6 tips to navigating unemployment during COVID-19

Co-authored by Jane Salmen, president and founder of Human Capital Partners, LLC*, who specializes in helping those in transition move forward and realize their next career or professional endeavor.

The financial impact of the COVID-19 pandemic is being felt globally across industries. Companies, both large and small, are seeing their revenues and earnings come to a screeching halt due to social distancing efforts used to combat spread of the virus; this reality has meant many businesses are closing temporarily or altogether.

The economic fallout has been unprecedented: In just one month, more than 22 million Americans, or more than 10% of the U.S. workforce, have lost their jobs.1 Furthermore, economists at the St. Louis Fed project the total unemployment rate to be 32%, with more than 47 million Americans out of work.2 Said differently, there is roughly a one-in-three chance you or someone you know has or will become unemployed as a result of COVID-19.

So, in addition to having legitimate health concerns associated with the COVID-19 pandemic, workers across the globe are now faced with an added layer of stress brought on by loss of employment and income. We’ve put together several tips to put yourself in the best possible position during these unprecedented times.

Tip 1: Take a deep breath

No matter the reason for losing your employment, the experience can be downright unsettling and even traumatic.

Often our jobs are our identity, but we cannot let shame or fear throw even more isolation on top of required self-quarantine measures. The first step to navigating unemployment is to pause, take a deep breath and reassure yourself that everything is going to be ok — calmer heads will prevail in the subsequent days, weeks and months. Be quick to remind yourself that being unemployed is a point in time that, believe it or not, will eventually pass.

Tip 2: Apply for unemployment insurance benefits

If you’ve lost your employment due to the COVID-19 pandemic, or if your place of employment is temporarily or permanently shut down, you qualify for weekly unemployment payments from the state in which you worked. Claims for unemployment insurance can be made online, over the phone or in person. Each state has specific guidelines for who can collect, as well as varying payment amounts, but the aim is to replace roughly half of one’s lost income.

The CARES Act, in which the federal government has entered into agreements with all 50 states to fund several new unemployment compensation programs, extends the unemployment payment period an additional 13 weeks and offers an additional $600 per week in payments from the time a worker has lost employment until July 31, 2020.

Typically, benefits are deposited within two to three weeks of filing your claim, but due to the high volume of claims being filed right now, you may need to prepare for a delay.

Tip 3: Maintain health insurance coverage

After becoming unemployed, your health insurance benefits usually end, leaving you with three main options to obtain coverage. These options include moving to your spouse or partner’s health insurance plan, continuing your employer-sponsored health insurance as allowed by the Consolidated Omnibus Budget Reconciliation Act (COBRA) or purchasing health insurance on an exchange.

Option 1: Enroll in spouse or domestic partner’s employer plan

Most employer health insurance plans will allow already enrolled employees to add coverage for their spouse, domestic partner and children under age 26 who were not already covered under the plan. Thus, for someone who has become unemployed, obtaining coverage through a spouse or domestic partner’s health insurance plan is an option.

If your spouse or domestic partner was enrolled in your health insurance plan and had declined their employer’s coverage, they are now able to enroll in their employer’s plan. This is because losing your job results in a loss of insurance for your spouse or domestic partner, which is considered a qualifying event. A special enrollment period begins and allows for the initiation of coverage outside of the normal open enrollment period.

Be mindful that most employers will require their employees to apply for health insurance coverage during the special enrollment period within 30 days of a spouse’s loss of previous coverage.

Option 2: Continue COBRA insurance

If your former employer is still in operation and has an employee count equal to or greater than 20, COBRA mandates that the employer must offer their former employees the right to buy and maintain health insurance coverage for 18 months.

When considering the COBRA route, there are a few points to consider.

First, the entire premium cost, up to 102% for your employer’s plan, is now your responsibility. Often the new cost of health insurance coverage is considerably higher than the amount you were previously paying, as your former employer will stop subsidizing premium costs.

Secondly, your former employer must notify you in writing about your rights under COBRA. Once this happens, you must make a decision within 60 days whether or not you will continue COBRA health insurance coverage.

Lastly, insurance premiums for COBRA can be paid using HSA dollars.

If the COVID-19 pandemic forced your employer to go out of business, health insurance coverage through COBRA will not be an option.

Option 3: Enroll in Affordable Care Act coverage

The federal government, through the passage of the Affordable Care Act (ACA), offers another option to obtain health insurance coverage. To gain coverage using an ACA plan, you usually need to provide documentation outlining that you lost insurance coverage. Subsequent enrollment in a health insurance plan needs to happen within 60 days of losing coverage.

In most states, selecting and enrolling in an ACA plan takes place on the federal healthcare.gov site. Some states have their own ACA marketplaces.

Generally speaking, ACA health insurance plans have high premiums, but federal subsidies based on income exist, and they serve to reduce monthly premium costs.

If you’re unemployed and without your normal level of income, qualifying for these federal subsidies may be a possibility that would have otherwise unavailable.

Tip 4: Organize your finances

After you have applied for unemployment insurance and safeguarded the continuation of health insurance coverage, the next priority is to understand how you will pay your monthly expenses while unemployed. Focus on assessing your monthly income and expense situation because if you need to spend less, a budget will help.

To create your budget, start by listing sources of income, like severance or unemployment insurance, and their duration. Next, list all your current monthly expenses. These include fixed costs like mortgage, rent, utilities, insurance payments, groceries, and gasoline, as well as discretionary items like entertainment or dining out.

To improve monthly cashflow during your span of unemployment, forego any nonessential monthly expenses. Generally, this means removing discretionary expenses, but it’s important to be judicious in reviewing fixed costs as well.

Another potential measure for improving cashflow is to notify lenders, creditors or landlords and apply for forbearance or a modified payment arrangement.

