Posted by Fred Lake

What Happens To Your 401(K) Loan If You Are Laid Off

What Happens To Your 401(K) Loan If You Are Laid Off

The coronavirus pandemic is not just a public health crisis. It has also ensured in the loss of millions of jobs, and a large part of the economy ceased socially in the spring of 2020. More than 26 million people already filed for unemployment at the end of April, and the Federal Reserve estimates that forty-seven million people could face unemployment before the end of the crisis. This would bring the total unemployment rate to 32%, even higher than the Great Depression rate. 

While these numbers may seem daunting, regardless of their employment status, keep in mind that economists expect them to be short-lived. 

Although many experts predict that the financial impact will be short-lived, that does not mean that it will have no real impact on those who do not have a stable income. If you are one of the millions who have recently become unemployed, you may have more immediate financial worries than retirement. But keep in mind that even if you lose your job, you have not lost access to your workplace pension plan or the money you have accrued in it.

This is what happens with your 401 (k) retirement account when you are laid off and the options you have for money invested in it.

What happens to your 401 (k) when you get laid off?

Even when you are no longer working, your retirement account remains yours. You can always check your balance, change your investment options, make withdrawals, or transfer your account. That said, some things will change:

End of employee and employer contributions

Once laid off, you generally lose access to employer-sponsored benefits, including your on-the-job pension plan. Although you can still access your retirement account, neither you nor your employer can make additional contributions. If your company has provided a match that required vesting, you will not keep any money that has not matured before your exit date.

Fred Lake
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