You’ve been laid off. What’s next?
If you're one of the thousands who have recently been laid off, you're not powerless. Here are steps you can take if you lose your job.
Recent layoffs at tech giants Google and Meta have affected thousands, and they are just the latest examples of downsizing we are seeing take place across the industry and country, due to lingering uncertainty in the economy.
Being laid off can come as a shock and can naturally lead to a range of emotions, from disappointment and anger to anxiety over money and being able to keep up with your expenses.
While no one may feel like they are prepared for a layoff, there are steps you can take to protect yourself financially as you get ready for the next steps in your working life.
1. Know who your HR contact is.
The notice of your layoff may come quickly, but the process of being laid off is not. Having that HR contact will prove crucial if you need help rolling over your 401(k) retirement plan, handling payout of paid time off, if applicable, and if there are any issues with the delivery of your severance pay.
2. Find out if there will be severance.
Your employer may or may not offer severance. Oftentimes it is tied to the number of years you have worked for the company. Companies will often offer severance to keep goodwill with former employees and severance may even be negotiable. Unless the company tells you their offer is non-negotiable, don’t feel compelled to accept the first offer. Take some time to sleep on it and really think about whether the severance payout will cover your expenses for the next several months.
Don’t rush into signing an agreement. Typically, employees are given a few weeks before they have to sign the severance document.
3. Reduce your spending.
Immediately start cutting back on your spending. Focus on only the essentials — food, housing, and utilities until you find your next job. This can help with extending your reserves. Think about cutting back on subscription services (food delivery, Hulu, Amazon); they can take up more of your funds than you might think, especially since they are often on autopay.
4. File for unemployment.
Being laid off is the exact situation unemployment benefits are for. Unemployment insurance offers weekly benefits to workers who are laid off. If you are laid off, file for unemployment as soon as you can because it can take a couple of weeks to receive your first check. You must meet work and wage requirements to qualify and yes, it is possible to receive unemployment if you also receive severance; just check to see what the rules are according to your state.
5. Manage your 401(k).
If you had a 401(k) retirement account with your employer and you were laid off, there are four possible steps you can take:
- Roll your old 401(k) into an IRS or individual retirement account. You will owe taxes on the rolled over amount if it’s a Roth IRA, but taxes are deferred if it’s a traditional IRA.
- When you get a new job, roll your 401(k) into the new plan. Contact the plan administrator at your former job and ask for a direct rollover.
- Let your 401(k) stay where it is. You might pay higher fees as a former employee and you won’t be able to make additional contributions.
- Cash out your 401(k). This is the expensive option. Your former employer could give you a check, but will have to withhold 20% in taxes for the distribution. It could also be deemed an early distribution, which carries a 10% penalty and potential taxes. But if you need the money, this could lessen the financial strain.
6. Reflect before you start job hunting.
Your first impulse may be to immediately start job hunting, especially if your finances are strained. Instead, take a moment. Think about what you want your next chapter to look like. Do you want to go back to work in the same industry? Do you really want another job? Don’t make a knee-jerk decision based on money. Take stock of your skills and understand what you have to offer. Is this the time to start your own business? Go back to school? Frequently, a setback is a setup for a comeback. This is the time to make your working life exactly what you want it to be.
Jennifer Streaks is Senior Personal Finance Reporter and spokesperson at Business Insider and a financial contributor at The Grio. A nationally recognized expert on money and affordable lifestyle living, Jennifer is an established financial columnist who has been featured on CNBC, Forbes, ABC, MSNBC, CBS, and more.
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