Dear Carrie, I’m a 59-year-old widow and was just recently laid off. Retiring early isn’t an option, but I want to prepare for a possibly long stint of unemployment. I received a small severance and have a sizable 401(k), but that’s about it. What’s the best way to plan out my finances for the next year? Should I roll over my 401(k)? Use it to pay off my mortgage? Borrow from it to supplement my monthly income? And what about healthcare coverage?

Dear Reader, It takes careful planning to get through a situation like yours and you seem to be on the right path with your thoughtful questions. I’ll provide answers where I can and point you in a couple of directions that you might not have considered. Many of the things you need to do make good financial sense whether you’re employed or not, so even if you’re fortunate enough to find a job sooner rather than later, you’ll still be ahead in terms of getting on top of your finances. 

Start with some careful personal accounting

You can’t determine how much you need to survive until you know how much you have, what you owe and how much you spend. Here’s what I suggest you do first:

–Create a personal net worth statement. Start by adding up all your assets — your 401(k) as well as things like the current market value of your home, bank accounts or investment accounts. Then take a look at your debts: mortgage, car loan, credit card balances, etc. Add these up and subtract them from your assets. This will give you a good idea of your current financial strength.

–Review your expenses. Focus particularly on essentials — your mortgage, utilities, phone/internet, groceries, health insurance premiums, car payments — anything you have to pay each month. Also review what you spend on nonessentials such as entertainment, dining out and extras like a gym membership or hair appointments. This will help you decide where you can most easily cut back for a while.  

–File for unemployment.  If you haven’t already, file for unemployment benefits.  There will likely be a lag time until you receive your first check, so it’s best to file immediately.

–Look at your budget in light of your resources. With your essential expenses in front of you, now calculate how much money you have on hand and how long you can get by. Include your severance, unemployment benefits, and any other savings that you have stashed away for an emergency. 

With this basic information, you can now look at ways to generate more cash if and when you need it. 

Treat your 401(k) with care

You have a couple of choices regarding your 401(k), but borrowing against it probably isn’t one of them once you’re no longer working for the company (and even if borrowing were an option, I wouldn’t recommend it.) Leaving your 401(k) at your former employer is usually an option. However, you might want to consider rolling your 401(k) into an IRA because it generally gives you greater control over your investments and can provide easier access should you need to make a withdrawal. Keep in mind; withdrawals before you’ve turned 59 1/2 are subject to a 10 percent early withdrawal penalty, and also subject to income tax on the amount withdrawn.

Just make sure you do a direct rollover from your employer to whichever financial institution you choose. If a 401(k) is distributed to you personally, it could be considered a withdrawal and trigger a penalty as well as taxes unless deposited into an IRA within 60 days. It’s best to avoid this possibility by rolling the funds directly into an IRA. Plus, it’s a lot easier. Your financial institution will handle the details for you.

That said, while this money could be a resource if you remain unemployed for a long time, I suggest using it only when absolutely necessary. At 59 1/2 there are no penalties on a withdrawal, but you do have to pay income taxes on it. So taking a large distribution, for instance to pay off your mortgage as you suggested, wouldn’t be the best idea. In fact, if you have a HELOC, that would be a better alternative for extra cash in the short term. 

Investigate Social Security benefits  

Another potential source of income is survivor benefits based on your deceased husband’s Social Security record. You can begin collecting survivor benefits as early as age 60, although it will be permanently reduced by about 30 percent if you start that young. Also, when you start working again, $1 will be withheld for every $2 you earn over an annual limit ($15,720 in 2016) up until the year you reach full retirement age (FRA).

However, this shouldn’t keep you from collecting if you need it. The good news is that your continued earnings will add to your own Social Security benefit. If your own benefit is larger than your survivor benefit, you could switch to it at any time after age 62. But if you can wait until your Full Retirement Age (“FRA”) or longer (up to age 70), so much the better. The longer you wait to collect on your own work record, the larger your benefit.

Make absolutely sure you have health insurance

You have a couple of options regarding health insurance. You could switch to COBRA for up to 18 months. This essentially gives you the same coverage you had under your employer. The catch is that you have to pay for it yourself, which can cost considerably more than you were paying as an employee. 

If you haven’t done so already, contact the benefits department at your previous employer and get the facts regarding the cost of COBRA and the process for making the switch. Once you have that information, do some comparison-shopping. You may be able to find a lower cost high-deductible policy through your state’s or the federal Affordable Care Act exchange at 

Whatever you do, don’t be tempted to go without insurance. You don’t want an illness or injury to jeopardize all your careful financial planning.

Talk to an advisor

At a time like this, a financial advisor can help you put things in perspective both for the short- and long-term. And it doesn’t even have to cost you. Many financial institutions offer a one-time complimentary consultation. But even if you have to pay a small fee, I think it’s worth it. The less worry you have about your finances, the more confidence you’ll have pursuing your next job opportunity. Best of luck.

Looking for answers to your retirement questions? Check out Carrie’s new book, The Charles Schwab Guide to Finances After Fifty: Answers to Your Most Important Money Questions (Crown Business, 2014), available in bookstores nationwide.

Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER ™ is president of the Charles Schwab Foundation and author of “It Pays to Talk.” You can e-mail Carrie at askcarrie@schwab. com.