Financial Survival – Insurance and Retirement Plans

    Published: 06-16-2009
    Views: 12,026
    Mark Johannessen, financial planner and member of the Financial Planning Association talks about putting a plan into place after losing a job. This video will focus on insurance and retirement plans.

    Mark Johannessen: Hi! I am Mark Johannessen, and I'm a financial planner and a member of the Financial Planning Association. I'm here to discuss job loss. Right now, I'm going to talk about insurance and retirement plans.

    In a sense, we touched upon employee benefits in our discussion of severance packages. So let's look at these financial planning areas next.

    Make maintaining health insurance our top priority, because getting hit with a major medical expense without insurance would be financially disastrous. See if your former employer will continue coverage for you. Convert benefits under the employer's group plan to coverage under an individual policy. Switch to a working spouse's plan. Typically, you have 30 days to make this change, because loss of job is considered a qualifying event that allows the change outside of open enrollment periods.

    COBRA is a federal program that may allow you to continue group plan coverage for upto 18 months. However, you must pay the full premiums and often a small administrative fee. Losing a job will likely force you to make some crucial decisions regarding any retirement account you had at your former employer such as a 401(k) plan, 403(b), or other qualified plan.

    Typically, you will have four choices, cash out, roll the funds over into a new employers account, roll the funds over into an individual retirement account, IRA or leave it in your former employer's plan. Also, know that funds, that are fully vested and/or employee contributions in a 401(k) are not subject to the claims of an employer's creditors. Thus, these funds are not at risk if the employer experiences financial difficulties.

    On the other hand, depending on the state where you leave an IRA may not have the same creditor protection. Now let's move from employee benefits to a very special aspect of financial planning, spending plans, debt, and investing.