Job Loss: The First 60 Days

Losing a job sets several clocks running at once: the last paycheck, the end of health coverage, deadlines to elect continued insurance, to file for unemployment and to decide what happens to a 401(k). Most of the expensive mistakes after a layoff are missed deadlines and rushed decisions made in the first weeks. This chapter walks through those weeks in order, with the money decisions that matter most and the numbers behind them.

The first week: paperwork before job hunting

Before updating a résumé, deal with the items that cost money if they slip.

1. File for unemployment insurance with your state's workforce agency as soon as your last day passes. Benefits generally start from the week you file, not the week you lost the job, and many states have an unpaid waiting week. Eligibility, amounts and duration are set by each state, so read your state's rules rather than relying on an average.
2. Read the separation paperwork. Check the severance amount and how it is paid, any conditions attached (a release of claims, non-compete or non-solicitation terms), when health coverage ends (often the last day of the month), and whether unused vacation is paid out, which depends on state law and company policy. Severance terms are sometimes negotiable, especially the payment timing and the date coverage ends; it costs nothing to ask.
3. Save what is yours. Download your own pay stubs, benefit statements, W-2 records, performance reviews and contact details for references, within the company's rules.
4. Note every deadline in one place: the COBRA election window, the marketplace enrollment window, any severance signing deadline, and stock option exercise windows if you have equity.

Your runway, with and without benefits

Runway is your cash divided by what you spend each month. Unemployment benefits reduce the monthly gap your savings must cover, which can stretch the same savings much further.

With no benefits, $20,000 covers 4.0 months of essential spending. If unemployment benefits cover enough to shrink the monthly gap to $3,000, the same money lasts 6.7 months. That difference is the case for filing on day one and cutting to essentials quickly; chapter 6 covers the order in which to pay bills if the gap is still too large.

Health coverage: COBRA or the marketplace

Losing job-based health insurance opens two main routes.

COBRA lets you keep your employer's exact plan, with the same doctors and deductible progress, usually for up to 18 months. The catch is cost: you pay the full premium, including the part your employer used to pay, plus up to a 2% administrative charge. You have 60 days from the later of your coverage ending or receiving the election notice to choose it, and coverage is retroactive to the day the old coverage ended. Some people use that window deliberately, electing only if they need care during it, though this carries the risk of missing the deadline.

The ACA marketplace (HealthCare.gov or your state's exchange) treats losing job-based coverage as a qualifying event, giving you 60 days to enroll. Premium tax credits are based on your expected household income for the whole calendar year, including what you earned before the layoff, so a layoff late in the year may leave you with less help than one early in the year. For 2026 the credit stops above 400% of the federal poverty line, after the temporary enhanced credits expired at the end of 2025; Congress has debated restoring them, so check the current rule when you apply. The ACA subsidy calculator estimates the credit from your income. If income falls low enough, Medicaid may be available instead, based on current monthly income.

The comparison usually comes down to three things: the monthly premium of each option, whether you have already met much of this year's deductible on the employer plan, and whether your doctors are in the marketplace plan's network. A spouse's employer plan, if there is one, is a third route, and losing your coverage also opens a special enrollment window there.

Unemployment, severance and taxes

Unemployment benefits are taxable federal income, and taxable in many states. Tax is not withheld unless you ask, so many people discover a bill the following April.

If part-year wages plus benefits come to $42,000, the federal tax on that year is about $2,860 before credits, and the top bracket reached is 12.0%. Withholding from your earlier paychecks covers some of it, but benefits paid with nothing withheld can leave a gap. You can ask your state agency to withhold 10% of each payment for federal tax by filing Form W-4V, or set money aside yourself. The tax bracket calculator shows your own year.

Severance is taxed as wages. Employers often withhold federal tax on it at the flat supplemental rate of 22%, which may be more or less than your actual rate for the year; the difference settles when you file.

Your 401(k): leave it, move it, do not cash it out by accident

You have three main choices for a workplace retirement account when you leave:

• Leave it in the old plan, if the plan allows and the balance is large enough. Simple, and keeps any special plan features.
• Roll it to an IRA or a new employer's plan. Ask for a direct rollover, where the money moves straight from plan to plan. If a check is made out to you instead, the plan must withhold 20% for federal tax, and you have 60 days to deposit the full amount, including the withheld part from your own funds, to avoid tax on it.
• Cash it out. The balance is taxed as income and, before 59½, usually also hit with the additional 10% tax. Chapter 6 shows how much that costs.

One exception matters after a layoff: if you leave a job in or after the calendar year you turn 55, withdrawals from that employer's 401(k) are not subject to the 10% additional tax (the age is 50 for some public safety workers). The exception applies only to that employer's plan, and rolling the money into an IRA gives it up. If you have a 401(k) loan outstanding, check the repayment deadline immediately; chapter 6 explains what happens if it is not repaid.

Bridging income and protecting your options

Part-time, contract or gig work during a job search reduces the drain on savings and can keep skills current. Before you take it, check how your state treats earnings: most reduce your weekly benefit by part of what you earn, and some count self-employment differently. Report all work to the state agency; overpayments must be repaid, sometimes with penalties.

If you are in the US on a work visa, the clock is different. H-1B and several other workers have a grace period of up to 60 days after the job ends to find a new sponsor, change status or leave, and that deadline shapes every other decision. The H-1B layoff runway calculator combines that deadline with your savings.

Finally, keep paying the insurance that protects your ability to recover: health cover, car liability and renters or homeowners insurance. Group life and disability cover usually ends with the job; some policies can be converted to individual cover within a short window, so check before it closes.