Financial Watch | February 2023

Financial Strategies For Surviving And Thriving In Today’s Changing Job Market

Following recent announcements of large-scale layoffs among some of the nation’s largest employers in the technology, housing and financial services sectors, January’s glowing jobs report came as a surprise. While many economists and government officials viewed these layoffs as a sign that the labor market was cooling, January’s job growth report appeared to confirm the opposite. The labor market, as a whole, is running hot—at least for now. The labor market added 517,000 jobs in January 2023, about double the size of December’s gain, pushing the unemployment rate down to 3.4%, its lowest level since 1969. According to the U.S. Bureau of Labor Statistics, job growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care.1 So what does this mean if you’re among the thousands of American workers caught up in a layoff, or simply looking to change jobs in the months ahead?

Whether a job change is planned or unexpected, it can be stressful and lead to unanticipated financial consequences, especially if it takes longer than expected to line up an opportunity with a new employer. That makes it important to have a strategy in place for how you and your family will continue to meet your lifestyle needs if you experience a disruption in income. Below are five things you can do now to help weather a job change in today’s evolving labor market.

1. Build Adequate Emergency Savings.

Even if you’re starting another job within days or weeks of leaving a former employer, it can take several weeks to get set up on your new employer’s payroll system. That makes access to cash reserves critical for bridging the gap during a career transition. Remember, you will still have expenses to pay during that transition period, which may include costs associated with a rent or mortgage, utility bills, meals, transportation, cable, internet, cell phone service, and more. If you anticipate a job change, think about ways you can shore up your emergency savings now.

2. Create A Transition Budget.

In addition to those listed above, you may have additional expenses associated with a gap in employment. These may include costs that were previously subsidized through your former employer for healthcare, daycare or a gym membership, or unreimbursed expenses related to your job search, such as travel for out-of-town interviews. Remember, the Tax Cuts and Jobs Act of 2017 suspended the deduction for moving expenses and job search expenses for most taxpayers for tax years beginning after December 31, 2017, through January 1, 2026.2 So it’s important to revisit your budget when making a career change to ensure you’re capturing any temporary increases in spending or new expenses that your budget will need to accommodate.

3. Take Advantage Of A New Tax Law.

Short on cash? Effective January 2023, the SECURE 2.0 Act of 2022 allows for up to one penalty-free distribution per year of up to $1,000 from a qualified retirement plan for unforeseen emergency expenses, with the option to repay the distribution within three years. However, you may not take another emergency withdrawal during that three-year period unless the initial distribution has been paid back. And while the 10% early withdrawal penalty has been waived, the distribution(s) is still subject to ordinary income tax in the year it is taken.Qualified plans include 401(k), 403(b) and similar employer plans, or an individual retirement account (IRA) you have established on your own. Keep in mind, it’s generally recommended that you consider all other options before tapping into your retirement plan accounts, since these assets benefit from tax-deferred compounding, which may allow them to grow faster as you pursue your long-term retirement goals.

4. Decide What To Do With Your 401(K).

If you currently participate in an employer retirement plan, it’s important to decide what you will do with those assets once you leave. You generally have four options: 1) leave the money in your former employer’s plan if the account balance is $5,000 or more, 2) cash out, 3) move the assets to your new employer’s plan, or 4) roll all or a portion of the assets to an IRA. The plan administrator at your former employer is required to notify you of your options and can answer any questions you may have about the choices available to you. However, a word of caution—cashing out is generally not recommended as distributions are subject to both taxes and penalties if you are under age 59 ½. Even if you are 59 ½ or older, any pre-tax contributions will be taxed as ordinary income upon withdrawal, which can significantly reduce the amount of money you keep. More importantly, you want those assets to continue to grow on a tax-deferred basis to help support your retirement goals for another 30 years or more.

5. Don’t Overlook Taxes.

Avoiding potential pitfalls is just one reason why revisiting your tax strategy is so important whenever you experience changes in your life. Certain situations may even create opportunities. For example, if you’re unemployed for several months, that could temporarily push you into a lower income tax bracket. That could present an opportunity to roll some of your retirement plan assets into a Roth IRA, since they would be taxed at a potentially lower rate. Always speak with a tax professional before making any decisions that may impact your taxes.

Want to learn more? Let’s schedule time to talk about how a proactive strategy can help you protect your income and your lifestyle as you pursue the goals that matter to you.

1 “Employment Situation Summary.” U.S. Bureau of Labor Statistics, 3 Feb. 2023,
2 This suspension does not apply to members of the Armed Forces of the United States on active duty who move pursuant to a military order related to a permanent change of station.

3 “SECURE 2.0 Act of 2022.” Senate Finance Committee, 19 Dec. 2022.

This information was written by KRW Creative Concepts, a non-affiliate of the Broker/Dealer.

This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.

Before deciding whether to retain assets in a 401(k) or roll over to an IRA, an investor should consider various factors including, but not limited to, investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock. Please view the Investor Alerts section of the FINRA website for additional information.

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