What to Do After a Layoff: 7 Essential Steps to Protect Your Income, Benefits, and Financial Stability (2026 Guide)

Smiling male worker learning what to do after a layoff

Losing your job can feel sudden, destabilizing, and deeply personal. Whether your layoff was part of a corporate restructuring, automation shift, cost reduction, or economic slowdown, the steps you take immediately afterward can dramatically impact your financial stability and recovery timeline.

This comprehensive 2026 guide outlines exactly what to do after being laid off in the United States — covering severance, unemployment benefits, budgeting, health insurance, credit protection, and job search strategy.

If you were recently laid off, start here.

Step 1: Carefully Review Your Severance Package Before Signing

Many employers offer severance packages, but not all severance agreements are equal.

Before signing anything:

Confirm the Total Compensation

  • Lump sum or salary continuation?

  • How many weeks per year of service?

  • Payment schedule?

  • Bonuses included?

  • Unused PTO payout?

Check Health Insurance Terms

  • How long will employer coverage continue?

  • Is COBRA subsidized?

  • When does employer coverage officially end?

Review Stock and Equity Terms

If you held:

  • RSUs

  • Stock options

  • ESPP shares

Understand vesting acceleration, exercise deadlines, and tax consequences.

Examine Restrictive Clauses

Many severance agreements include:

  • Non-compete clauses

  • Non-solicitation clauses

  • Confidentiality provisions

  • Non-disparagement language

You may have time to negotiate. In many states, severance agreements include review periods (often 7–21 days).

Important: Signing may waive your right to pursue legal claims. If you suspect wrongful termination or discrimination, consult an employment attorney before signing.

Step 2: File for Unemployment Benefits Immediately

Unemployment insurance (UI) is temporary income support for workers laid off through no fault of their own.

Why Filing Immediately Matters

  • Processing can take 2–3 weeks

  • Some states have waiting periods

  • Backdating is limited

  • Delays reduce cash flow

What You’ll Need

  • Social Security number

  • Driver’s license or state ID

  • Employer name and address

  • Last day worked

  • Reason for separation

  • Direct deposit details

How Much Will You Receive?

Benefits vary by state. In 2026, weekly payments typically range between $250 and $700 depending on state maximums and prior income.

Does Severance Affect Benefits?

It depends on your state and how severance is structured:

  • Lump-sum severance may not delay benefits

  • Salary continuation often does

  • PTO payout rules vary

Check your state unemployment agency for details.

Step 3: Secure Health Insurance Coverage

Losing employer-sponsored insurance is one of the biggest risks after a layoff.

You typically have four options:

1. COBRA Continuation Coverage

Allows you to keep your employer plan for up to 18 months.

Pros:

  • Same coverage

  • No provider changes

Cons:

  • You pay full premium (often $500–$1,200+ per month)

2. ACA Marketplace Plans

You qualify for a Special Enrollment Period after losing coverage.

Pros:

  • Income-based subsidies

  • Potentially cheaper than COBRA

Cons:

  • Different provider networks

3. Spouse/Partner Coverage

If applicable, compare cost differences.

4. Medicaid

If income drops significantly, you may qualify.

Do not allow coverage gaps. Even a short uninsured period can expose you to catastrophic medical costs.

Step 4: Build a 90-Day Financial Survival Plan

Your primary objective after a layoff is to extend your financial runway.

Calculate Your Runway

Formula:
Savings ÷ Monthly Essential Expenses = Months of Survival

Example:
$24,000 savings ÷ $6,000 monthly expenses = 4 months runway

If you received severance, include it in total liquidity.

Identify Essential vs Non-Essential Expenses

Essential

  • Housing (rent or mortgage)

  • Utilities

  • Food

  • Insurance

  • Transportation

  • Minimum debt payments

Non-Essential

  • Subscriptions

  • Streaming services

  • Dining out

  • Gym memberships

  • Travel

  • Discretionary shopping

Cancel aggressively. You can always reinstate later.

Contact Creditors Early

Mortgage servicers and lenders often offer:

  • Forbearance programs

  • Payment deferrals

  • Loan modification

  • Hardship programs

Proactive communication protects your credit score.

Step 5: Protect Your Credit Score

Missed payments can drop your credit score 60–100 points.

Immediate Actions:

  • Monitor credit reports

  • Set payment reminders

  • Negotiate hardship terms

  • Avoid high-interest payday loans

Your credit score impacts:

  • Mortgage approvals

  • Car loans

  • Insurance premiums

  • Future rental applications

Step 6: Update Resume, LinkedIn & Professional Brand Within 48 Hours

The hiring cycle moves quickly — especially after large corporate layoffs.

Resume Strategy

  • Focus on measurable impact

  • Remove outdated skills

  • Add current industry tools

  • Highlight AI or automation familiarity

LinkedIn Optimization

  • Update headline

  • Add “Open to Work”

  • Post thoughtful update about your search

  • Reach out directly to recruiters

Many roles are filled through referrals — not job boards.

Step 7: Apply Strategically (Not Emotionally)

Avoid panic-applying to every job listing.

Instead:

  • Target growing industries

  • Focus on stable companies

  • Consider contract or freelance work

  • Track applications in spreadsheet

  • Follow up appropriately

Additional Critical Considerations After a Layoff

401(k) and Retirement Accounts

Do NOT immediately cash out your retirement account unless absolutely necessary.

Options:

  • Leave with former employer

  • Roll over to IRA

  • Roll into new employer plan

Early withdrawals may trigger:

  • Taxes

  • 10% penalties

Stock Options and Equity

If you held stock options, check:

  • Exercise window (often 90 days)

  • Tax implications

  • Whether options remain valid

Missing deadlines can forfeit value.

Emergency Income Options

If job search extends beyond 90 days:

  • Freelance consulting

  • Temporary staffing agencies

  • Contract roles

  • Gig economy platforms

  • Remote project work

Temporary income protects long-term financial health.

Frequently Asked Questions

How long does it take to find a new job in 2026?

It varies by industry, but average job search duration can range from 2–6 months depending on role, seniority, and market conditions.

Can I collect unemployment if I received severance?

Often yes, but timing may be affected. Check state rules.

Should I accept the first job offer I receive?

Not necessarily. Evaluate compensation, growth potential, and stability.

72-Hour Layoff Action Plan Checklist

Day 1:

  • Review severance

  • Secure documents

  • Update resume

Day 2:

  • File unemployment

  • Review insurance options

  • Build survival budget

Day 3:

  • Reach out to network

  • Identify target roles

  • Create job tracking system

Final Thoughts

A layoff is disruptive — but it is not permanent.

The difference between prolonged financial stress and controlled transition often comes down to early, decisive action.

Focus on:

  • Cash flow protection

  • Health insurance continuity

  • Strategic job search

  • Mental resilience

The faster you stabilize your foundation, the faster you can pivot toward opportunity.