I just got laid off. What do I need to decide first?

William Clinton |

If you were just laid off, the most useful thing I can tell you is that you are not facing one decision. You are facing four, and they run on different clocks.

Most people treat a layoff as a single event with a single question: how much is the package worth. That question matters, but it is the one with the most time attached to it. The decisions that actually cost people money are the ones with short windows that nobody warns them about.

Here is the map.

The exit decision. If your company is offering a transition period, retention pay, or a "stay through the wind-down" arrangement, you have a choice to make quickly, and the math is not obvious. This is the one people get wrong most often, so it is where the series starts.

The package decision. Lump sum or salary continuation, and what each does to your benefits, your unemployment eligibility, and your exposure if the company changes hands. These are tradeoffs, not a right answer, and the right choice depends on your situation.

The equity decision. If you hold RSUs, options, or performance shares, leaving starts a set of clocks written into your plan document, not your severance agreement. Some of that money disappears on a deadline most people never see.

The account decisions. Your 401(k), your tax year, and your health coverage all change the day you separate. A few of these involve one-way doors, where a choice made in the first month cannot be reversed later.

Four decisions, four clocks. Some give you months. A couple give you days.

The reason I built this series is that the fast decisions tend to get the least attention. People spend two weeks negotiating a number and thirty seconds on a 401(k) choice that cannot be undone. I want to flip that.

This is the first piece in a series. Each post answers one of these decisions completely, and I am publishing them over the next few weeks. The first is live now. Read the one you need right now, or come back as the rest go up.

 

Coming over the next few weeks:

  • Lump sum or salary continuation
  • What happens to your unvested equity when you leave
  • Why your tax bill is bigger than you expected
  • What to do with your 401(k)
  • How long your severance actually lasts, and why to cut back now
  • The list of names and ages attached to your agreement

I have walked people through this across a range of industries, from pharma to finance to tech, and the pattern is always the same. There are more moving decisions than anyone can hold in their head at once, and the pressure to act fast makes it worse. The financial planning process exists to bring order to exactly that. We take the decisions one at a time and we look at how each one affects the others.

Part of how I do that is modeling. The planning software I use runs what-if analysis, so instead of trying to picture the tradeoffs in your head, we toggle the scenarios on and off and you see them on a screen. Stay or leave. Lump sum or continuation. Roll the account or hold it. You watch what each choice does to the whole picture before you commit to any of it.

If you want to look at your own situation that way, start a conversation and we will put your numbers on the screen together.

Securities and Advisory services offered through LPL Financial, A Registered Investment Advisor, Member FINRA/SIPC