Happy Holidays, Now You’re Fired

Layoffs are picking up, just in time for the holidays.?

At first it was the job-slashing in tech that gobbled up all the attention. From Twitter to Amazon, tech firms have cut more than 146,000 jobs in 2022 after years of seemingly unlimited hiring, according to tracker Layoffs.fyi. Yet with each passing day, the unemployment gloom spreads. It’s reached Wall Street, real estate, crypto, and even the food and beverage industry.?

At first glance, the cuts feel out of step with the broader US labor market. Data last week showed a still-tight employment picture, with firms adding 263,000 jobs last month, well above the 200,000 median estimate in a Bloomberg survey of economists. But dig deeper, and you’ll see those gains were uneven across industries. Much of the hiring in November was concentrated in leisure and hospitality, a sector still doing a lot of “catch-up” hiring after the pandemic. Other sectors self-admittedly “over-hired” during the pandemic and are now facing cost pressures.?

Even those employees lucky enough to keep their jobs face a glum outlook on discretionary pay. Big banks, for instance, are considering cutting bonuses for some staff by as much as 30%. If that weren’t enough, bonus snubs are often seen as a precursor to firing.?

Unsettling? You bet. To deal with all this job uncertainty in the air, I emailed a few financial advisers to see what they suggested for people who have been — or believe they may soon be — laid off. I also asked them how people should prepare for a potentially smaller bonus. Here is what they told me:

Liquidity, liquidity, liquidity?

Dennis Nolte, financial consultant with Seacoast Investment Services in Winter Park, Florida

What to do about a looming or recent layoff? Stop contributing to any retirement funds unless you are putting in only what the company matches. You need to build cash. Make sure you have liquidity, even considering a loan against your company retirement plan if you’re not 55 yet. You can’t borrow against an inactive 401(k).

And a diminished bonus? Spend less on your holidays, put off buying that new car or front-loading that cruise. And make sure you have liquidity like a HELOC.

Master your severance?

Michael Wren, CEO of Legacy Financial Strategies in Leawood, Kansas

What to do about a looming or recent layoff? If you’ve been laid off and are receiving a severance package, be sure to check your state laws. Many companies will offer you the option of a lump sum or weekly severance over a period of time. The option you select may have a huge impact on the unemployment benefit you’ll be eligible for.

And a diminished bonus? If you’re expecting a much smaller bonus or none at all, consider whether you’ll be in a lower tax bracket than the previous year. Roth conversions, Roth eligibility, and other tax-related goodies may suddenly be in reach whereas in previous years they were disallowed. Remember to always invest or defer your bonus, where possible, into your 401(k) or someplace other than your checking account. That way a skipped or lower-than-normal bonus year won’t impact your spending and cash-flow management.

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— Charlie Wells

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