Tips on How to Survive a Layoff

Aug. 7 -- If you have been laid off this year, you're in good company.

More than 650,000 Americans were laid off between January and May of this year. That's 40,000 more than were laid off in all of 2000.

July Job Cuts

Good Morning America's frequent contributor Mellody Hobson, President of Ariel Capital Management in Chicago, provided advice for what to do following a layoff.

Protect Your Retirement

First, scrutinize your severance package to see where you stand on important issues such as health insurance coverage, Hobson said. And be sure to request a recent statement for your 401(k) plan.

"Know who you need to call to make any changes in the future, such as a rollover into a new company plan or a personal IRA," Hobson said. "Find out if there will be an exit fee. At all costs, do not touch the money!"

Retirement Planning Calculators

The tax penalties for withdrawing the money you have saved for retirement are huge, so resist the urge, Hobson said. The average 401(k) is worth about $55,000.

If you withdrew $20,000 from that average 401(k) over several months, you'd have to pay a 10 percent penalty, plus taxes. Assuming you are in a 28 percent tax bracket, the $20,000 would end up only being worth $12,400. If you had not touched the money, it would have grown at 10 percent for 25 years, yielding $595,909. With the $20,000 subtracted, the 401(k) would be worth $379,215 — a difference of nearly $220,000 in long-term growth.

In the 1980s, many workers had their personal worth tied up with their workplace.

Of course, if you are being laid off, your company's financial state is at issue.

"You really want to think through if the company's financial problems are temporary or more terminal," Hobson said. "You might want to cut your losses and take your lumps: take the stock money out and invest it in a Roth IRA or a mutual fund account."

Be Sneaky About Health Insurance

COBRA (which stands for Consolidated Omnibus Budget Reconciliation Act) is a federal law that allows the unemployed to continue their health care coverage after leaving their job.