In the news recently, two high profile companies in Texas announced layoffs. Even when the country is prosperous, sometimes companies trim their workforce. But, whatever the reason for their downsizing, it puts people out of work.
Many of us have experienced severance at least once in our lives. It’s a difficult and stressful time, yet for many, it is one of the most important moments in our lives. In these uncertain times, it’s critical to make the right financial decisions for the future.
Know your severance
Job cuts aren’t taken lightly. Your employer must provide all the paperwork that they’re legally required to give, but it’s important to DO your own due diligence, so scrutinize your severance package thoroughly. Make sure you have your latest signed contract, that you keep any correspondence relating to bonuses, and any corporate paperwork that relates to severance.
With a pocket full of cash, it might seem like a good time to splurge on a new car, but DON’T! That new BMW can wait. Speak to a financial planner about your own unique situation. Depending on your age and individual situation, it might make sense to readjust your allocation of stocks, bonds and cash.
Any decisions you make may seem subtle but could have far-reaching consequences, so DO talk with your financial planner about the options available. At GDS Wealth Management, we’ll connect you to the right people to ensure that you get what you’re entitled to receive.
To cash-out or not, that is the question
My immediate reaction is “DON’T do anything yet!”. If you’re under 59½ then cashing-out your 401(k) could have serious financial consequences, such as a 10% penalty.
Talk to a financial planner who will recommend a variety of options. Remember, you may not have to do anything. Most companies won’t force you to leave their 401(k) plans. Granted, they won’t continue to contribute, but they won’t make you redeem the value either. In fact, some employers have alternative plans available for ex-employees, which would allow you to keep your money in one place.
DO talk to a financial planner
You’re an expert in your own field. At GDS Wealth Management, we have experience in financial planning, so whatever your field of expertise, we recommend that you take a step back and look at your own unique situation through the eyes of a financial expert.
We ask clients to review their finances and career goals. After a few discussions and some soul-searching, many of our clients decide to roll back their career ambitions in favor of more family time or less traveling. In fact, some clients decide to change careers altogether.
It’s not a race
There are a few deadlines that usually relate to the severance package. Otherwise, I always say to people “Don’t rush.” Talk to a financial planner who will connect you with other professionals. Afterwards, we’ll slow down the process and thoroughly analyze your finances. There’s still time for that new BMW but maybe not right now!
GDS Wealth Management is not a registered broker/dealer and is independent of Raymond James Financial Services. Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Any opinions are those of Glen D. Smith and not necessarily those of RJFS or Raymond James.
As Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.