What would you do?

[Crystal1588]

My husband's company announced yesterday that it was merging with a much larger company.  He has been at his job for 2 years and is mid-level making about $85,000/year gross.  I also work making $40,000/year gross.  We also have rental income of about $400 net each month.

Our expenses are about $4,000/month including our mortgage.  No debt except mortgage. 

There has been a lot of talk about people being let go.  While right now there has been no huge writing on the wall that he would lose his job, we're always trying to be proactive.  We are maxing out my 401k (I have a 25% match up to federal limits so my company contributes $4500/year into my 401k) and also putting a lot of money into saving for rental properties (adding it to mutual funds as of now). My husband also maxes his IRA.  So we put about $28,000 into retirement accounts.  We have about $20,000 in liquid or near liquid assets. 

Should we be setting more money aside in liquid accounts in case he loses his job? I feel like he would find a job quickly (Web Engineer) but who knows.  I just want to make sure we're being as smart about the possibility as possible.  I also know that there is a good possibility he won't lose his job.

What would you do?

[Thegoblinchief]

I would, since your cashflow would be quite negative on your salary alone, unless you have a reasonable expectation of a severance package if he is laid off.

I guess it depends on exactly how negative your cashflow would be, and how many month's buffer you want.

[Lucky Girl]

I think it depends a lot on how close you are to FIRE and how much income could be generated by your stash.  If all you have is the rental at $400 per month, I'd be funneling all into cash right now.  But if you have a stash that could provide you a decent cushion for a while (especially when unemployment benefits are factored in) then you could stay closer to your current course without any concerns.

Emphasizes once again how important that stash is to giving you a sense of control and lack of FEAR!

[tonysemail]

I would sleep fine with 6+ months of living expenses in an emergency fund.

[frugaliknowit]

At this point, it's "just a merger".  I would continue on your path for now.

If a layoff becomes imminent, I would reroute any new unmatched savings to a liquid account until a new job is secured and cut unnecessary expenses.  Fingers crossed, best of luck!

[SwordGuy]

$20,000 in liquid assets / ($4000 monthly expenses - $400 rental income) = 5.5 months of living expenses.

I'm betting you could cut expenses a bit if you had to.

And if you're making any money, you have even more months of living expenses.

Assuming your husband is willing to move  ( or at least work out of town in the short term),  you shouldn't really have to worry at all.  He should be able to find a job somewhere...

[Crystal1588]

Thanks for the input guys!
At this point I'm more concerned about the people that have been there 25+ years.  This employer still has a pension plan and although my husband doesn't qualify for it yet (need to be there 5 years), many employees do have it.  Hopefully it doesn't get completely cut for the people that have a lot vested into it.

[AZDude]

I've been in three different "merger" scenarios. All three involved layoffs. They will be coming, but I have found the IT side tends to go more slowly than regular operations and other "people skills" types of positions. He should brush up his resume and formulate a plan in case it does happen, but chances are his job will be going nowhere for at least a year.

Maybe check the local job boards to see how the market is. In my experience in IT, the time of year often makes a big difference. Late winter/spring is usually peak hiring season, with another short hiring spree in late summer and early fall. Winter is almost a dead zone since most companies put in technology freezes over the holidays. Worst case, make sure you have enough to survive until the spring(sounds like you do).

[Brilliantine]

Mergers do come with some job eliminations so it is great that you two are cognizant of this.

Any "lay-off" usually comes with a severance package so, in the not very likely event that your husband does get laid off, he will possibly continue to have an income for a while. He could also qualify for unemployment?

If he does indeed lose his job, you may be able to bring down your expenses such as transportation, lunches, etc.

And as a web developer he would, hopefully, find a new job rather quickly.

So, I wouldn't lose too much sleep over this merger. Who knows, maybe the new company will take a look at his salary and say "we need to level you up; you have been grossly underpaid all these years." :)