What if your employer goes bankrupt?
Strategies to protect your finances if you lose your job because your employer goes out of business.
Key Takeaways
- Avoid concentrating your investments in your employer's stock across both 401(k) and personal portfolios—this is a common mistake that amplifies employer solvency risk
- Understand your PBGC and state guarantee fund coverage limits, as pensions and annuities exceeding these thresholds may not be fully protected if your employer becomes insolvent
- If offered a lump-sum pension payout, honestly assess whether you can invest it to generate the same income as the annuity; if not, keep the annuity rather than taking the lump sum
- Your 401(k) assets are protected in a trust fund separate from employer assets, so bankruptcy poses minimal risk to vested contributions already deposited—only undeposited contributions are at risk
- Diversify insurance company risk by avoiding heavy concentration in annuities from any single insurer, just as you would with stock investments
Strategies to protect your finances if you lose your job because your employer goes out of business.
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