Key steps to take following a job loss
Consider these adjustments to your financial strategy to help you stay on track.
If you're confronted with an unexpected job loss, the changes to your income, benefits and life situation will likely require some adjustments to your financial strategy. Here, we'll explore some steps you may want to take to stay on track as you carve a new path ahead in your career.
Understand the terms of your layoff
Before signing on the dotted line, make sure to carefully review the terms of your layoff so you know exactly what you're agreeing to. For example, if your company offers a severance package, note the amount and if it will be paid in a lump sum or a continuation of salary for a set period. Also note how long your employer's benefits coverage will last, as well as any unused time off you may be paid for.
It's also a good idea to gather any paperwork you might need for the future, like stock incentive documents, information related to retirement, references from colleagues and managers, and any written and creative work to add to your portfolio (to the extent allowed by law, your employer’s rules and/or professional standards).
Taking the first steps following your layoff
Here's a handful of steps you may want to take shortly after the loss of employment to help put yourself in the best financial position. Be aware that many of these steps are time-sensitive:
File for Employment Insurance (EI) benefits
While EI may not replace your salary, it can provide up to 55% of your salary up to a maximum of $650 per week, for up to 45 weeks after job loss. The process of filing a claim can be time-consuming, and there is a short waiting period before you can begin to collect, so consider filing as soon as you can.
There are some requirements to be eligible for EI, however, including your unemployment being involuntary and through no fault of your own, and meeting the benefit criteria for time worked and earning requirements. You can learn more about Canada's Employment Insurance benefits and leave online.
Adjust your budget and spending
The loss of income following a layoff will likely require some changes to your budget and spending, at least in the short term. Try to focus your spending on the essentials, like housing, utilities and food, and see where you can cut costs—or substitute for less expensive alternatives—on the non-essentials, like dinners out and entertainment.
If you're saving for longer-term goals, like retirement or education, it may make sense to pause those contributions temporarily.
Evaluate other sources of income
As you review and adjust your spending, consider how other sources of income can help support you during this transition. In addition to severance and EI, the income of a spouse or partner may cover a portion of your expenses. For any shortfall, look to cash in chequing or savings accounts including cash in TFSAs and non-registered investment accounts.
Other options may include stock incentives, using the cash value of insurance policies or annuities, accessing retirement accounts, selling taxable investments, and various borrowing options. Your Edward Jones advisor can help navigate the trade-offs of these alternatives.
Review your benefits coverage
Some employer benefits may continue for a set period after a layoff, so it's important to know which benefits are included and how long you'll be covered. Here are some common options for maintaining coverage after that grace period ends.
- Spouse's/partner's plan — If your spouse or partner has benefits through their employer, receiving coverage through their plan may be an option. You may only have a short window to enroll, so it’s important to notify the employer and sign up quickly.
Understand your employer retirement plan options
Though you can no longer contribute to a company retirement plan once you've left the company, there are various options for your former plan your financial advisor can help you understand your options.
Decide what to do with the money you've saved
Depending on the type of retirement savings plan, you may have different options available upon leaving your job. Some of the most common include:
- Group RRSP – you can transfer the amount in your group RRSP to an individual RRSP. There are no immediate tax consequences to this transaction, as the transfer occurs on a tax-deferred basis.
- Deferred Profit-Sharing Plan (DPSP) – depending on the terms of the plan, and how long you've contributed, you may be able to transfer the amount to your RRSP. There are no immediate tax consequences to this transaction, as the transfer occurs on a tax-deferred basis. If you have not been in the plan for a sufficient period of time (as defined by the terms of the DPSP), the amount in your DPSP may have to be returned to the employer.
- Registered Pension Plan – depending on your age, province of residence, and type of pension plan, there may be several different options available, including:
- Transfer the amount to either a Locked-In Retirement Account (LIRA) or Locked RSP (LRSP). Amounts in excess of your "maximum transfer value" may have to be transferred to other accounts and may create immediate tax consequences.
- Purchase an annuity by sending your pension assets directly to an insurance company for the purchase of a deferred or immediate annuity.
- Remain in the pension plan, although no new contributions are permitted. Depending on your age at the time you leave the employer, you may be able to start receiving your pension immediately or deferred to a later date.
- Transfer your assets into your new pension plan (if you start a new position at another firm that also has a pension plan) if both pension plans permit.
Deciding what to do with your retirement savings when leaving a job is an important decision with many considerations. Your Edward Jones advisor can work with you to help you determine the appropriate path forward.
Understand your employer life insurance options
If you had life insurance through your employer and need to maintain that coverage, explore if your policy is portable (you can keep group coverage for a limited period) or convertible (you can convert your group policy to an individual policy). You generally have 30-60 days to elect this, so keep your deadline in mind.
If you aren't covered through work any longer, talk with your advisor to determine how much life insurance you need and whether you should purchase or increase coverage on an individual policy.
Carving a career path forward
Working through the list above may help you feel more confident in your financial position following a job loss, and more prepared to take on your next career opportunity.
As you start looking for new positions, consider speaking with a legal professional if you've signed a non-compete agreement with your former employer to understand how this may impact your future job options,. From there, update your resume and LinkedIn profile and start networking both for potential career opportunities.
How we can help
A job loss can feel overwhelming, so don't hesitate to reach out to a financial advisor, who can help you prioritize your budget, explore different options for covering your living expenses, and help reduce the financial impact.
Insurance and annuities are offered by Edward Jones Insurance Agency (except in Québec). In Québec, insurance and annuities are offered by Edward Jones Insurance Agency (Québec) Inc.