Skip to comments.Lost My Job This Week
Posted on 07/04/2012 5:40:54 AM PDT by Free America52
Lost my job this week which comes on top of 4 years of putting kids to college, etc. Cash funds are depleted and I am seriously considering something I never thought - doing a strategic foreclosure on my house, cashing in IRA / 401(k) funds and paying cash for a smaller house. Just curious about everyone's thoughts?
Wow, sorry to hear about this!
Will be praying for you, a fellow FReeper, in this time of need.
As for financial advice, I’m not really qualified to give it...
You lose a LOT when you cash in the 401K/Retirement funds. Talk with a lawyer and an accountant before you take such steps. Sorry about the job.
I think paying off a house is a smart move.
How about drawing unemployment and looking for another job first? Sounds to me like you are going straight to the nuclear option.
Prayers. Times are terrible. My business is dead dead dead. Zero phone calls lately. Double the work for half the pay.
have you looked for other employment??? my wife was out of work for a while then boom! she got two big offers the same week....
hang in there as long as you can before foreclosure and depleting your retirement savings...any chance of selling your house??? short sale??
Never give up,never give in!
A close friend who was laid off at 65 just got hired - months later- in a better job.
Good luck, and prayers for you and the family.
NOT a financial genius here, but I hear people call in to Dave Ramsay all the time with questions like this. He knows what he’s talking about and is able to walk them through the tangles. Might be worth a try. What I hear is - usually there is a better way to do it than the person has thought of.
I feel bad for you man. Don’t know what to tell you.
Houses are depressedright now in most places and arent selling well. Cashing in the 401 might not be a good idea.
If you pay off a house it does not end. You still have taxes maintenance,and other expenses.
Still if the house is dragging you down it may have to go.
I wish you all the luck in th world and hope you find new employment. God Bless You man.
If you are younger than 59, the greedy government will take its chunk out of your savings if you withdraw them, so look for other ways to get by.
Cut your cable, phone, and any other frivolous expenses. (Watch free over-the-air-TV if you must have it, and buy a Trac Phone with prepaid cards.) Increase the deductible on your car and home insurance. Use restaurant coupons and clip food coupons from your Sunday paper to stretch your money. Look up money saving tips online, and you will find many more tips from others in Obama’s vast army of unemployed.
Tell everyone you know that you need a job and will take anything for now. Now is not the time to be proud.
Jesus invites you, “Call upon Me in the day of trouble. I will deliver you, and you will glorify Me.” We will add you to our prayer list.
You'll need money for food, think Food Stamps, Unemployment funds and contact your local church and/or local government for whatever is available (food, cheese, etc.).
Clothing same as above.
As for Shelter, Mortgage companies take a very long time to get around to it. Concentrate on keeping Electricity, Water and Phone going. A free cell phone may be available so think of ditching your expensive home phone.
Attend Networking course at your Unemployment office ASAP. Networking is the key to your next job. Educational funds may be available and attending courses in or near your field can help keep your sanity.
Been there with you.
If you are over 50, consult an attorney with experience in age discrimination law. File a claim for unemployment insurance tomorrow when the state office opens. Network with friends in your industry or related business to find out about openings.
Economize, but don’t ravage your retirement plan or make any radical moves with your home.
Don’t buy, rent. Just take out enough from your 401K on Dec 31 to pay the the rent each year. Also, RENT FIRST. Because when you walk away from the mortgage your credit rating goes to crap.
To everyone, thanks for your comments and thoughts. I am 56, have risen from nothing to comfortable middle class and now it is disappearing before my eyes. And I have other friends who are also in similar situations. Whoever thought we would see this type of environment in our lifetime?
Might consider other options before touching those 401Ks. My brother did that and he just got hammered with taxes. Now he’s trying to finance paying for those taxes.
You’re entitled to unemployment. Use it. It’s a messed up economy.
Good luck and hope you find something soon.
I got laid off in 2009 and sold my house, got a new job, with a better living location, etc.
I’ll be praying for you. It can be done.
When I was laid off after 40 years and 26 years with the last company, I got a severance package. Earlier that year the company changed the rules to force me to go on unemployment get the “transition benefit”. I was reluctant to go on unemployment, having never done so, but I wasn’t going to give up my package. Do what you have to do. Go for the unemployment and use the tools that come with it to find a job that replaces the income you had. Good luck!
