Need to File for Unemployment? Expect Delays in Getting Benefits

You'd better load up your savings just in case.

When the COVID-19 pandemic first hit U.S. soil, millions of jobs were lost within weeks. That left impacted workers scrambling to file for unemployment benefits. And it left states scrambling to keep up with jobless claims.

Things are very different today -- namely because unemployment levels are fairly low. In spite of that, it's taking longer for new jobless claims to be processed today than it was during the early stages of the pandemic. And that's a serious problem.

A major lag in unemployment benefits

Workers who lose a job through no fault of their own are generally entitled to unemployment benefits, provided they're not self-employed and meet certain criteria. Now the federal government considers payment of unemployment benefits within 21 days of an initial claim to be timely. 

In March 2020, when jobs were being shed in short order due to nationwide shutdowns, 97% of unemployment benefit payments were considered timely. Today, that share has dropped to just 78%, according to Department of Labor data as reported by CNBC. 

Of course, a delay in jobless benefits has the potential to result in severe consequences. For someone without money in savings, it could mean racking up credit card debt or falling behind  on bills in the absence of that money. Neither is a good thing at all.

Protect yourself with an emergency fund

When economic conditions are generally sour, it's easy to anticipate an uptick in unemployment. But that doesn't mean workers can't get laid off out of the blue.

That's a situation you should do your best to prepare for. And the best is to build yourself an emergency fund. 

Ideally, you should aim to have enough money in a savings account to cover a full three months of living costs. That might come in very handy if you file a claim for unemployment benefits and it's delayed. 

For even better protection, you may want to aim for more like six months' worth of bills in the bank. Filing a claim for unemployment benefits doesn't guarantee approval of that claim. And if you have to go through an appeals process, it could take even longer to get your money -- if you even get it at all. So your best bet is to put yourself in a solid position to keep up with your bills in the absence of a paycheck.

Now is an especially good time to give your savings a boost given the recession warnings we've been hearing, because a broad economic decline could lead to an uptick in jobless claims. And frankly, many state unemployment systems aren't well-equipped to handle that. Some of these systems are built on archaic coding, and as such, they're prone to crashes during periods of high volume. 

But even during periods of low unemployment, which is the case today, it can still take time to process jobless claims. Many state offices are sorely understaffed, and until that issue is more broadly addressed, lags in unemployment benefits could persist. So your best bet is to gear up for that by socking away more money in the bank so you have cash reserves to tap if you end up having to wait on jobless benefits you're entitled to.