6 key financial steps to take after a layoff


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1. Take a financial inventory

Among the first things to do if you lose your job is take stock of financial resources at your disposal, according to financial advisors.

Those may include other streams of income such as a partner’s salary, as well as emergency savings, company stock and financial accounts including a 401(k) or individual retirement account (more on this in a bit).

Your resources may also include company benefits like severance pay or cashing out unused leave like vacation and sick days. Workers should also check to see if they can continue receiving benefits like company-sponsored health and life insurance.

Households should also update their budgets to get a sense of current spending and how that could be adjusted without your paycheck.

“You want to get clarity,” said financial advisor Winnie Sun, co-founder of Sun Group Wealth Partners in Irvine, California, and a member of CNBC’s Advisor Council. “We all think we don’t spend that much.

“But most of us probably do.”

These factors — your budget and money stash — will help dictate your timeline for finding a new job.

2. Apply for unemployment insurance

Further, be prepared with relevant information like employment records for about the past two years, Nightingale said.

“Don’t just pick up the phone and say, ‘I was working at XYZ Company,’ because you need more than that to apply,” she said.

You may not be immediately eligible for unemployment insurance if you’re receiving severance pay. But you may be eligible for full or partial benefits depending on your individual circumstance and state rules. If you’re deemed ineligible, file a new claim once severance pay stops.

3. Negotiate your exit

There may be some wiggle room to negotiate on severance and other company benefits, Sun said. (Not all businesses offer severance, though.)

If you are in good standing with your company, ask your manager if you can get a few extra months of severance pay, and an associated extension to medical and dental benefits.

Or, similarly, ask if you can extend your employment (and delay the layoff) by a few months. This becomes especially important if you’re close to being — but aren’t yet — fully vested in benefits like a 401(k) match or company stock, Sun said.

Typically, those who try get something.

Winnie Sun

co-founder of Sun Group Wealth Partners

There may also be room to negotiate staying on part-time or as a freelancer — which may be particularly important for workers closer to retirement age who aren’t confident they’ll be able to find another job quickly, Sun said.

“At this point, what’s the worst thing that’ll happen to you?” Sun said. “Typically, those who try get something.”

4. Figure out which assets to tap, in what order

Those with long-term investments (held for more than a year) in taxable brokerage accounts can sell them for income at a preferential tax rate.

Tax-deferred accounts like a pre-tax 401(k) or IRA should generally be a last resort, according to Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management, based in Washington.

Workers would owe income tax on that distribution, and those under age 59½ would pay an additional penalty. One exception: The “Rule of 55” allows a laid-off worker who’s at least 55 years old to withdraw 401(k) funds without that 10% early-withdrawal penalty.

“You may be someone who always said, ‘I’ll never withdraw those retirement contributions,'” said Kevin Mahoney, CFP, founder and CEO of Illumint, based in Washington. “But under certain circumstances, that’s the most prudent move to make.”

5. Network and build job skills

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6. Take a deep breath

Lastly, don’t be too hard on yourself. Recognize that layoffs are often due to factors beyond an individual’s control instead of a personal failure.

Take a deep breath. Use your available time to step back and reflect on your career — what’s important to you? Would you like to try something new?

“Life is a long-term race, not a sprint,” Johnson said. “Sometimes it’s really a blessing to get laid off” even though it may not seem that way right now, he added.



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