Pack That Parachute

By Jean Chatzky

First, the good news: If the war is over in a month, about 1.7 million new jobs will be created over the next year, according to forecasts by Gus Faucher, senior economist at Economy.com These jobs wouldn't quite equal the number that have been lost in the past two years--2 million--but they would be a good start.

The bad news: if the conflict in Iraq drags on, there will not only be additional layoffs but longer ones too. Still, you aren't powerless. If you think you might be laid off--and especially if you have already been given notice--there are moves you can make to ease the lean times of joblessness. But don't delay; once you're off the payroll, some of these moves will no longer be possible.

SECURE YOUR HEALTH INSURANCE. This is your No. 1 issue, especially if your policy is vital for covering family members. If you're in a position to negotiate severance, try to get your company to extend health benefits through the severance period or beyond. If you have a working spouse, see whether it's possible to be added--along with any dependents--to his or her plan. Many companies allow such additions in the event of a job loss. Of course, there's COBRA--the federal law that lets you maintain your prelayoff health coverage for 18 months by paying out of your own pocket. But you may be able to do better on your own. A good place to start is eHealthInsurance.com

OPEN A HOME-EQUITY LINE OF CREDIT. This is not for living off the equity built up in your home. This is for emergency use, and the only way to get a competitive rate (the current average is about 5%) is to seal the deal while you're employed.

CONSIDER CONTINUING OTHER COMPANY-SPONSORED INSURANCE. Many employees who have group life, disability or long-term-care coverage through their company are, at the time they're laid off, offered the option of converting to individual, self-paid coverage at rates substantially lower than on the open market. If you have the savings to swing it, the cost of maintaining these benefits can be worthwhile, especially in the case of high-priced (and underappreciated) disability insurance.

RECONSIDER YOUR 401(K) PARTICIPATION. Cashing out your 401(k) retirement account early--and paying the resulting tax and penalty--is a measure of last resort only. One thing you need to question, though, if you will be receiving severance paid out over time, is whether to keep making contributions during that period. If you're vested and you will get a company match, by all means continue. If not, you may as well stop.

MAXIMIZE FLEXIBLE-SPENDING DOLLARS. Here's a nifty loophole pointed out by Nancy Collamer, author of The Layoff Survival Guide: you can be paid the full amount of your annual, planned contribution to a pretax flexible-spending account for health care even before you have made the full annual contribution. So if you're worried about getting laid off, the usual December rush to the doctor may need to come early. After a layoff, you can make claims for only the amount that has accumulated in the account.