How Long Can You Really Live on Unemployment?

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If you lost your job today, how long could you and your household survive on your unemployment income? How much of an emergency fund do you need to help you bridge the gap between your unemployment benefits and the full-time income that you'd no longer have? Most people don't know the answer to this question, says Kirk Cassidy, president of Senior Planning Advisors in Farmington Hills, Michigan.

"No matter if you have a full-time job or you are already in retirement, you need to set aside a certain amount of money each month for emergencies," Cassidy says. "You might think that your income is stable. But it isn't. Your income is unpredictable. Something can happen, and you need to be ready for it."

Sudden unemployment ranks as one of those unpredictable events. But losing your job is something you should plan for, even if you feel secure at your place of employment. You need to know how replacing your full-time income with unemployment benefits will impact your household budget. You need to know how long it would take for the money in your savings to run out, and how long it might take before making your mortgage and auto payments becomes a financial burden.

How Much Unemployment Will You Get?

Each state has its own formula for determining the amount of unemployment benefits available to individuals who are out of work or between jobs through no fault of their own. The maximum amount of money that you will receive each week depends on how much you were earning before you lost your job. But no matter where you live, don't expect to receive unemployment benefits that equal what you used to earn on your job.

For example, in New Jersey as of 2015, you could receive a maximum of $646 each week in unemployment benefits. But if you live in Tennessee, that weekly maximum was only $275 as of 2015.

In most states, you'll be able to receive unemployment benefits for a maximum of 26 weeks, or six months. Two states provide unemployment benefits for longer — Montana, at 28 weeks, and Maine, which provides benefits for 30 weeks.

Eight states as of 2015 provide unemployment benefits for less than 26 weeks: Arkansas (25); Michigan, Missouri, and South Carolina (20); Kansas (16); Florida and Georgia (14); and North Carolina (12).

The formula for how much you will receive each week varies according to state. As an example, in Massachusetts, the state looks at the last four quarters in which you worked. It adds your total wages from the two quarters in which you earned the highest amount of money and then divides that amount by 26, the number of weeks in the two combined quarters, to determine your average weekly wage. The state then divides that average weekly wage in half to determine your weekly benefit amount.

Here's an example from the website of Massachusetts' state government: Say you earned a total of $18,840 during your two highest-paid quarters in the last four. Divide that figure by 26 and you get $724.61. Divide that in half to get $362.30. Round to the nearest dollar to leave you with $362 in unemployment benefits each week.

That's just one example. But you can see that even with unemployment insurance, your weekly income is going to take a big hit. So how long can you survive on this reduced income?

Other Factors to Consider

To determine this, you must consider a host of factors. What are your current monthly expenses? What can you cut — the usual suspects such as cable TV, healthclub memberships, magazine subscriptions — to reduce this amount?

You must also look at the income coming into your household each month. Add your unemployment insurance benefits to this while removing the money you formerly brought home each month from your full-time job. Maybe your spouse or partner works. This extra income can buy you more time to survive on unemployment benefits.

You also need to consider your savings. Financial experts recommend that you build up enough money in an emergency fund — for most people this will be a standard savings account — to cover six months of your household's typical expenses. The problem is that most U.S. households have not done this.

In May, the Chain Store Guide released a report saying that 40% of U.S. adults said that if they lost their incomes, they could only maintain their current lifestyles for one to three months. The report found that 21% of adults wouldn't be able to do this for even one month. (See also: Is Your Emergency Fund Big Enough to Keep You Afloat?)

This means that plenty of U.S. households haven't been saving up for an emergency fund.

Paul Metler, co-president of Senior Planning Advisors, says that this is a big mistake. A well-stocked emergency fund can be an important safety net for households trying to live partly on unemployment benefits.

"I don't know how many people have saved up enough in their emergency funds to provide them with a healthy cushion should they lose their jobs," Metler says. "It does take planning. It does require you to live within your means and not overspend. There is no book that can magically tell you how to do it. You have to look at your own situation and budget accordingly."

If you've ever been unemployed for a stretch, how'd you manage?