Getting laid off is not just simply a matter of losing a
job. There is collateral damage as well or at the very least some
inconveniences that need to be dealt with. In case this layoff becomes a premature retirement, I had to take care of my bank accounts. For a long time while employed, I've
taken for granted (perhaps you too) monthly maintenance bank fees that I have
not had to pay because of my check being directly deposited by the payroll
department to my checking account. It has been one of the bank's requirements
to avoid their fees without requiring a minimum balance. Another way to avoid
fees if you had more than one account is the combined balance service where the
total from the accounts, if they don't fall under a certain required balance,
you will not get charged any fees either. With the loss of a job, the direct
deposit is gone and since there is no income and only withdrawals, you run the
risk of falling below the balance requirements. What can one do to minimize
this damage? In my case, I researched several bank's fees to find the least amount
required and found out that most of them require at least $1500 each for a
checking or savings account. I live near a credit union so I checked their
website to see their membership and minimum balance requirements. To my
surprise, it was much lesser than banks - $1 membership fee, $5 minimum in a
savings account, and $300 minimum in a checking account, with all the
conveniences that regular banks have. You know, ATM/Debit cards, direct
deposit, online banking, online bill payment, etc. The only difference is that
the credit union doesn't have as many branches as the major banks, but at least
you can find a lot of fee-free ATM's in the credit union network.
So I decided that's what I was going to do after I received
my final paycheck from my former job. I deposited that paycheck at my bank and
waited for it to clear, then the next day, I went to the neighborhood credit union
and opened several accounts. Not only did I decide to move my savings and
checking accounts there but to also rollover my work 401K to the credit union.
Would you believe that it took almost 2 hours set up those accounts? The
representative even had to rearrange her lunch break because of it. The
complicated part was setting up the rollover to a traditional IRA and a Roth
IRA from several financial institutions. That is what took the most time.
Why was it complicated? During the process, we discovered
that different investment companies had different policies on rollovers. One
required the bank to send the request to them, another required me to call them
so they could write me a rollover check to be sent to me so I can deposit it in
the bank myself. The third company had me request the rollover online and they
were going to send the check directly to the bank. I thought when I visited the
credit union to open the rollover account, all they had to do was send the
request to the three investment companies. It required more legwork,
fingerwork, and telephone work on my part to consolidate three funds into one.
Heck as of this writing, not all of the funds have been transferred yet.
I did learn something new though. The agent from one of
those financial institutions told me about the over 55 rule regarding closing or
rolling over a retirement account from a job if you are over 55 years old. Normally,
there is a 10% penalty in addition to being taxed for withdrawing money from a
retirement plan before you turn 59-1/2 years old. If you lose your job/resign/get
laid off after you are 55 years old, the 10% penalty is waived by the
government for the amount you wish to cash in, but you still have to pay the taxes.
I chose not to avail of this waiver and just asked the financial institution to
rollover the whole amount to the newly opened IRA at the credit union.
In other business, I closed my bank savings account which
was earning a paltry .10%, and moved the funds to the same bank's checking
account so I can meet the minimum balance without being charged the monthly
maintenance fee, moved some of the funds to the credit union to meet their
minimum requirements, and set up online bill pay accounts with the credit union
so I can start paying my bills from there. And as soon as everything clears at
the credit union, I plan on closing my bank account and moving everything to
the credit union so minimize the fee requirements. How's that for taking care
of business? Then there's the matter of paying off the mortgage...
Interesting article I found days after I posted this entry: http://www.dailyfinance.com/2013/11/16/no-free-checking-avoid-bank-fees/
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