Just Got a Layoff Notice? 10 First Steps Before You Sign
October 19, 2026
Just Got a Layoff Notice?
The First Things to Do (Before You Sign Anything)
Getting a layoff notice is a gut punch. Whether you saw it coming or it landed out of nowhere, your first instinct may be to act fast: sign the paperwork, move your 401(k), cut every expense at once.
Take a breath. The decisions you make in the next few weeks matter, and many of them can’t be undone. Here’s where to focus first.
1. Don’t sign the severance agreement on the spot
Severance agreements usually ask you to give up the right to make legal claims against the company in exchange for a payment. You generally have time to review it. If you’re 40 or older, federal law typically gives you at least 21 days to consider the agreement (45 days in a group layoff) and 7 days to change your mind after signing.
Read every line. Look at the severance amount, how it’s paid (lump sum or installments), whether health coverage is included, and any non-compete or non-solicitation terms. If the package is large or the terms are unclear, an hour with an employment attorney can be money well spent. Severance is sometimes negotiable, especially for long-tenured employees.
2. Get the key details in writing
Before your last day, make sure you know:
- Your official last day of employment
- When your final paycheck arrives, and whether unused vacation or PTO is paid out
- When your health, life, and disability coverage ends
- What happens to any bonus, commission, stock options, or restricted stock
- Who to contact with benefits questions after you leave
Once you’re off the system, these answers get much harder to track down.
3. Sort out health insurance
Don’t let coverage lapse by accident. You typically have three main options:
- COBRA. You can usually keep your current plan for up to 18 months, but you’ll pay the full premium yourself, which is often a shock. You generally have 60 days to elect it, and coverage is retroactive.
- A spouse’s plan. Losing your coverage usually lets you join a spouse’s employer plan, but the window is often only 30 days.
- The ACA Marketplace. Job loss opens a special enrollment period. Depending on your income for the year, you may qualify for subsidies that make it much cheaper than COBRA.
Compare all three before deciding. And while you’re still covered, schedule any appointments, refill prescriptions, and spend down any FSA balance, because that money is often forfeited when you leave.
Schedule your meeting here or you can give us a call at 210-428-6250
4. File for unemployment right away
Don’t wait. File as soon as you’re eligible. Some states delay benefits while you’re receiving severance, but filing promptly protects your place in line.
5. Don’t touch your 401(k) yet
This is where many people make an expensive mistake.
- Don’t cash it out. You’d likely owe income tax, and possibly a 10% penalty, on the entire amount.
- Know the “Rule of 55.” If you leave your job in or after the year you turn 55, you can generally withdraw from that employer’s 401(k) without the 10% penalty. Rolling it into an IRA too quickly can lose that flexibility.
- Watch out for 401(k) loans. An outstanding loan usually has to be repaid by your tax-filing deadline for the year you leave. Otherwise it’s treated as a taxable distribution.
- Get a professional to walk you through it. Between vesting, outstanding loans, company stock, rollover options, and the tax rules, there’s a lot happening with your 401(k) at once. An expert in your employer’s benefits can help you understand all of it before you make a move.
You usually don’t need to move your 401(k) immediately. Make that decision deliberately, not in a panic.
6. If you have a pension, slow down
If you’re offered a choice between a lump sum and monthly payments, take your time. Either one can be the right decision. A lump sum offers control, flexibility, and something to leave to your family. Monthly payments offer a guaranteed income you can’t outlive. The right answer depends on your health, your other savings, your spouse, and your plans.
What matters most is that the choice is usually permanent. Once you elect, you generally can’t change your mind. Before you decide, sit down with a professional who understands your employer’s benefits so you know exactly what you’re choosing between.
7. Check your life and disability insurance
Group life insurance usually ends with your job, but many policies let you convert or continue coverage, often within about 31 days. If you have health issues that would make new coverage hard to get, this window can be very valuable.
8. Build a bare-bones budget
Figure out what your household truly needs each month: housing, utilities, food, insurance, debt payments. Then figure out how many months your savings and severance can cover. Pause the extras for now, but don’t make major financial moves until you know where you stand.
9. Think twice before claiming Social Security early
If you’re close to retirement age, it can be tempting to start Social Security right away. Claiming early permanently reduces your benefit. For married couples, it can also reduce what a surviving spouse receives. Make sure it’s part of a plan, not a reaction.
10. Give yourself some grace
A layoff isn’t a reflection of your worth or your work. It’s a business decision, and right now it’s happening to good people across many industries. Talk to your family, lean on your network, and give yourself a few days to process before tackling the big decisions.
| You don’t have to figure this out alone. At Secure Financial Management, we help people navigate layoffs all the time, dozens of times a year. We know the questions to ask about severance, health coverage, 401(k)s, and pension elections, and we can bring an expert set of eyes to your situation before you make decisions you can’t undo. If you’ve received a layoff notice, reach out to Secure Financial Management to schedule a conversation with our team. |
| This article is for general educational purposes only and is not individualized tax, legal, or investment advice. Rules vary by employer, plan, and state. Consult a qualified professional about your situation. |