Important Steps to Take After a Layoff

By Alexia Candelaria, CFP® | Dec 01, 2022 |

Our occupations frequently serve as much more than just a means of support. Studies show that our jobs are a crucial component of our identities and are intimately related to self-worth and how we regard our unique societal roles. They offer us a social outlet and can help give our lives structure, direction, and meaning. This is why job loss can be one of life’s most traumatic events, regardless of whether you were laid off, downsized, or forced to retire early.

If you’ve suddenly experienced a job loss or have concerns that one is imminent, here are a few critical steps you should consider.

The First Step

This can be a dislocating experience; give yourself a moment to pause, reflect and gather your thoughts.

Immediate Next Steps

The next step involves getting organized, starting with obtaining and reading through the severance paperwork once your former employer provides it. In particular, you’ll need to review the following essential details:

  • Final Payment & Severance Package — You should receive details about your last paycheck, paid time off (PTO) payout, available options for your retirement plan/pension plan, how equity compensation will be handled, and if you will be offered a severance payout (including variable and bonus compensation). It is important to note that many of these details are negotiable. Severance agreements can be complex, particularly regarding issues like accelerated vesting or the potential tax impact of what happens with your equity compensation. For those who must make decisions about exercising options in a short time frame (typically 90 days) or face the potential tax ramifications of being forced to start receiving payments from deferred compensation, we recommend engaging with an advisor to explore the best options for you.
  • Employment Attorney — While some severance packages are straightforward, there are specific circumstances where you may be asked to sign a release waiving the right to sue the company or pursue any further claims against it. Before signing any official documents, we recommend consulting with an employment attorney, particularly one specializing in your industry. Also, depending on your role, contributions and continued work outside of the employer, you may want an expert’s insight to confirm you are not opening yourself up to potential litigation.
  • Cash Flow Planning — The biggest concern for many is planning around cash flow needs and determining how to align resources to replace a consistent paycheck. In particular, how to allocate any payments (lump sum, the exercise of options, forced income from deferred compensation, etc.) to ensure that they serve current and long-term needs. Clearly defining your cash needs, maximizing returns, and planning for any tax liability is crucial to success during transitions. For some, this may involve creating a paycheck from your portfolio while being strategic about asset classes you pull from during a volatile market. Putting that capital to work alongside your other investments and leveraging the benefit of working with a professional who can help manage any needed distributions over time can provide peace of mind.
  • Health Insurance Benefits — Information provided by your former employer should include details about your health and dental insurance status and options, including COBRA or ACA plan availability. Pay attention to deadlines and take steps to maintain coverage – either one of these options or perhaps a spouse or partner’s employer-based health insurance plan. Consider the time of year, current deductible status, and when it may make sense to transition to a new plan.

What Follows

Once you’ve taken care of the more immediate and pressing issues, it is time to revisit your goals and priorities and take stock of where you stand. This could be the optimal time to pursue that start-up venture you’ve been putting off. Or perhaps you use this time to explore a career change or find an exciting new opportunity with a different employer. For some, it may even be the push they needed to step into vocational freedom.

Losing a job can be jarring. However, taking the proper steps can be liberating if done thoughtfully. Working with professional advisors, like those comprising our Personal CFO teams, can help ease your transition to your next chapter. Contact us to learn how we can help you create a plan that protects your balance sheet and enables you to pursue your long-term goals.

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