Note - my layoff was Gulf Oil Spill related and a direct result of that little swim that Obama photo-op’d in Pensacola bay. It was done to send a message to the Coast Guard to get the Oil Spill off the front page, they cancelled our contract, and I was laid off.
I’ve been there.
Note to OP: If you go Chpt. 13, retirement savings does not count as ‘assets’. They are protected.
Find a job close to home. A different house may not be the best option if it isn’t in good condition. See Mike Holmes before signing.
hear...hear...., I know the feeling my friend.
Sorry, FRee America52...yet another Preezy O victim...
Cash in your assets, buy bartering goods, metals, tobbacco, whiskey or pure grain alcohol....time to go Galt.
With this lawless administration, and nobody on “The Hill” willing to hold them to account, it is time to go Galt.
I might be assuming too much, as we are not aquianted...if you can tap your 401 to maintain status quo until January 20, 2013, do so.
Very common situation in Obummers aMeriKa.
As you are finding out, your home is a very illiquid asset that isn't easily sold to generate the funds you may need for other things. If I were in your position I would sell the home outright and rent for a while with the proceeds of the sale before even thinking of cashing out the retirement accounts.
Most important of all ... you need to slow down, step back, get advice from people who know a lot about these things, and think carefully before doing anything that could have serious unknown tax consequences later.
What kind of leasing market do you have in your area? Depending of how much you are underwater on your current home it might be make sense to lease your current home if the lease would cover much of the current mortgage payment rather than defaulting. Next step might be to rent rather than buy a smaller place while looking for another job.Do you want to exhaust all your emergency reserve in the IRA in an all cash purchase of another home? The longer you can retain your IRA as a emergency reserve while looking the better.
I’m just thankful for you that you did not lose your job at my age with my financial situation. Pay cash for a smaller house? I probably wouldn’t qualify for a small rental. I’m holding onto the home I’ve had for 25 years, just praying our corrupt politicians don’t tax me out of it. I’ll never live long enough to find another job.
If you are not 59 1/2 you will be hit with a penalty.
Everything you take will be taxed as ordinary income, so you most likely will take a big hit there because you will be in a higher income bracket. Run the numbers.
Conceptually I like the idea.
Two years ago, I would have said “what foreclosure”, now. It might be a good idea.
God’s Speed. Think very carefully about your idea, every which way you can.
If you have a good amount in retirement savings take a loan from it for four months of your problematic mortgage payment to give yourself so breathing room to access and network.
Cut expenses. Apply tomorrow at your companies two best competitors. You may be a fresh asset to them.
Do all the employment efforts you can compile. Take any offer that will keep the lights on. I have seen people turn down an offer as too low that months later they wish they had taken.
If you are upside down due to borrowing on the house that is a separate issue — treat it that way.
This is easy advice for me to give when I'm not in your situation, but if your kids are grown and you don't have a compelling reason to stay where you are I would advise you to be open to the possibility of relocating. There are places in this country where good workers are in high demand. Maybe you don't have the ideal skill set for some of these jobs, but your best assets are a good work ethic, flexibility, and a willingness to learn. A wise employer would covet someone with these attributes, regardless of the job in question.
Sorry to hear it, FA52. But every cloud has some silver and you will find it; don’t lose heart.
Now about advice...even folks who emit advice incessantly, will not be able to tell you much without some details, which understandably you might not want to impart on a discussion forum where we enjoy anonymity.
So my advice will be general and limited.
If your kids are grown and flown, you may have too much house there. Is the mortgage substantial? With unemployment insurance, would it be in the budget? You might want to think about downsizing, even in a bad market. Strategic foreclosure, as you phrased it, can get complicated. First order of business would be to talk to an attorney and then the lender, explore lower payment options, refi, and the acceptability of various other avenues, like renting out the house and moving to another, whether purchase or rental.
Just to be on the safe side, the first thing I’d probably do in the situation: find a house in foreclosure, or a decent house going to sheriff’s sale, and buy it for cash while you still have some lying around. It is your safety net and you may one day need a safety-net house. Owner-financed homes and sheriff’s sales are out there.
You can pick up a good home for $2k or less. It won’t be the prettiest in the litter, but you must regard it as a temporary thing, a stepping stone.
And remember, when you meet with your lender, the very last thing they want is your house. They will negotiate if at all possible, and it usually is.