The goal in preparing a budget is to determine if you have a monthly cashflow shortage, and for how long. It’s recommended to project your sources of income and expenses for the next 12-18 months. In the event you end up having a shortage, determine how much more money you will need to draw upon from other sources such as an emergency fund, taxable investment account or retirement account.

While retirement accounts should be considered a last-resort option for meeting monthly expenses, it should be noted that the CARES Act has made exceptions to normal rules for these accounts given the COVID-19 pandemic. Dubbed coronavirus-related distributions for individuals who have contracted coronavirus or who have suffered adverse financial consequences due to the coronavirus outbreak, distributions from a retirement account in 2020 will not be subject to a 10% penalty if the person is under 59.5 years of age.

Retirement account distributions can also cumulatively total $100,000. Distributions are still subject to income taxes; however, the taxes due may be paid over three years. Notably, you can repay retirement account distributions made in 2020, free of income tax, if your financial situation improves, so long as repayment occurs within three years of the date the money was received.

If income taxes are paid on a withdrawal and the decision to repay a 2020 distribution is made, an amended tax return can be filed to recover the taxes.

Tip 5: Seek guidance and begin planning

During times of uncertainty and high emotions, a person’s decision-making ability can become compromised, especially when unemployment and loss of income are involved. Choosing to work with a financial advisor can help you avoid making costly financial mistakes. Historically, financial advising was built on the transfer of technical information to clients — advice on cashflow, taxes, investments, insurance, retirement and estate planning. More recently, however, financial advisors are also complimenting their technical knowledge and advice with behavioral coaching, serving to help clients remain disciplined through challenging times in the short run.

Generally speaking, financial advisors should spend time discussing and updating their client’s comprehensive personal financial plan. When you have a financial plan, it is easier to see the big picture, focus on the long-term, and make sound financial decisions in the present.

Tip 6: Refocus and revamp

During this period of unemployment, as you are adjusting to job loss and all that is happening in our world due to COVID-19, it’s important to work through your feelings.

Like other people in your situation, at times, you probably feel at a loss. You may also feel anger, fright, frustration and failure. These emotions are very normal, and it’s healthy to acknowledge them — you have just been forced into an unexpected and unwelcomed phase in your life. Try to keep in mind that the COVID-19 pandemic is a once-in-a-century anomaly, and businesses that downsize and lay off employees are making business decisions, not attacking you personally. After you have been able to recalibrate and acclimate to your new situation, refocus yourself and begin working through this transition period by preparing yourself for employment once life returns to normal.

First, prepare a powerful, up-to-date resume and LinkedIn profile. While you are not alone in your unemployment, you are unique in that no one has your set of skills. Draw on your professional experiences and accomplishments to build a powerful resume and LinkedIn profile that summarize and highlight you, your story and your brand.

After completing your marketing materials, you are ready to launch your employment search. This involves identifying and using a variety of sources to discover potential employers and opportunities.

Apply multiple marketing campaign tools as you begin your job search, including networking, search firms, recruiters, target company websites, and professional associations. A high percentage of professional openings are not public knowledge. Networking — communication with a purpose — has become a necessary skill to discover employment opportunities. Career experts agree that more professionals complete a successful career transition through networking than all other methods.

Take advantage of the resources that are available to you. In addition to unemployment, federal, state and local governments offer additional services and benefits. Many workers who lose a job through no fault of their own may need some help returning to work. Finding a job under these circumstances can be stressful and overwhelming. The Dislocated Worker program, a federally-funded program, offers free services to help laid off individuals find suitable reemployment and help take the stress and uncertainty out of the process. Services are tailored to address an individual’s specific needs.

Additionally, the Dislocated Worker program offers financial assistance for individuals interested in training programs, from short-term training, brushing up skills or getting a new certification to long-term training for new skills in a new field.

Oversee your search, manage it effectively and make the best use of your time and effort. Be mindful that searching for new employment is hard work, and as such, maintaining a positive attitude is critical in the job search process. When you land in your new position, continue to re-examine, and improve. Also, reflect on your accomplishments through this challenging time of your life — even small wins can inspire big change more than ever during this time.

What to do when unemployed: Ask questions

By taking a measured approach to your unemployment, you can ensure your ability to endure short-term financial hardships and position yourself for long-term financial and employment success once the COVID-19 pandemic subsides.

If you have questions about how else COVID-19 may impact you, or if you are looking for additional information, reach out directly to Wipfli Financial Advisors. And to further help navigate the impact the coronavirus has had on you or a loved one, please visit our affiliate Wipfli LLP’s COVID-19 resource center

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6 tips to navigating unemployment during COVID-19

Wipfli Financial Advisors, LLC (“Wipfli Financial”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC); however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Wipfli Financial is a proud affiliate of Wipfli LLP, a national accounting and consulting firm. Information pertaining to Wipfli Financial’s management, operations, services, fees and conflicts of interest is set forth in Wipfli Financial’s current Form ADV Part 2A brochure and Form CRS, copies of which are available from Wipfli Financial upon request at no cost or at www.adviserinfo.sec.gov. Wipfli Financial does not provide tax, accounting or legal services. The views expressed by the author are the author’s alone and do not necessarily represent the views of Wipfli Financial or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Wipfli Financial, and Wipfli Financial does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Wipfli Financial of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
John Shevlin

CFP® | Financial Advisor

John Shevlin, CFP®, is a Financial Advisor with Wipfli Financial Advisors in Minneapolis, MN. John focuses on comprehensive financial planning for individual clients and families, and also specializes in serving business owners seeking strategic advice and transition planning.

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6 tips to navigating unemployment during COVID-19

time to read: 9 min