Author: Nick Prigitano
We've seen from the unemployment numbers that more and more people are losing their jobs because the coronavirus. We hope that this will only be temporary, and in the next few months life and work will return to normal. In the meantime, if you're one of the many who have lost their job or have had hours reduced, there are likely unemployment benefits you can apply for through Massachusetts. While this won't replace all your previous income, having some money coming in is better than nothing. In addition to the normal benefits through MA, the federal government recently passed the CARES Act which expands unemployment benefits along with other assistance for individuals and businesses. Here's what you should know about filing for unemployment in Massachusetts and what your benefits might be.
How do you apply for MA unemployment benefits?
To file for Massachusetts unemployment benefits you can either create an account online, or call their service number. As a result of the stay at home order the unemployment offices, like most businesses, are temporarily closed in Massachusetts. If you decide to call, expect long delays because many individuals are requesting benefits right now.
The fastest way to apply is by registering online. When you register online you will need to provide some basic information about you including your Social Security number, address, phone number, and employment history for the last 15 months, among other things.
Once you have registered you can now apply for your unemployment benefits. This is something that must be requested each week in MA, as long as you remain unemployed.
Are self-employed individuals eligible for unemployment benefits?
Generally, self-employed individuals are not eligible for unemployment benefits. However, the CARES Act does extend unemployment benefits to self-employed people. Unfortunately, as of this writing Massachusetts does not have the system set-up for self-employed people to apply. If you are self-employed and are currently not able to work, we suggest you follow the MA unemployment page for updates. The page clearly says that self-employed people will be eligible, it is just not a system Massachusetts has set-up at this time.
They do note that although you are unable to apply at this time, benefits will be backdated through when you would have been eligible for benefits. They expect to have this system available later this month.
What is the amount of unemployment benefits in MA?
The unemployment benefits you receive in MA are based on your earnings from the previous year and work history. Specifically, you can receive up to 50% of your average weekly wages up to a maximum of $823 a week. You may also receive additional money for any dependents that you have. You can use the MA unemployment estimate calculator to approximate what your benefit may be.
In addition to your normal benefit, the CARES Act also has a provision to increase weekly benefits by up to $600 a week. This federal program has already begun in MA. If you are currently collecting unemployment there is nothing additional you need to do to collect from this federal program.
How long do unemployment benefits last in MA?
The maximum amount of time your benefits can last is 30 weeks. However, based upon the calculation the length of your maximum unemployment benefits may be shorter.
Another benefit of the CARES Act is that it extends unemployment benefits for another 13 weeks once your Massachusetts benefits are exhausted. If you do run out of state benefits, there is nothing additional you need to do at this time. However, they do ask for claimants to check back for updates in case this changes.
To qualify for benefits, MA usually requires the attendance of certain work-related seminars and to apply for jobs weekly. Due to the pandemic they are waiving the requirement to attend seminars. However, it appears as if the work search component still applies, but will possibly be more lenient. They ask that you do 3 separate job searches each week and to keep a record of this activity in order to qualify for benefits.
What if you work in a surrounding state and live in MA?
Where you file for unemployment depends on where you work and where your employer pays unemployment taxes for your labor. If your employer pays unemployment taxes to MA, even if you work in a different state, you would file for unemployment with Massachusetts. This is something you should ask your HR department if you are unsure where to file. If you're unable to get this information from your previous employer, you could file for unemployment in Massachusetts and if you do not qualify you will get denied. In that case try to apply in the state you work in.
Financial planning considerations if unemployed
Being unemployed is certainly a difficult and stressful situation for both the unemployed individual and their family. However, this is a crucial time to not make any financial mistakes that will hurt your long-term financial planning goals. We recently wrote an article about general financial planning considerations during this pandemic. Here are some specific suggestions for unemployed individuals or those at risk of becoming unemployed.
Beef up your emergency fund
If you're fortunate enough to still be working, now is a good time to revisit financial planning 101 and make sure you have the basics covered. A good rule of thumb is to have at least 3-6 months' worth of living expenses (mortgage/food/utilities/etc.) saved in cash as an emergency fund in case an unexpected expense comes up, you lose your job, or your income is reduced. If you're still working, now is a good time to build up your emergency fund if it isn't where it should be already. If you are especially at risk of losing your job in the near-term, it may be prudent to have additional cash set-aside beyond the typical 3-6 months to prepare.