All is not lost. You have experience, assets, and your family. You are in very good shape, when you think about it. Don’t let this rattle you and weaken your assets or your family ties.
Cut your expenses right now. Can you live without the tv? Lower the insurance payment on the car? Live with fewer cars? It’s amazing what you can save by chatting with your insurance agent about the legal minimum of car insurance. :)
You should also talk to the local tax office and see if, given your age and income, you qualify for a discount on your property taxes. In some areas, if you’re not employed, there are some taxes you don’t pay, or pay much less.
Finally, look for a job. Any job. You never, never know what’s behind a door, and what seems like a lowly job, a bitter comedown, may actually increase your overall happiness and contentment. I’ve known people who started driving a cab or delivering pizza, and found it preferable to the career they left. Others take part time jobs and discover they can live very well on part time income.
What seems a catastrophe now, may turn out to be a blessing. The two are easily confused.
Finally, God’s got your back. Don’t forget to thank Him!
Just remember that your mortgage is your strongest tax-lowering mechanism. Talk to your tax preparer about the implications of your plans. Also, if I may say so, the only way to make real money is to go into business for yourself. If you have a skill and the time to knock on doors and make cold calls, you have a job.
Instead of selling your home, what about renting it out and you rent something cheaper yourself until things work out? Someone I know did that, eventually found a job again and was able to afford to move back into their home. Worked out for them because the value of the property had increased greatly over time. Not sure how that would shake out with your situation and this economy, but just another option to consider. Particularly if you don’t really want to lose that home.
“f your kids are grown and you don’t have a compelling reason to stay where you are I would advise you to be open to the possibility of relocating. “
Very good advice. Pessimism is your enemy. Avoid it as best you can.
I would also think about whether or not your personal beliefs and politics are known where you work and may have played a role. Stranger things have happened. If this is a possibility, you might want to look into legal options, but this is a long and painful road.
I agree. Things are bad right about now, but you have some options. Exhaust them before doing anything drastic. Prayers up.
One thing you have have to is not pay the mortgage, but don't move out. I'm in real estate and and I have seen people live in there house for 2 years without the bank setting up the court date but of course every state is different. People were able to put a lot money away before they actually had to get out of their house.
You may be able to get your mortgage monthly payment reduced by going this route.(bankruptcy)
The private sector has been hit so much more than public sector, we need to do what is best as long as it is legal to get though obama’s economy.
Now, as to the question: Since such a drastic measure comes with a lot of penalties - the foreclosure affecting credit report, the 401k cash out creating a big tax liability - the use of such a tool should be justified by a much better future outlook. Are you moving to where there are jobs? Lower property taxes? Lower cost of living?
If you are just shifting sideways in your present location and there's not a lot of great jobs available, then you're probably going to get into a lot of financial trouble for not a lot of gain.
I'm taking some random guesses here - you're somewhere near the Tech Triangle, but likely 45-50 minutes of commute away. Probably at least two cars, probably a large house with at least two extra bedrooms, and the house is probably 20 years old. A whole lot of neighbors are banks already. You're looking at the big picture, and downsizing the family home is probably at the top of the chart as your biggest expense.
But with little cash assets, it sounds like you should first go through your family expenses and cut out a whole lot of extra expenses - for a lot of families, there's a big number of hundred dollar expenses each month, and that can quickly add up to a house payment.
1) Notify your mortgage company about the change in your income. Ask for any assistance information they might have - some companies have a grace program that lets you skip a couple payments without penalty, etc.
2) Do not bother with public assistance yet - most programs work on what you earned in the previous quarter, not what you're earning now.
3) Pull out your most recent bank statements, credit card statements - take a red pen, and mark every vampire charge on that statement - Monthly phone bills - Do you need three phones? A MagicJack can replace a home phone. Downgrade handsets and drop data plans. Return cable/dish equipment. Remove kids from car insurance. Cancel gym memberships, end subscriptions. I'm going to guess that by the time you're done, you'll find out you've spent more each month on various charges, fees, and subscriptions than you pay for your house. Had a friend realize recently that he was paying Netflix, Hulu, a full cable bill, etc to just watch the over the air broadcast sports broadcast each week. Handle the yard work yourself rather than paying someone else, etc.
