Tech Layoff Financial Planning: What to Do in the First 90 Days

Tech layoffs move fast. You get the calendar invite, the 45-minute call with HR, and a packet of documents — then you're trying to make a dozen financial decisions while processing what just happened. This guide covers every financial lever you need to pull in the right order, with numbers specific to tech compensation structures.

Week 1: What to do immediately

1. Read the severance agreement before signing

Most companies give you 21–45 days to sign a severance agreement (ADEA requires 21 days if you're 40+, 45 days for group layoffs). Use this window. Key things to look for:

• Severance amount: Typically 1–4 weeks per year of service at large tech companies; startups are often 4–8 weeks flat.
• Equity acceleration: Does any unvested equity accelerate on termination? This is negotiable and often not volunteered.
• Post-termination exercise window: For ISOs and NSOs, you typically have 90 days to exercise after leaving. Some companies offer extended windows — ask if yours doesn't.
• Non-compete and non-solicitation clauses: Check enforceability in your state (California, North Dakota, and others largely void these).
• Reference policy and rehire eligibility: "Laid off" should mean eligible for rehire. Confirm this in writing.

If your total comp was $400K+ or you have significant unvested equity, spending $500–1,000 on a one-hour employment attorney review of the agreement often pays for itself many times over.

2. Understand your last paycheck and final equity events

Your last paycheck should include any accrued PTO payout (required in California, optional in most other states). Check your equity portal within 48 hours of your termination date — sometimes a vest event falls on or just before your last day and you want to confirm it was processed.

3. Freeze discretionary spending (temporarily)

You don't need to panic-cancel everything. But a two-week spending freeze while you understand your severance, runway, and timeline gives you clarity. HCOL tech workers often have surprisingly high fixed costs ($5–8K/month in San Francisco, Seattle, or NYC) that compress runway faster than expected.

Health insurance: COBRA vs. the ACA marketplace

This is the most time-sensitive decision. You have 60 days from your coverage end date to enroll in either COBRA or an ACA marketplace plan. Don't miss this window — if you do, you'll have no coverage until the next open enrollment.

COBRA

COBRA lets you keep your existing employer plan. You pay the full premium (what you paid plus what your employer was paying) plus a 2% admin fee. For a family plan at a major tech company, this often runs $1,800–2,800/month. For individual coverage, $600–1,200/month is typical.

Advantages: same doctors, same network, no gap. Disadvantages: expensive, and you have to remember to pay monthly (no auto-enroll like payroll deduction).

ACA marketplace

A job loss is a qualifying life event, giving you a 60-day special enrollment window. If your income will be significantly lower this year (even counting severance), you may qualify for substantial premium subsidies. The income thresholds for subsidy are based on your annual household income for the calendar year, not your pre-layoff salary.

Marketplace plans often have narrower networks than large employer plans, which matters if you have an existing specialist relationship.

Your 401(k): the decision isn't urgent

You have several options with your 401(k) after a layoff, and none of them require an immediate decision (as long as you're not doing anything with the account):

• Leave it where it is. Most plans allow former employees to keep assets in the plan indefinitely. This makes sense if you like the investment options or have low-cost institutional funds not available elsewhere.
• Roll it to an IRA. Direct rollover to a traditional IRA (for pre-tax) or Roth IRA (for Roth) at Fidelity, Vanguard, or Schwab. More investment flexibility, often the right move if you have good brokerage relationships.
• Roll it to a new employer plan. Wait until your next job and check if their plan accepts rollovers. Some plans are better than the IRAs available to you.
• Cash out — do not do this. Early distribution (before 59½) triggers income tax plus a 10% penalty. On a $200K 401(k) balance, that's potentially $70K+ gone to taxes and penalties. The only exception is if you're in genuine financial hardship.

One important note: if you have after-tax contributions (Mega Backdoor Roth) in your 401(k), roll those specifically to a Roth IRA to preserve their tax-free status. Don't accidentally roll them into a traditional IRA.

