Neil Fenning | Aug 25 2026 13:00
A layoff arrives with two problems at once, and only one of them is financial. There is the practical question of what happens to your income, your benefits, and your equity compensation, and then there is the harder part, which is making decisions while you are still absorbing the news.
Our suggestion is to separate those two things. The first thirty days are for building clarity, not for resolving everything. Most of the decisions in front of you have more room than they appear to, and a few of them genuinely don't. Knowing which is which is the point of the checklist below.
At A5 Financial, we work with pre-retirees, retirees, and technology professionals across Bothell, Bellevue, Kirkland, Redmond, and greater Seattle, and job transitions come up regularly in that work. What follows is a general planning framework rather than employment, legal, or tax advice, and your own circumstances may call for a different order of operations.
Week one: stabilize cash flow
Before you evaluate any single decision, you need to know how much runway you have. That comes down to four numbers, which are your severance amount and its payment schedule, the cash you can reach without a penalty or a sale, your essential monthly expenses, and the cost of continuing health coverage.
Severance can arrive as a lump sum or as continued payroll, and the difference affects both when the money lands and how it gets withheld. Accessible cash means funds you can use immediately, so a savings account or taxable brokerage account counts while a retirement account generally does not. Essential expenses are the ones that don't flex, including housing, insurance premiums, food, transportation, and debt payments.
Health coverage deserves its own line, because it is often the largest new expense in the budget. Employer coverage typically ends on a specific date, and the options after that usually include COBRA continuation, which commonly runs up to 18 months, or a plan through the health insurance marketplace. Marketplace subsidies are income-based, which means a year with lower earnings can change the math considerably. There is typically a limited special enrollment window of about 60 days after coverage ends, so this belongs near the top of your list rather than the bottom.
Once those numbers sit on one page, you can answer the question that actually lowers the temperature, which is how many months you can cover without touching long-term savings.
Weeks one and two: review what your workplace benefits do next
Your 401(k) does not require an immediate decision. You generally have several paths available, including leaving the balance in the plan, rolling it into an IRA, moving it into a future employer's plan, or taking a distribution. That last option carries the most consequences, because a distribution is usually taxed as ordinary income and may add an early withdrawal penalty if you are under 59½, though certain exceptions can apply when you separate from service at 55 or later. The other three paths rarely need to be settled in month one.
One exception is employer stock held inside a 401(k). A tax treatment called Net Unrealized Appreciation can apply in specific circumstances and generally requires planning before the money moves, because a standard rollover typically closes that door.
Equity compensation is where the actual deadlines tend to live. Unvested RSUs are commonly forfeited at termination, although some plans include exceptions. ESPP shares you already own remain yours, though the tax treatment of a sale depends on how long you have held them relative to the purchase and offering dates. Stock options are the most time-sensitive of the three, because vested options usually come with a post-termination exercise window that is often around 90 days, and unexercised options generally expire when that window closes. Your plan documents and individual grant agreements govern all of this, so gathering them in the first two weeks is one of the highest-value hours you can spend.
Deferred compensation is one more item to check. Distribution timing is frequently set by the plan rather than by you, and a separation can trigger a payout on a schedule you did not choose, which may concentrate a large amount of income into a single tax year.
Weeks two and three: avoid the moves that are hard to reverse
A few common mistakes account for most of the lasting damage we see after a job loss.
- The first is a rushed retirement account withdrawal. It solves a short-term cash problem and creates a tax bill, a possible penalty, and a permanent hole in the balance that was meant to fund your retirement.
- The second is a large investment change made during a stressful stretch. Moving a portfolio to cash after a difficult month feels protective, and it also locks in whatever the market has already done while removing your participation in whatever comes next.
- The third is leaving concentrated employer stock alone. If a meaningful share of your net worth sits in one company's shares, a layoff has already demonstrated the connection between that company and your household finances. Reducing that concentration usually deserves a deliberate multi-year plan rather than a single decision made under pressure.
- The fourth is overlooking tax consequences entirely. Severance, a deferred compensation payout, an option exercise, and a stock sale can stack in the same calendar year, and the combined effect on your bracket is easier to manage before the transactions happen than after.
Week four: build a decision timeline
By the end of the first month, most people can sort every open item into one of two columns.
The deadline-driven column holds health insurance elections, stock option exercise windows, any COBRA election deadline, and estimated tax payments if a large lump sum has already arrived. These need attention on someone else's calendar.
The open-ended column holds the 401(k) rollover, the diversification plan for employer stock, portfolio allocation changes, and the larger question of whether this event has changed your retirement timeline. These can wait until your employment picture is clearer, and in most cases they should.
How this looks in practice
Consider a household in their late fifties where one spouse is unexpectedly laid off. Before deciding anything about the 401(k) or the vested options, they spend a few evenings building the one-page summary, which shows them that severance plus accessible cash covers roughly eight months of essential expenses once marketplace coverage replaces the employer plan.
That single fact reframes the whole situation. The option exercise window still has a hard date and gets handled first. The rollover decision moves to month three, when they will know whether a new role is likely. And the conversation they actually needed to have, which is whether this changes the year they planned to retire, becomes a planning question rather than an emergency.
Nothing about that process guarantees a particular outcome. It does tend to replace urgency with sequence, and sequence is usually what makes the remaining decisions manageable.
Where we fit
If a layoff has changed your retirement timeline, your tax picture, or your equity compensation plan, that is the kind of situation we are set up to work through with you.
John Carruthers, CFP®, and Neil Fenning, CFP® work directly with every client at A5 Financial, and a strategy review starts with your numbers rather than a recommendation. Schedule a strategy review by clicking here.