Once you've your expenses under some restraint, start networking with people you know - former clients, friends, family, coworkers, former coworkers - get it out there that you're looking for a job. If you're tech savvy, get it out there that you'd be willing to handle small tech jobs - fixing that blinking 1200, hooking up that TV, etc. If you're willing to relocate, make sure people know that too.
My sympathies to you and your situation. I can only offer sincere, positive thoughts to send your way and lots of prayers. God Bless.
See a bankruptcy attorney
See a bankruptcy attorney
I was in your shoes 2 years ago. It took me 6 months to find a new position. I did a multitude of things. There isn’t necessarily one right answer.
1) Take the unemployment - you paid for it - use it. This can lead to a frame of mind - why should I pick up a lower paying job than the unemployment! Been there - thought that- very depressing to acquire Welfare Mentality so quickly! However, your real issue is “Cash Flow.” Also - ANY income can REALLY screw this up. I was technically “on furlough” from my original employer, so I had health coverage still ( a god send!) but the state law where my company is located required them to pay me for holidays! 1 day of pay wiped out my income from unemployment for the week AND got them thinking I was working again! Took 2 weeks to get that straightened out without pay.
2) Selling the house in a depressed market MAY not solve your problems. Can you get enough from the house to give you a few years of cash flow and still have a roof over your head?
3) I wound up selling off Mutual funds I had purchased from an inheritance 30 years ago! This is much like your 401k answer without the negative tax implications for me. That is how I stayed a float and met my expenses without reducing standard of living. I’m not sure this was the brightest way to go. I’m now out about 30K in savings I use to have. It is what I did at the time. Vast reduction of expenses is a good idea.
4) Kids pay for their own college! That sounds heartless - but I have one in college right now! My Dad wound up going through a period like this when I was in college! It’s what got me independent! I paid for my last year 100% myself!
5) Internet sites like Dice, etc are only marginally helpful. I must have submitted 1000 applications in the 6 months I was unemployed. I did find out that you want to make your Resume searchable. That got me a few hits - directly sending your Resume to companies through websites doesn’t work at ALL. Work your contacts in your own industry, they are your best bet for re-employment. I got a contract job that was good for 2 months from one of the first people I contacted. He came through 5 months AFTER I talked to him! Then the searchable resume got me a couple of interviews, one of which got me my current position. Also - think about walking a paper copy of your resume in. That got me an interview. Finally - don’t expect to match every requirement in a job posting. If you are a 60% match they may look at you. The real trick is getting someone to really SEE your resume. Finally - the searchable resumes were found by “Head Hunters!” If I were to loose my position today, they would be the first guys I’d call.
6) Is there any line of business you can pursue out of your home, i.e. self-employed?
7) Age is a consideration. It ain’t legal, but it’s there. I shaved my gray beard off, and didn’t have anything in my Resume that gave away my age directly. I trimmed 15 years of experience off the resume too. Not telling any falsehoods -the experience wasn’t directly relevant to industry I now work in. Hiding your age in any way possible to get you in the door can help.
Sorry for your situation.
Instead of “strategic foreclosure”, have you considered simply walking into the bank and robbing them? If you get away with it, it won’t ruin your credit. It’s something to consider. Either way you would be stealing.
Exactly. No need to jump into the burning pit without first weighing your options. Give things time. Kids can get grants and scholarships or they can start paying a bit of their own way (McDonald's is hireing). Hang onto the 401K and the house. Cut everything thing you can NOW - magazine subscriptions, phone/cell extras, tv, don't eat out, stock pantry foods now while there is cash available. Call your credit cards and explain the situtation and ask for a lower interest if you have outstanding debt. Ask your auto insurance if you eliminate the "home to work" travel. Get the most important bills or monthly charges paid off NOW - all insurance payments (home, life, car), property taxes so they can't take your home later... yes, I know you said there is no money but take the $ that you can cut out and put it toward those important bills. If you don't pay your car insurance then you're subject to a fine if you're stopped and you're up the creek and can't go for job interviews if you have a wreck without insurance. Same with health insurance.
Then get your resume together and start looking for another job. Jobs are out there but many people think they're too high and mighty that they won't take a lower paying or lower prestige job. Don't be that guy.
So is up to $40K in equity in your home. Depending on location, this may allow you to stay in your present home with minimal effort.
But, again, Chapter 13 is a nuclear option to be considered as a last resort. The very threat of playing that card suddenly makes some creditors more reasonable. But it takes only one jag-off to say no.