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WalletPrep worksheet · Work and income

What to do after a layoff

Name ____________________ Date __________

Key ideas

  1. File for unemployment in the first week. Benefits usually count from the week you file. Use the state where you worked, even if you got severance.
  2. You have 60 days for health coverage. You can elect COBRA or pick a Marketplace plan within 60 days of losing job-based coverage. Compare both before choosing.
  3. Count your runway in months. Add cash and severance, then divide by your monthly gap. That number tells you how much time you have.

Vocabulary

401(k)
A retirement savings plan offered through an employer. Money comes straight from your paycheck, often with an employer match.
COBRA
A federal law that lets you keep your employer's health plan after you leave the job or lose coverage, usually for up to 18 months, at up to 102% of the full premium.
Rollover
Moving money from one retirement account to another, such as an old 401(k) to an IRA, without paying tax on it.
IRA
Individual retirement account: a tax-advantaged retirement account you open yourself at a bank or brokerage, separate from your job.
Special Enrollment Period
A window outside yearly open enrollment when you can sign up for or change health insurance because of a qualifying life event, like losing coverage or having a baby.
Unemployment insurance
A state program that pays part of your old wages for a limited time after you lose a job through no fault of your own.

Work it out

Sam was laid off with $9,000 saved and $6,000 of severance after tax. His essentials are $3,000 a month and unemployment pays $1,800 a month for 6 months.

  1. Savings
  2. Severance after tax
  3. Cash on hand
  4. Gap while on benefits
  5. 6 months of gap
  6. Left when benefits end
  7. Months more at $3,000
  8. Total runway

Check yourself

  1. How long do you usually have to elect COBRA coverage?

    • A. 7 days
    • B. 30 days
    • C. 60 days
    • D. 1 year

  2. You have $12,000 in cash and a monthly gap of $1,500 while on benefits. How many months does it cover?

    • A. 6 months
    • B. 8 months
    • C. 10 months
    • D. 12 months

  3. What is the cheapest way to move your 401(k) after a layoff?

    • A. A direct rollover to an IRA or new plan
    • B. Ask for a check and spend part of it
    • C. Cash it out and reinvest later
    • D. Take a hardship withdrawal

Your turn

File your unemployment claim, then write your monthly essentials on one page. Subtract your expected benefits and divide your cash plus severance by the gap. Put that runway number where you'll see it.

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Answer key

What to do after a layoff

Work it out

  1. Savings$9,000
  2. Severance after tax$6,000
  3. Cash on hand= $15,000
  4. Gap while on benefits$1,200
  5. 6 months of gap− $7,200
  6. Left when benefits end= $7,800
  7. Months more at $3,0002.6 mo
  8. Total runway8.6 mo
  1. Sam's gap while on benefits is $3,000 − $1,800 = $1,200 a month. Over 6 months that is $1,200 × 6 = $7,200.
  2. His cash is $9,000 + $6,000 = $15,000. After 6 months he has $15,000 − $7,200 = $7,800 left.
  3. With no benefits, $7,800 ÷ $3,000 = 2.6 more months. His total runway is 6 + 2.6 = about 8.6 months.

Check yourself

  1. C. 60 days You have 60 days, counted from when job-based coverage ends or when you get the election notice, whichever is later.
  2. B. 8 months $12,000 ÷ $1,500 = 8 months. Then check whether your benefits last that long, because the gap grows when they end.
  3. A. A direct rollover to an IRA or new plan A direct rollover moves the money with no tax withheld and no tax due. A check paid to you has 20% withheld.