Don’t Leave Any Money On The Way Out

October 06, 2015

I was recently talking to a dear friend of mine who just lost her job due to a layoff. She was shell-shocked, scared and not sure what to do. As I listened to her talk about her plan, I asked her about her workplace benefits and she said that she got the package, saw no value in anything she had and was getting ready to throw the package away.

I told her that some of the best financial products and services most people have are through their employer and some of the benefits can still be used when she left. She perked up a little when I said that. I looked at her benefits package and saw a treasure chest of benefits:

Heath savings account. Her company offered a high-deductible medical plan eligible for a health savings account or HSA. Even better, she and her company have been funding the plan for years and she was surprised to learn that she had several thousand dollars in the account. I told her that the HSA belonged to her and that she can take it with her and continue to use the account for medical expenses. She was thrilled to also learn that if she is receiving unemployment insurance and/or paying COBRA premiums, she can use her HSA account to pay for her medical premiums.

Health care coverage. COBRA insurance allowed my friend to continue her health benefits even after she left. She found the medical premiums to be too high but was surprised that the dental and vision were pretty low. Since my friend was healthy with no health issues, she chose to get her medical insurance through the healthcare exchange, pay the premiums with her HSA account and continue her dental and vision since she needed dental work and wore glasses.

Life insurance. My friend was pleasantly surprised to find out that her life insurance was portable and much cheaper than what she could have gotten now on the individual market so she chose to keep her life insurance policy.

401k plan. My friend looked at her options for her 401k plan. She could cash it out but did not want to face the 10% penalty plus possible additional taxes. She could roll the money over into an traditional IRA, leave her money in the existing plan, or move the funds to her new 401k plan. My friend liked the simplicity of having all of her funds in one place and after reviewing her new employer’s 401k plan, decided to roll it into that one.

Everyone’s situation is different so the best decisions may be different for you. If you experience a layoff, make sure you take the time to review your benefits package. For example, if you have 30 days before your benefits end, that may be a great time to do an annual checkup, get dental work done or get a new pair of glasses before your benefits run out. Reviewing your benefits can go a long way into making your transition as smooth as possible.