RSUs and equity: what happens to unvested shares

This is the most company-specific part of a tech layoff. The general rules:

• Vested RSUs you already own. They're just shares in your brokerage account.
• Unvested RSUs are forfeit upon termination unless your offer letter, plan documents, or severance agreement specifically provides for acceleration.
• ISOs must generally be exercised within 90 days of termination to retain ISO tax treatment. After 90 days, they convert to NSOs (taxed as ordinary income, not capital gains).
• NSOs also have a 90-day window in most plans, though some companies have extended it.
• Unvested ESPP contributions are typically returned to you as cash, but verify this with your plan document.

If you have ISOs in a pre-IPO company with a high strike price relative to current 409A valuation, the 90-day clock creates real urgency. This is one scenario where a financial advisor's guidance in the first week pays off significantly — the math on whether to exercise vs. walk away involves AMT exposure that's specific to your income picture for the year.

Unemployment insurance

Tech workers qualify for unemployment insurance in every state. File the same week you're laid off — most states have a one-week waiting period before benefits begin, and the clock doesn't start until you file. Common misconceptions:

• "I make too much to qualify." Unemployment insurance eligibility is based on prior earnings and reason for separation (laid off = eligible), not current financial need.
• "Severance disqualifies me." This varies by state. In California, severance paid as a lump sum generally doesn't reduce UI benefits. In some states, it may delay or offset benefits. Check your state's rules.
• "The amounts are too small to bother." California's maximum weekly benefit is over $1,600/week (around $7,000/month) for up to 26 weeks. That's not trivial even for a senior engineer.

Tax planning for your layoff year

A layoff creates a compressed income year with unusual planning opportunities. Key considerations:

Severance is ordinary income

Severance is taxed as wages — subject to federal and state income tax, plus Social Security and Medicare through the wage cap. Check your withholding. Employers typically withhold at the 22% supplemental rate, which can under-withhold if you're in the 32% or 37% bracket even after accounting for reduced income from the layoff.

Roth conversion opportunity

If your total income this year will be substantially lower than usual, a partial Roth conversion may be attractive. Converting $50K of pre-tax 401(k) or IRA at a 22% or 24% effective marginal rate is better than doing it later at 32–37%. This is the kind of calculation that a fee-only advisor does in under an hour and can save you $10K+ in lifetime taxes.

Capital loss harvesting

If you have concentrated stock positions (RSUs from your employer) that are now at a loss, harvesting those losses creates a carryforward that offsets future gains. This is particularly relevant if you're holding restricted stock from a company that's declined significantly.

HSA and FSA

If you had an HSA, the funds remain yours indefinitely — invest them and leave them alone. FSA funds typically forfeit if unused (check your plan's grace period or rollover rules). Use FSA funds for eligible expenses before your coverage ends.

How long is your runway?

HCOL tech workers often have savings rates that look high on paper but runway that's shorter than expected. A rough calculation:

Don't count 401(k) balances as emergency runway unless you've truly exhausted all other options. The tax and penalty hit makes early withdrawal very expensive.

Job search financial strategy

A few financial dimensions of the job search that often get overlooked:

• Counteroffer timing: If you receive multiple offers, the leverage window is narrow. A financial advisor can help you quickly model the net-of-tax difference between a $400K FAANG package and a $280K + equity startup offer — especially if the equity structure is complex.
• Severance bridge: If you're deep into negotiations and severance runs out, don't let pressure force you into a less-good offer. Know your runway precisely.
• Startup equity diligence: If you're considering an early-stage startup, understanding the cap table, preference stack, and probability-weighted equity value is something most candidates skip. It matters more than base salary differences.

When a financial advisor makes the biggest difference

Not every tech layoff requires an advisor. But the cases where working with one pays off significantly:

• You have ISOs or early-stage equity with a 90-day exercise decision
• You're evaluating a startup offer vs. a public-tech return
• Your severance puts you over $400K total income and you need to optimize withholding, Roth conversions, and tax-loss harvesting as a package
• You're simultaneously deciding on HCOL housing (the "should I buy now that I'm between jobs?" question)
• You've been using the Mega Backdoor Roth and need to handle the rollover correctly