Unemployed - where to withdraw first?

[mozar]

I was laid off in March and I've been using the cash in my bank account to pay bills (runs out this month). I have about 50k in a Vanguard account that is less than 5 years old. I also have about 10k in a mutual fund (American Century) that I have had since 1995. This is separate from my tax deferred accounts. I was going to start with Vanguard because the mutual fund I would have to pay a lot of capital gains taxes. Am I thinking about this right?

[jennifers]

sorry you got laid off :(
Are both the accounts taxable? They aren't special retirement accounts?

[pecunia]

Good luck - It can be very painful being out of work depending on the circumstances. 

These appear to be good times for job searching.  Keep pounding the pavement. 

[Gone_Hiking]

I'm sorry to hear about your layoff.   

Capital gains tax rate for funds held more than a year is zero% for taxpayers in the 10% and 12% tax brackets.  Since you've been laid off in March, you might not have to pay any capital gains taxes on your withdrawals.  Unless, of course, you get a well-compensated job soon, which is more likely now than it was two years ago.  Job market seems to be good nowadays - like @pecunia  mentioned, keep your chin up!

[mozar]

Thanks for all the support! I plan on retraining for a different career so I don't plan on going back soon. I'm sure glad though that I kept my head down and worked so hard for the past 10 years.

capital gains tax rate for funds held more than a year is zero% for taxpayers in the 10% and 12% tax brackets.

That's a good point, I got 20k in payment for 2018 and that might be it. So I would lean toward the mutual fund then.

They aren't special retirement accounts?

Correct

[Acastus]

It is worth saying, now is the time to trim as much as possible from your expenses if you have not done so yet. You need internet and a phone, but you don't need cable or an I-fone X. Gym fees, dining, subscriptions, lawn service - these all go. It is temporary, just until you have income again. Throttle back, and your cash lasts longer.

I have been there. I finished my MS in 1 semester the last time I was unemployed. Severance + UI paid for a lot, but I had more expenses. I had a pretty healthy emergency fund, and it served me well.

[radram]

I was laid off in March and I've been using the cash in my bank account to pay bills (runs out this month). I have about 50k in a Vanguard account that is less than 5 years old. I also have about 10k in a mutual fund (American Century) that I have had since 1995. This is separate from my tax deferred accounts. I was going to start with Vanguard because the mutual fund I would have to pay a lot of capital gains taxes. Am I thinking about this right?

No doubt this sucks. Been there. In my opinion you should not be asking yourself where to draw from first. You should be asking how much do I need to keep from drawing anything. I would call it treading water. Most Americans would just be calling it living their lives.

In this economy, you should be able to find something that pays the bills while you figure out all the other stuff. Protect your hard earned stache by trimming expenses to the bare minimum and get something that keeps you from going backwards. Be open to the idea of moving if there is nothing in your area. Many areas of the country are absolutely desperate to find bodies willing to work.

All that being said, I have seen many American Century funds, and many of them have high fees and do not outperform. Yours could very well be costing you money. Which fund do you own? Assuming I am correct, I would look into using this temporary dip in your income to see if you can sell it while keeping inside the 0% capital gains tax rates, and transferring that money into your Vanguard account (presumably buying index funds, like you did with the 50k already there).


Keep us posted.

[LilMissMinimalist]

I was in your shoes in February. I had been very unexpectedly laid off after 10 years with the company. I had been trying to pay off debt, so I had very little in savings to fall back on. I was lucky to have 2.5 months severance. I knew the only way I could get ahead in my situation was to erase the debt, which would cut my monthly expenses in half. I did the math, and could *almost* get by on unemployment alone, should it come to that.

I cashed in 50% of my 401k and rolled the other 50% into an IRA. In one sweep I paid off all my debt, and used what was remaining of the cash-out to pay ahead any other commitments I could (switched all my monthly subscriptions to annual plans, for example).

Fast-forward to today. My first day at my new job. I have no credit card debt, very low monthly financial commitments, finally a respectable credit score and the most money I've ever had in savings in my life (I managed to stay very busy freelancing the past few months).

Getting laid off was the best thing to ever happen to my financial life.

[mozar]

Which fund do you own?

It's Ultra TWCUX

[radram]

Which fund do you own?

It's Ultra TWCUX

This fund has performed well, outperforming the market as a whole, in fact. The disadvantage to this fund is the .98% expense ratio. If you wanted to stay in a similar fund (large cap growth) with lower expenses, you might try VLACX from Vanguard.