6 Tips to Stay on Track to Achieve Your Investment Goals After a Job Loss

If you’ve been laid off, furloughed, or need to take unpaid leave to care for yourself or a loved one, it can be easy to fall behind on your good financial habits. After losing a job, when you are in economic survival mode, who has time to think about investing for the future?

But losing income doesn’t have to derail your financial plans. You can prioritize your recovery while protecting your financial future. Here’s how to keep your investments going even when your career is on pause.

Apply for unemployment

Unemployment benefits can help you make ends meet until your next job comes along — but only about 25% of unemployed workers receive these benefits. This is despite the fact that full-time employers are obligated to pay Federal and State Unemployment Insurance Program Through taxes. Researchers believe that unemployed workers often do not apply for their unemployment benefits because They think they are not qualified. for them.

Your state of residence is closely tied to the number of unemployed people who apply for benefits, since eligibility requirements vary from state to state. But if you lost your job for reasons beyond your control, it’s a good idea to apply for benefits through Your state’s unemployment insurance officeIn most states, benefits last up to 26 weeks, and although the amount of your weekly benefit is generally low, receiving unemployment insurance benefits can help you stretch your savings much further.

Hold the course with your investments

Losing income does funny things to an investment plan. Suddenly, the prospects of dollar-cost averaging and long-term investing can seem too slow, and the siren song of quick-and-dirty investing can seem too tempting. Why wait for compound interest over time when you can invest in Uncle Neil’s Beanie Baby NFT and officially retire a millionaire in six months?

Although you may be fully aware of the risk of investing in anything your Uncle Neil suggests, don’t assume you’re in the right emotional place to make the best decisions about your investments. Long-term investing only works if you are in it for the long term. Shifting your asset allocation to something that seems like it might solve your short-term problems is a sure way to cause bigger problems for yourself.

In general, it’s best to leave your investments in the event of a major financial crisis. In the immediate aftermath of a job loss, you’re more likely to make reactive decisions based on your current emotional state. This imposes lasting consequences on a temporary problem.

Once you’ve had a little time to adjust to your new circumstances, it may make sense to consult with your financial advisor to determine whether your investment plan will still meet your needs and goals — including how to handle ongoing contributions.

Depending on your circumstances, you may need to pause contributions while you’re unemployed. (This is easy if you’re contributing through automatic deductions from your paycheck. Otherwise, you’ll need to pause your contributions manually.) But if you can afford to keep investing, even if it’s just $5 a month, it pays to keep up the habit of investing while you’re unemployed. Every dollar you save now is a dollar that will grow for your future.

Get health care coverage as soon as possible

Unfortunately, leaving a job in America often means losing your access to health insurance coverage. Since medical care is a big expense in every budget, the first thing you should do after any career setback is find out what your health care coverage is.

There are two ways to get health care coverage after leaving a job: continue your workplace-sponsored health insurance through COBRA or purchase insurance from the ACA Marketplace.

Cobra Coverage Allows workers to temporarily continue their group health insurance after a job loss, reduced work hours, or other major life change, such as death or divorce. However, you may be required to pay the full premium, up to 102% of the plan cost, to maintain your COBRA coverage. Since your employer would likely pay a portion of the premium to keep costs down for employees, this option can be very expensive. Also, COBRA coverage is generally only available for up to 18 months after you lose your job.

Alternatively, losing your employer-sponsored health insurance qualifies you to enroll in… ACA Marketplace Health Plan– Without having to wait until the general enrollment period from November 1 to January 15. Affordable Care Act plans offer savings based on your income, so this can be a more affordable option for health care coverage. Just remember that income from your previous job is included in your estimated income for the year, which is how the Affordable Care Act determines whether you qualify for savings on Marketplace health plans. If the job you lost was a high-income one, you may not be eligible for Affordable Care Act savings this year.

strategic withdrawal

In a perfect world, your emergency fund would be enough to cover your living expenses during any period of unemployment or underemployment. Since this is also the fantasy world where you floss every day and never finish a pint of Ben & Jerry’s by yourself, it’s okay if that doesn’t describe your situation.

So where can you get the money you need while you weather a downturn? After you’ve exhausted your emergency fund and unemployment benefits, you might consider these two other sources of cash:

Home equity line of credit

on 48 million American homeowners By 2024, borrowers were able to build equity in their homes, averaging $206,000 in usable equity per borrower. That kind of money can be a lifeline after losing income, and there’s a simple way to tap into it: a home equity line of credit (HELOC).

This type of variable-rate revolving credit allows you to borrow money when you need it, pay it back, and borrow it again over a draw period, which is typically 10 years. While most HELOCs are used for major home renovations or other major expenses, money from a HELOC can be used for any expense — including living expenses while you’re unemployed.

You only pay interest when you borrow money from a HELOC, so having a line of credit that you don’t use won’t cost you anything. That’s why it may be wise to open a HELOC while you’re working to keep it as a backup in case you need it.

If you borrow from a home equity line of credit, don’t take out more than you need. You’ll have to repay that money, with interest, and defaulting on your home equity line of credit could put your home at risk.

Roth IRA

Standard advice puts your retirement accounts completely off limits, but one of the main advantages of a Roth IRA is that any and all contributions can be withdrawn tax- and penalty-free whenever you need them.

Roth IRAs require you to have the account for at least five years and reach age 59½ before you can withdraw earnings without taxes or penalties. But any money you put into the fund is fair game at any time. Since you’ve already paid taxes on your contributions, Uncle Sam will let you access that money at any time.

The only downside to withdrawing money from your Roth IRA is the loss of compound interest. Losing that growth potential is nothing to sneeze at, which is why withdrawing from this account shouldn’t be your first resort. But accessing the money in your Roth IRA will be less expensive than tapping into any other retirement account.

Don’t let the setback crush you

No one’s career follows a straight upward trajectory, which is cold comfort when you’re in the middle of a career setback. The key to surviving and thriving through loss of income is to take advantage of unemployment insurance, stick to your investment plan even if you feel financially stressed, make sure your medical expenses are covered no matter how long unemployment lasts, and stay afloat. Strategy on how to access cash.

If you adopt these strategies, your career setback won’t necessarily lead to a long-term financial setback.