| controlled on the state level within federal | | | | as prescriptions, that are not covered by |
| guidelines. During times of high unemployment, the | | | | Medicare. Finally, Medicare will not cover family |
| federal government may pass legislation to | | | | members under age 65 or domestic partners. |
| extend the length of time benefits can be | | | | |
| collected. You will have to show proof that you | | | | REVIEW EMPLOYEE STOCK PLANS, STOCK |
| are actively looking for work to remain eligible for | | | | OPTIONS AND RESTRICTED STOCK |
| continued benefits. Your state employment office | | | | If you have an employee stock plan, stock |
| has a wealth of resources to help you find new | | | | options or restricted stock from your former |
| employment, to obtain training for you or to refer | | | | employer, you will need to determine the following |
| you to information you may find useful. | | | | things: |
| DETERMINE IF APPLYING FOR SOCIAL | | | | - Do any unvested stock options become fully |
| SECURITY BENEFITS MAKES SENSE FOR YOU | | | | vested and exercisable or do they expire? Is |
| If you are eligible, the Social Security | | | | there an extension time frame for exercising |
| Administration may provide a regular source of | | | | vested options? |
| income starting at age 62. However, beginning | | | | - Will you continue to have direct access to |
| Social Security payments early will mean that | | | | shares purchased in your Employee Stock |
| your monthly check is permanently lower than if | | | | Purchase Plan? Do you have Internet access to |
| you waited until your Normal Retirement Age | | | | this account? |
| (age 65 to 67, depending on your year of birth). | | | | - Are any restrictions lifted on your restricted |
| Also, if you collect Social Security payments | | | | stock once your employment ended? What |
| before your Normal Retirement Age and begin to | | | | shares, if any, are forfeited? |
| work again, your Social Security benefits could be | | | | |
| reduced further and may be subject to taxes, | | | | A financial advisor can help you sort through your |
| depending on your adjusted gross income. | | | | former employer's plan specifics and advise you |
| Typically, it would pay to begin early collection of | | | | on a course of action. |
| Social Security benefits only if you have no other | | | | START WITH THE FOLLOWING HELPFUL |
| sources of adequate income or if you anticipate a | | | | RESOURCES |
| shorter-than-average life expectancy due to poor | | | | Government Organizations - The US Department |
| health. | | | | of Labor and your state and local governments |
| Your Social Security benefits are a key piece of | | | | offer many services to help you deal with the |
| your retirement plan. Before making any decision, | | | | effects of layoffs, especially those that result |
| talk to your financial advisor about when to begin | | | | from increased competition from imports, or |
| receiving your payments. Your financial advisor will | | | | from natural disasters and other events. Check |
| offer suggestions on how you can prepare for | | | | your local public offices for more information on |
| your future retirement security and can run a | | | | your benefits and for other services that might |
| complimentary Retirement Analysis that | | | | be available to you. |
| incorporates your potential benefits into a | | | | Outplacement Services - Many employers offer |
| comprehensive plan. Such a plan would help you | | | | displaced workers a limited amount of counseling |
| determine if the loss of your job might adversely | | | | and other services provided through an |
| affect your retirement security and offer options | | | | outplacement firm. You should be sure to make |
| for mitigating the financial shock. | | | | use of this service, since you will have access to |
| PULL TOGETHER YOUR INVESTMENT | | | | office equipment and knowledgeable professionals |
| STATEMENTS AND RETHINK YOUR PORTFOLIO | | | | who can help you find a job. You will also benefit |
| Today's economic environment may have | | | | from sharing knowledge with others in your same |
| changed the makeup of your investment portfolio | | | | situation and from having somewhere to go |
| so that your financial holdings have become out | | | | every day. If outplacement services were not |
| of balance or no longer match your current | | | | part of your severance package, this benefit is |
| needs. A financial advisor has the expertise and | | | | often negotiable, so be sure to ask for it outright. |
| resources to help you determine how your | | | | Professional Organizations - Professional |
| investments might provide much-needed current | | | | organizations can be a great way to network with |
| income, while still remaining positioned to work | | | | those in the same line of work as you. They may |
| toward achieving your long-term goals. An | | | | assist you in finding out which companies are hiring |
| asset-allocation analysis will give you the big | | | | and providing other valuable information that could |
| picture of your holdings and will help you make | | | | lead to employment. If you don't belong to a |
| sure that your current investment mix is | | | | professional organization, now is the time to join. |
| appropriate for the changes you have recently | | | | Professional organizations may also offer |
| experienced. | | | | attractive group rates for insurance and discounts |
| GET ADVICE BEFORE YOU MAKE RETIREMENT | | | | on necessary services. |
| PLAN DECISIONS | | | | Top Financial Assistance - Losing a job can have a |
| Today, most employers offer departing | | | | severe impact on your current and future |
| employees the choice of a "lump-sum" distribution | | | | well-being. Most financial advisors have access to |
| from their retirement plans when they separate | | | | numerous resources to help you get back on |
| from service. This single payment represents | | | | your feet and move forward. Ask your financial |
| years of hard work and carries with it the hope | | | | advisor for a complimentary analysis of your |
| of a long-awaited, well-financed retirement. You | | | | financial accounts and for help in making these |
| may be tempted to use your retirement plan | | | | important decisions regarding your severance |
| assets as a source of current income during your | | | | package and benefits. |
| period of unemployment. This move could cause | | | | The number of layoffs continues to trend upward |
| dire consequences to your long-term security. For | | | | with unemployed persons exceeding 10 million and |
| example, consider that most of the funds | | | | the unemployment rate nearing 7% in November |
| distributed directly to you will be subject to taxes | | | | 2008, according to the Department of Labor. |
| and will incur a possible penalty. Before you make | | | | |
| any irrevocable decisions regarding your company | | | | Graeme H. Patey is a Financial Advisor located in |
| retirement fund distributions, you should speak to | | | | Cleveland, Ohio and may be reached at |
| a financial advisor to review your available options | | | | 216-523-3015 or |
| for managing these funds. There are four | | | | |
| common options for receiving your retirement | | | | Smith Barney does not provide tax or legal |
| plan assets. Each is summarized below. | | | | advice, and it is important to consult with a tax or |
| Roll over the funds into an IRA. By rolling your | | | | legal advisor before investing. |
| company retirement funds into your own IRA, | | | | © 2009 Citigroup Global Markets Inc. Member |
| your funds will retain their tax-deferred status. An | | | | SIPC. Securities are offered through Citigroup |
| IRA gives you access to a wide range of | | | | Global Markets Inc. Smith Barney is a division and |
| investment choices and the ability to tailor a | | | | service mark of Citigroup Global Markets Inc. and |
| portfolio that is most appropriate for you. An IRA | | | | its affiliates and is used and registered throughout |
| will allow flexibility in customizing your beneficiary | | | | the world. Citi and Citi with Arc Design are |
| designations. You could also structure a payout | | | | trademarks and service marks of Citigroup Inc. |
| plan, to begin at any age, which avoids the usual | | | | and its affiliates, and are used and registered |
| early withdrawal penalties. To help you decide | | | | throughout the world. Working WealthSM is a |
| what works best in your circumstances, your | | | | service mark of Citigroup Global Markets Inc. |
| financial institution will have the services of a | | | | Citigroup Global Markets Inc. and Citibank are |
| financial advisor who will work with you to design | | | | affiliated companies under the common control of |
| a retirement investment portfolio that is most | | | | Citigroup Inc. |