Getting laid off is hard and stressful. As you process this significant life change, give yourself grace and consider what you should do next. First things first… read your severance agreement carefully! Understand what you are getting paid, what you are walking away from, and, most importantly, what can alter or void the terms of your severance. Are you getting paid out for your unused vacation days? Is there room to negotiate a higher package based on your tenure? Don’t sign anything until you understand the terms, especially non-competes or non-disclosure agreements. These could potentially affect your job opportunities. An attorney or a financial advisor can also be very helpful in reviewing your severance agreement.

• You can extend your health insurance through your employer with COBRA. This means you can stay on your current healthcare for 18 months (nine if you’re at a company with 19 or less employees). You will most likely have to cover the full premium, which can be costly (roughly $400 – $700 for individual coverage). Losing your job is also considered a “qualifying life event”, similar to getting married or having a baby. This means you can look for healthcare on the marketplace or switch to a spouse’s coverage, outside of the open enrollment window. Typically you have 60 days to decide if you want to enroll in COBRA coverage. If you have a health event during that time, you can elect your coverage retroactively. Use the 60 day window to review your options or wait for a new employer plan to kick in.
• If you have a Flex Spending Account (FSA), use up any remaining funds if you are able to do so or submit receipts for any medical expenses you incurred. You will lose the funds once you are no longer an official employee. This includes dependent care FSAs and health care FSAs, although you can keep your healthcare FSA if you elect COBRA coverage. If you have a health savings account (HSA), the good news is you can take it with you. Often HSA providers will begin charging monthly fees once you are no longer an employee, so roll it over to a low-cost HSA provider such as Fidelity or Lively.
• If you receive your severance as a lump sum, file for unemployment as soon as you reach your termination date. If you receive your severance as installments, file for unemployment on the last day of your severance payments. You should be eligible for unemployment unless you were fired with cause (or if you resigned). State unemployment funds are usually funded with employer contributions, so please do not pass on taking this money.
• Check your emergency savings. Do you have enough cash to cover expenses for a three to six months along with your severance? If not, consider selling some of your company stock if you have it. This can give you some breathing room to pay your bills while you are looking for a new position. On average it takes about three to six months to find a new job. If you find something sooner, that is great! You want to prepare yourself financially if it does take longer than you anticipated.
• Did you receive stock from your company? If you have equity compensation, like RSUs and stock options, review your severance agreement to see what will happen to any unvested shares. Some severance agreements will accelerate vesting, but often you will lose anything that hasn’t vested yet. Do you have vested stock options you haven’t exercised yet? You will need to find in your severance agreement how long you have after termination to exercise your vested options. If it’s not in your severance agreement, look at your grant agreement.
• Take a look at your 401k plan. You may have to call to get an updated login if you’ve been using your company email. Check how much of your balance is unvested. Contributions that you’ve made are always yours, however many employer contributions are subject to a vesting schedule. These vary, but it’s usually a period of time you have to be with your employer before you can keep their contributions. Unfortunately, being laid off means losing what has not vested. What are your options for your 401k? Well, you can leave it where it is for now while you look for another role. Once you find another role, you can roll it into your new employer plan (depending on their investment options), or move it into an IRA. Keep in mind that some plans will start to charge you additional fees if you are not an employee anymore.

It might feel rough right now, but you never know what opportunities this may open up for you. Take the time to feel all the feels, think about what your next move might be, and take it one step at a time. We are here for you if you want a sounding board or a partner to help you think about your next steps.

-Chelsea Ransom-Cooper, CFP®

All written content is for information purposes only. Opinions expressed herein are solely those of Zenith, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.