By Mike Gibbons, RICP®
No company is immune to corporate challenges regardless of past success or long-term prospects. This is especially true given the unique economic conditions of the past several years, including historic inflation, rising interest rates, a rumored housing bubble, market volatility, and the threat of a recession. Even the most seemingly stable companies can face unexpected losses and be forced to lay off employees.
Unfortunately, the past two months have seen mass layoffs in nearly every market sector, with job losses from Amazon, Twitter, DoorDash, Meta, Cisco, and Goldman Sachs reported. The pharma industry is no exception, with AbbVie laying off 99 employees in September 2022.
While there is no official word on additional layoffs from Abbott Labs or AbbVie, you may be worried about what to do if your job is on the line. To help navigate this delicate situation of a current or potential layoff, here are 4 steps you can take to ease some of the financial stress.
What Should You Do?
The first thing you should do if you have been laid off, or you’re facing a potential layoff, is to remain as calm as possible and remember you are not in this alone. Don’t be afraid or too proud to seek help. You will also want to map out a systematic approach to address your financial concerns. Talking to a qualified financial professional can be a big help if you find yourself in this situation.
Many people are devastated when they’re laid off, and it can be a very emotional time. Making important financial decisions under heightened emotional stress can be a very dangerous combination. In addition to any concrete financial advice they might provide, an outside financial professional can help alleviate some stress and help you avoid making poor decisions. In addition, they can take some of the financial planning burden off your shoulders so you can focus on finding a new job.
Understand Your Current Financial Situation
The first step after a job loss is to have a clear understanding of your current financial situation. This will involve an “inventory” of your current assets, debts, short-term needs, long-term goals, and retirement outlook. Don’t forget to consider any severance package you may have been offered as well as the options for your 401(k) and any company stock you may have accumulated.
Once you have a clear picture of where you are currently, you will be able to map out how far your current savings will get you in the event you experience an extended job hunt. Just knowing what you have, where it all is, and how to access these financial resources to best meet your living expenses during the job hunt can help reduce overall stress levels.
Create a Plan to Move Forward
Once you have completed the initial inventory of your financial assets and have a clear understanding of what you have, it is time to focus on liquid emergency funds and medical benefits to provide for your family during the job hunt. How long will your existing benefits be in effect? Will you need to turn to COBRA? What other medical benefits options might be available?
Your plan should also look at a projected time frame for your job hunt so you can map out and track expenses against liquid emergency funds. You will likely need to implement an adjusted household budget. If you have accumulated significant shares of company stock, if, when, and how to access these funds is also an important aspect to plan for, especially with regard to potential tax consequences.
You should also consider future job criteria. If you have multiple job opportunities, it’s worth your time to project out how the difference between company matches, profit sharing, pensions, and other benefits will affect your near-term and long-term financial future.
Consider Your Retirement Planning Options
When you change jobs, you have the unique opportunity to reevaluate different options for the money you’ve acquired and saved. For example, Abbott Labs/AbbVie has a very generous benefits package, and those leaving the company will likely need to consider what to do with their 401(k), employee stock options, as well as any vested company stock shares. If you’re close to retirement age, it may be helpful to review your Social Security benefits and personal retirement savings and consider how all this might integrate with the benefits package offered at your next potential job before you accept it.
During a job transition, you typically haver four options (and may engage in a combination of these options), each choice offering advantages and disadvantages:
Leave the money in your former employer’s plan, if permitted.
Roll over the assets to your new employer’s plan, if one is available and rollovers are permitted.
Roll over to an IRA
Cash out the account value
When rolling over your 401(k), pay special attention to the different treatment of Roth and traditional funds. Each rollover option will have different rules and potential tax consequences, so it’s important to carefully address these concerns with a financial professional who can help you make the best decision for your specific situation.
These same considerations will apply to any company stock options and any vested company shares you may be able to take with you.
Depending on the next job you choose and the benefits offered, you may also need to adjust your retirement plan. For example, the difference in benefits offered by Abbott Labs/AbbVie as compared to your next company could have a positive or negative effect on your ability to retire on time.
Review Your Investments and Risk
If you’ve been with Abbott Labs/AbbVie for several years, you may have accumulated a significant amount of company stock. While this can provide an incredible opportunity to improve your financial standing and supplement your retirement assets, it can also greatly impact your overall investment risk. It is not uncommon to see households with 70% or more of their entire net worth in one company stock.
While this may have been a fun ride on the way up, now would be an excellent time to reassess your situation and your risk tolerance, as well as find smart ways to diversify into a more risk-appropriate portfolio. Not only can this improve your chances for long-term investment success, but it can also improve your chances of reaching your long-term retirement goals.
Take Action Today
If you or someone you know was laid off from Abbott Labs/AbbVie, or any company for that matter, we’d be happy to discuss your situation and help you understand your options going forward. Call 224-419-5550 or email me at Mike@gibbonsfinancialgroup.com to schedule a complimentary consultation. And be sure to join our free webinar, Retiring Early From Pharma.
About Mike
Michael J. Gibbons is founder and president of Gibbons Financial Group, an independent advisory firm providing custom-tailored financial planning and investment management services to pharmaceutical and healthcare professionals and their families. Mike has over 25 years of experience and spends a significant portion of his day working with pre-retirees and retirees, focusing on asset management, Social Security and pension planning, as well as retirement income preparation.
Mike has degrees in both business and psychology from Lake Forest College and currently holds his Retirement Income Certified Professional (RICP®) designation from the American College. Mike was named a Five Star Wealth Manager for 2016 and 2018* Mike is heavily involved in his community, having served on the Village of Gurnee Police Pension Board as a Community Volunteer and the St. Patrick’s Parish Financial Board. When he’s not working or volunteering, Mike loves playing golf and spending his time with his wife and children. To learn more about Mike and how he can help you, connect with him on LinkedIn, visit his website, and register for his free webinar, Retiring Early From Pharma, created specifically for professionals retiring from the pharmaceutical, biotechnology, and healthcare industries.
*Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2016/2018 Five Star Wealth Managers.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.