Amid the recent wave of layoffs, employees have a lot to consider in order to keep themselves financially secure today and in the future.
In the past month alone, tech companies including Twitter, Meta, Amazon and others have laid off tens of thousands of workers. Partnered with
"With all the turnover that's out there, either voluntary or involuntary, the big question is, do you want to use your retirement assets to get by in the event of a job loss or job change?" Parks says. "This was something we talked about when the pandemic was in full swing and it's the same message as now, which is that: no, that should be your last resort."
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In the event of a layoff, employees have a few options to make sure their
"You have to know how much your monthly expenses are and then see where you can trim and still have enough cash in the bank to cover around six months of those," Parks says. "That'll give you an opportunity to make better decisions."
If and when an employee does lose their job, they don't need to dump out their retirement accounts immediately, either — even when an employee no longer works for an employer, their 401(k) balance can stay in an employer-provided account. While the employee would no longer be making contributions or receiving matching funds, the money will still stay invested, and employees will avoid penalties that come with liquidating their assets.
"The retirement assets that you've accumulated at an employer are in your name. They're your dollars and investments and even if you're no longer an employee of that company, you have the right to keep those investments in that plan," Parks says. "But if you think there's something better out there, you can make a decision to do a rollover."
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Employees can decide to invest in an IRA through a brokerage of their choice, and then instruct their current 401(k) provider to roll their retirement dollars into the account. Individuals would then have to reinvest those funds through their new account to keep saving. Once an
In addition to not digging into their retirement savings early, employees should also work to keep track of their funds, Parks says. While leaving and changing jobs can be emotionally taxing, employees shouldn't let their savings fall to the wayside. At the end of 2021, there was $1.35 trillion left in forgotten 401(k)s, according to Capitalize, a fintech company that facilitates 401(k) rollovers.
"It's crazy to think that people would have an account and forget about it, but we've all been in that boat," Parks says. "But those things are out there even if you're not paying attention to it — you can go back to old statements or contact your old employer to find out what your options are."
If you've really lost track of a 401(k) account, it's possible the state has a record of unclaimed or abandoned assets, Parks says. While this is more of a long-shot, it's a worthwhile effort to ensure that every dollar is accounted for.
While an employee may not have much goodwill for an employer that laid them off, it could be prudent to ask for resources on next steps when it comes to retirement funds and other financial matters, Parks says. Companies should provide guidance through their offboarding process and help employees make a plan.
"Upon separation — and this really does depend on the quality of the company and their offboarding procedures — businesses should be letting a person know their role, their rights and responsibilities and providing some resources," Parks says. "A lot of people aren't comfortable having to become their own investment expert, so this is an opportunity to introduce employees to a financial adviser."