It's likely that your expenses have decreased since the pandemic because many individuals are not eating out or shopping as often with many businesses closed. These forced expense cuts are a great way to add additional savings to your emergency fund that you may not have been able to before.
Don't cash out your 401k!
A common mistake that we see when someone loses their job is that they immediately cash out all, or a portion, of their 401k. Sometimes this happens automatically if you don't take action by a certain time after being let go. While there may be a need for additional money, it's important to review all your options before pulling from retirement accounts.
There is a general order of where money should be taken from first in a time of need. The first step is to make a new budget and base any shortfall after taking into consideration your unemployment benefits. Second, you hopefully have an emergency fund that you can use before pulling from retirement savings. Third, if you have investments outside of retirement accounts, those will probably be the next best source. Lastly, if your unemployment persists, then it may make sense to take money from your retirement account, but only as much as you need to get by and should be reevaluated month to month. This is a complex decision with many financial implications and is something you should speak with a financial advisor about before doing.
Taking money from your retirement account can be disastrous to your long-term financial planning goals. To begin, your investments value is likely down from its recent levels only a few months ago. By selling stock to access additional cash, you are locking in lower prices without allowing the stocks to recover, as they historically always have. Selling when the market has significantly fallen can have disastrous effects on your long-term investment performance and financial goals.
Also, any money taken from a 401k is taxable to you. For instance, if you're in a 25% tax bracket and take out $10,000, $2,500 will be owed in taxes so your net is only $7,500. Therefore, you're really not getting as much money as you think out of your retirement account, and could be in for an unwelcome surprise at tax time next year.
Thankfully with the CARES Act if you're under 59.5 the additional 10% early withdrawal penalty is waived for many who need to take money from retirement accounts as a result of the coronavirus. Also, the bill allows for eligible money to be paid back to the retirement account over a 3-year period. However, even with the benefits, it does not change the fact that you are potentially locking in lower stock prices by selling, and that you will need the additional cash in the future to reimburse yourself for the money taken. Both of these considerations can impact your long-term financial success.
It's important to note that cashing out your 401k is much different than rolling it over to an IRA. Depending on your 401k provider, when you leave your employer, they may force you to take the money out of your 401k within a certain amount of time. If you don't make a decision, they will send you a check, with is most likely something you don't want. Instead of that, you can move the money from your 401k to an IRA doing what's called a direct rollover. This is not taxable to you because you moved from one retirement account to another. If you can stay with your previous employer's 401k there still may be reasons to roll over these funds. To determine which course of action is best for you, we suggest speaking with a qualified financial advisor.
Keep some structure and take time to improve yourself
Losing a job and being unemployed is never easy. It's crucial to not make the situation worse by acquiring bad habits along the way. While unemployed you should try to stick to some form of a schedule as you did when you were working. This means getting up at a similar time, exercising, eating normal meals, and doing some productive work during the normal hours of the day. This will provide a form of structure instead of having all your time sucked away by binge watching Netflix. (Although we’ve heard that Tiger King is a must watch.)
While unemployed, many spend this time applying for new jobs. During this time, you likely won't be able to apply for many jobs in Massachusetts. But, there are other things you can do to make the day productive. Fine tuning your resume is a good place to start. You could also tackle some of those home maintenance projects that you never seem to have time for. A great thing you can do during this additional time is to learn a new skill. The digital era has made it easier than ever to acquire free knowledge on the internet.
Websites such as Codecadeny or Free Code Camp provide basic tutorials on some of the more common programming languages. Other websites such as Coursera or Alison have free courses on a variety of topics. You can pay to receive a diploma at the end of some programs, but if you're trying to limit expenses, as most people are, you can do the free versions to get most of the learning content. Coming out of unemployment with a new skill can be a great way to make yourself more marketable when businesses start to hire again. It’s also a way to structure your day doing something productive just as if you had been going to work.
Being unemployed is never easy, especially in these uncertain times. It's important to know what your Massachusetts benefits are that will hopefully fill the financial gap between now and your next job. There are also things you should and should not do while unemployed. It's crucial to not make any irreversible mistakes that will hinder your long-term financial goals. For help with your financial plan, especially during uncertain times, we suggest reaching out to our financial planning team and working with one of our qualified advisors.