What to Do Financially When You Get Laid Off in Tech 

Layoffs in tech are not rare, and they often arrive with little to no warning. What you do in the weeks that follow, though, is very much within your control, and the financial decisions you make in the first 90 days can affect you for years. 

A layoff starts several clocks at once. Some of your most important decisions, including vested stock options and severance terms, come with hard deadlines, a few of them measured in days. At the same time, a sudden loss of income can create pressure to act quickly and emotionally, which is exactly when people tend to make expensive mistakes. We believe the goal in the first 90 days should be to make deliberate decisions before the clocks run out and to avoid the forced moves that panic can produce. 

The sections below take these steps in order: Steady your cash flow first, then work through the decisions that carry hard deadlines. 

First, Stabilize Your Cash Flow 

When income stops, the instinct is often to do something dramatic. However, a deliberate and logical first step may be more useful. Consider beginning by figuring out how long your financial runway is. Add up your accessible cash, any severance, and unemployment benefits, then compare that total against your essential monthly spending. That number tells you how much time you have, which can impact the urgency of every other decision you make. 

As you file for unemployment, know that benefits are capped, and high earners in tech will replace only a fraction of their former income. In California, this step means filing with the Employment Development Department. (One tax note worth knowing: Unemployment benefits are subject to federal income tax, but California does not tax them, so they will not show up as income on your state return.) 

Next, consider your spending. Separate the essential from the discretionary and pause what you can. This is not permanent austerity. It is buying yourself time and options. 

One move to resist is panic-selling your investments to raise cash. Markets fall as well as rise, and selling into a decline can lock in losses and may prevent you from participating in a subsequent market recovery. If you do need to raise cash, do it deliberately, preferably with the guidance of a fiduciary financial advisor, because the account you draw from and the specific lots you sell can change both your tax bill and your long-term position.  

Health Insurance: COBRA vs. the Marketplace 

Losing employer coverage is one of the first deadlines you will face, and you generally have two paths. 

COBRA is a federal law that lets you keep your existing employer plan, with the same doctors, network, and progress toward your deductible, for up to 18 months. The catch is the price. You pay the full premium, both your old share and the portion your employer used to cover, plus up to a 2% administrative fee. For many people, that is a much larger number than they ever saw while employed. Sometimes companies will cover a few months of the premiums as part of the severance package. It is important to get clarity on this as it can significantly change how much of your income is available for other expenses. 

The Health Insurance Marketplace is the other path. (California has its own marketplace, Covered California.) Losing job-based coverage is a qualifying life event, which opens a special enrollment period of 60 days, so you do not have to wait for open enrollment. Marketplace pricing depends on your age, state, and estimated annual household income. 

One feature of COBRA is easy to miss: The election may provide retroactive coverage if you timely elect COBRA and pay the required premiums. The applicable election period and payment requirements are important, so review your COBRA notice carefully before relying on retroactive coverage. 

Two points specific to 2026 are worth knowing. First, the enhanced premium tax credits that lowered marketplace premiums from 2021 through 2025 lapsed at the start of 2026, so marketplace prices are higher than many tech professionals may remember, and there is ongoing debate in Congress about whether to restore them. As of this writing the rules are in flux, so check the current rules at healthcare.gov before you decide. Second, marketplace subsidies are based on your estimated income for the full calendar year, with there being a true-up when you file your taxes in the following year, and a midyear layoff can lower that annual figure enough to qualify you for help you would not have received on a full salary. It is worth running the numbers even if you assume you earned too much. 

For many people, the marketplace is the cheaper option, but price is not the only consideration. COBRA’s real advantages are continuity and the fact that employer plans are often better than what you might be able to afford in the marketplace. If you are in the middle of treatment, rely on a specialist who is not in any marketplace network, or have already met most of your deductible late in the year, keeping your existing plan may be worth the premium. Run both numbers before you decide. 

Your Vested Options Have a Deadline 

Equity often comes with the tightest deadlines and, for many tech professionals, the most money at stake. 

Start with what happens automatically. You most always forfeit unvested restricted stock units (RSUs) and unvested options when you are laid off, unless otherwise specified in your severance package. Vested RSUs that have already been delivered to your brokerage account are yours to keep. Vested stock options are the ones that require a decision. 

Vested options come with a post-termination exercise window, and this is where tech professionals can lose money without realizing it. The most common window is 90 days, but it is set by your plan and can be shorter, or at some companies, much longer. The window generally starts on your termination date, not when your severance ends. If the window closes before you exercise, the options are simply canceled. One of the most important actions here is to find the exact deadline in your own grant agreement rather than relying on what anyone tells you verbally. 

