- Do you qualify for government benefits?
- Are you entitled to severance?
- What are the tax implications of a severance?
- Do you still have group benefits, or do you need to replace lost coverage?
- Do you need to make a decision about a company pension or savings plan?
- Will you need to use investments or debt to fund expenses if you cannot easily replace your job?
For those who are close to retirement, a job loss may be a reason to update a financial plan to determine if you can afford to retire in the same timeframe as you’d previously envisioned, and help make decisions related to pensions and insurance coverage. But for those who are searching for a new job, short-term financial planning is probably more important than long-term.
Business
The impact of the pandemic and other significant life or business changes should prompt someone to revisit past planning. As with a job loss, though, some of the considerations should likely be short-term in nature, like:
- Do you qualify for government benefits?
- Should you be considering reducing hours or laying off staff, even temporarily?
- Should you change or reduce your own compensation (salary, dividends, shareholder loans, etc.)?
- If you need to supplement cash flow, should you take withdrawals from your investments?
- If you need to borrow money, should you borrow personally or corporately?
- Is the business still viable and profitable enough to keep running?
Some of the business planning a business owner can do should be done with assistance from their accountant or an employment lawyer. Some require the business owner to make reasonable assumptions about the future of their business.
I have worked with business owners over the years whom I have encouraged to consider closing their businesses and getting a job elsewhere. This may not be appealing to some business owners, but it may be easier than going down with the ship, so to speak.
Like anyone, a business owner should revisit their financial plan from time to time, as significant changes may impact retirement, spending, saving and tax strategies.
The upshot
COVID-19 has had a big impact on different people in different ways. Some studies have shown that significant unexpected events are among the main contributors to retirees having saved too little for retirement, as opposed to things like poor investment returns or simply not saving enough each month.
Years from now, there may be people who look back and cite the pandemic as one of the contributing factors to their own retirement savings regret. Now is a good time to hit pause and assess your finances, and it may or may not be a good time to update a financial plan.
Most importantly, the younger you are in your financial journey, the more important it is to know there may be other such negative events that occur during your life. Hopefully, the positive surprises outweigh the negative ones.