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In companies across the country, most notably automakers and airlines, layoffs are still a painful fact of life, forcing workers to make quick decisions about dealing with severance packages and retirement funds — while they’re also struggling to keep up with bills and find new jobs.

Challenger, Gray & Christmas Inc., a Chicago-based outplacement firm that tracks layoff notices, said more than 103,000 job cuts were announced in January, the second consecutive month with more than 100,000. For all of 2005, the total exceeded 1 million.

Even workers who suspect it could happen to them often are dazed when it does, experts say.

“Right off the bat, most people experience a ‘deer in the headlight’ syndrome because they’re overwhelmed by the potential impact,” said Brian Clapp, senior vice president and general manager of Right Management Consultants, an outplacement firm headquartered in Philadelphia.

They need to take a step back and assess where they are financially, he said, adding: “Then you’re not acting from fear but from fact.”

Clapp said that the first thing workers facing layoff need to do, whether they’re from the executive suite or the assembly line, is to study their severance package.

“Usually there’s a letter that you’re being released, along with the terms and any benefits associated with that,” he said. “You need to understand it — and ask questions if you don’t — because it will affect many of the decisions you’ll be making.”

Among the money issues: Are you eligible for severance pay? Will it be a lump sum or a monthly payment? Over what period of time? Will you be paid for vacation or sick time you didn’t use? When can you expect a check?

Benefits also can be important, Clapp said. Some companies continue health insurance coverage through the severance period, others don’t, he said. A laid-off worker may have to scramble to extend their company coverage, switch to a spouse’s policy or find private insurance.

The next step is taking a hard look at your financial obligations over the next several months.

“People tend to fall into two camps,” Clapp said. “One assumes the worst. They’re going to cut back all of their spending to the point of saying, ‘I’m not going to eat lunch tomorrow.’ The other is, ‘This is great! I’ve got a windfall! I’ll take the next two months off!’ ”

Financial adviser Hank Parrott, president of Estate & Financial Strategies Inc. in Brentwood, Tenn., said younger workers face different decisions than older workers when they lose their jobs.

Parrott said he was working with a man in his mid-50s who recently lost a job in telecommunications.

“There’s a real dilemma here,” he said. “To go out at this stage and try to replace that job at the income he was earning will be extremely difficult to do. Also, with roughly 10 years to retirement, is this really the time to seek retraining?”

So while a younger worker might push for a severance package that includes tuition help, an older worker may need to do some serious financial planning, possibly with the help of a professional, to develop a bridging strategy, Parrott said. An older worker may have a large enough settlement package that he or she can opt for a part-time job or a full-time job at a lower salary.

Parrott believes older workers should try to get lump-sum payments of pensions rather than annuities, which are paid out over time. The reason is that companies doing layoffs generally are in financial trouble and could fail and not make good on their promises or could turn their pension program over to the government, which caps monthly payouts.

Both younger and older workers should avoid tapping their retirement savings accounts until they actually retire, both Parrott and Clapp said. Workers often can leave their 401(k) or other company-sponsored accounts with their former employers, or they can roll the money into tax-deferred Individual Retirement Accounts. Money withdrawn from retirement accounts before age 59½ is subject to taxes and penalties.

Eileen Alt Powell writes about personal finance for the Associated Press.

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