For incentive stock options (ISOs), a second deadline is easy to miss. Under IRS rules, ISO tax status generally ends three months after you leave, regardless of how long your company’s window runs. Exercise after that point and the option is taxed as a non-qualified stock option (NSO/NQSO), which means the spread between fair market value and your strike price is treated as ordinary income. The same exercise can carry a very different tax bill depending on the date. For example, if your company gives you five months from the date you leave to exercise your ISOs, they will only receive ISO treatment through the first three months. Exercises in the last two months will be treated as NSO/NQSO exercises. 

None of this means you should rush to exercise. Exercising can cost you cash at the exact moment your income has stopped, and if the shares are still private, you cannot sell them to cover that cost. For ISOs, exercising and holding can also trigger the alternative minimum tax (AMT) on a paper gain, again with no sale to pay it. Whether to exercise depends on several factors, including the size of the spread, your cash position, your conviction in the company, and whether the shares are liquid. This is a decision to make deliberately, and often one to model with a tax or financial professional, rather than one to make in the first emotional week. 

Severance Is Negotiable, So Don’t Sign in a Hurry 

Severance is rarely required by law, which means the terms are often more negotiable than people assume. Beyond the cash amount, there are levers that can really matter: an extended window to exercise your vested options, continued coverage of your health premiums for a period, proration of a bonus, outplacement support, or even the timing of your separation date if a vesting date is close. 

Before you sign, take it slow. Severance agreements almost always include a release, in which you give up the right to bring certain legal claims in exchange for the payment. Federal law gives older workers time to consider this: If you are 40 or older and part of a group layoff, you generally have 45 days to review the agreement and seven days to revoke it after signing. Use that time. It can make sense to have an employment attorney review the agreement, and if you work with a financial advisor, it is worth running the terms by them as well, since the equity and tax implications can be easy to underestimate. 

A few tax and benefit details round this out. The IRS taxes severance as supplemental wages, and the default withholding may not match your actual rate, which can leave a balance due at tax time. Whether severance delays or reduces your unemployment benefits depends on your state and how the payment is structured. Depending on the state where you live, a lump sum may be treated more favorably than salary continuation.  

What to Do with Your Old 401(k) 

When deciding what to do with your 401(k) after you leave, you have four options, each with its pros and cons: 

Keep it where it is:  

• Pros: No further action is required. 

• Cons: It becomes another account to keep track of. It often gets forgotten and under-managed. You may begin paying more administrative fees that your employer was covering for you while you were employed at the company. 

Wait and roll it over into your next company 401(k):  

• Pros: It keeps the funds in a spot you regularly check and limits the chance of losing track of the account. 

• Cons: The new 401(k) has to allow for rollovers, and you are limited to the investment options in the new plan. 

Roll it over to an IRA:  

• Pros: You have nearly unlimited investment options. Usually, people will have the IRA at the same place they have their taxable brokerage account, so it is all under one login. It also avoids plan administration fees. 

• Cons: This can complicate backdoor Roth IRA contributions (different from the mega backdoor Roth 401(k)), if that is a strategy you are using. 

Take a distribution:  

• Pros: You can access the funds immediately. 

• Cons: The distribution is generally taxable and may be subject to an additional 10% federal tax if you are under age 59½ (unless an exception applies, such as the age 55 separation from service exception). A distribution is typically not advised unless your specific circumstances call for it. 

What you do with your 401(k) is not something that needs to be decided on day one, but it should be something you think through once you have made the more urgent decisions. 

If you have an outstanding loan on your 401(k), speak to your plan provider or HR representative to clarify your options. You want to avoid inadvertently triggering an early withdrawal that could result in taxes and penalties. 

Make the Decisions Deliberately 

The theme running through all of this is timing. Your health coverage, vested options, and severance each come with a deadline, and the loss of a paycheck can create pressure to act before you have considered all your available options. Taking the time available to evaluate your options can help you make more deliberate decisions rather than reacting to each one as it arrives. 

A layoff is also a significant life transition, and your financial plan should adapt to it. If you already work with a financial advisor, this is the moment to bring them in so you can weigh your cash flow, taxes, equity, and long-term goals together rather than one at a time. 

Savant offers fee-only, fiduciary services, including financial planning, equity compensation planning, investment management, and tax planning. If a layoff has put these decisions in front of you and you would like to think them through with someone who works with technology professionals through career transitions, please feel free to contact us. 

This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment or tax advice from Savant. Please consult your investment or tax professional regarding your unique situation.