7 min read August 18, 2021
What to do when you lose your job? These 7 steps can help.

From health care coverage to 401(k) options, this financial list of to-dos can help you navigate the future after losing a job.

A man unfortunately carrying his belongings out of his workplace after losing his job.

If you’ve recently lost a job, it can be a shock to your emotions. A job loss can also create concerns about finances in both the short and long term.

“It’s natural to be worried about an unexpected job loss, or confused about what to do next,” says Heather Winston, assistant director of advice and planning at Principal®. “Dealing with job loss can be stressful, but you can still make financial decisions to set you up for whatever comes next.”

This list can help you work through it.

1. Apply for federal or state unemployment benefits, if needed.

Each state runs its own program, and may offer options to file online, by phone, or in person. Learn more at usa.gov.

2. Review your final paycheck.

It may include compensation for earned time off, back pay, commissions, severance, or a bonus. Those extra funds may help tide over your budget, especially if you’re able to trim expenses, too. “If you run short, you could still tap your emergency fund, rather than use credit cards to finance day-to-day living expenses,” Winston says.

3. Determine when current employee benefits end.

Is it the day you leave or the end of the month? Do you have a severance package that covers you through a certain date?

  • Health, dental, and vision insurance: If you have a termination date, see if you can schedule appointments and fill prescriptions before you leave.

  • Life insurance: If you bought or were provided extra life insurance coverage (called a voluntary policy) through your employer and want to keep it, there’s paperwork to convert it from a group policy to an individual policy. Premiums go directly to the insurance company, rather than being payroll deducted.

  • Retirement: You may have decisions to make about your retirement plan such as a 401(k) or 403(b). More on that below.

Graphic of a thumbtack.  Tip: For future reference, enter the contact info for human resources or the benefits administrator at your former employer into your phone.

4. Check your health insurance options.


  • A spouse/partner plan. You’ll likely need to sign up within 30 days of your last day.

  • COBRA continuation coverage. This allows you and your family to continue health insurance for up to 18 months. Because you pay the full premium and an employer no longer covers part of the cost, COBRA can be pricey. If you have dental and/or vision insurance in your old job, that’s included, too.

  • Health Insurance Marketplace plans. Availability varies from state-to-state. Depending on your household income, it could cost less than COBRA. Visit healthcare.gov to learn more.

5. Decide what to do with your retirement plan, such as a 401(k) or 403(b).

Your former employer will provide you a decision deadline. Options include:

  • Keep your money where it is, if allowed. Many retirement plans don’t let you stay in the plan if your account balance is under a certain amount ($5,000 is common).

  • Roll your savings into an IRA. Combining retirement accounts gives you flexibility in decision-making to help ensure your assets support your goals. Learn how to start a rollover IRA.

  • Move your money to your next employer’s plan. This is typically an option if you find another job within your retirement plan’s decision window and your new company offers a retirement plan that allows roll-ins.

  • Cash out your account balance. There are definite downsides to this. You may lose up to 30% of it to taxes and penalties and it could bump you into a higher tax bracket. Plus, you’ll miss out on future growth or earnings. It may be tempting to have the extra money now, but there are better options for emergency cash than an early 401(k) withdrawal.

6. Review health savings account (HSA) funds and your flexible spending account (FSA) balance.

If you enroll in a high-deductible health plan at your next job, you can often transfer an HSA balance. If you don’t, you can generally leave any remaining funds and use as needed for future eligible health care expenses.

If you use HSA funds for unapproved expenses, there are tax implications.

Your company will have their own benefit rules and deadlines for your FSA. If you have a balance, what you don’t use, you lose, so shop for FSA-eligible items. (Your employer has a list.) Submit claims for dependent care or health care expenses through your termination date so you can be reimbursed.

7. Learn more about any stock options and other non-salary perks.

If you’ve been getting non-salary compensation, know the vesting period and what percentage of compensation is available, if any, when you leave. Many companies require you to exercise stock options within a certain amount of time, often 90 days from your termination date.

If you're taking classes, check your company’s tuition reimbursement program for specific rules about how your company handles reimbursement if you’re laid off vs. fired, and if you’re required to remain with the company a certain amount of time or may have to pay back funds received.

Next steps

  • If you have a Principal retirement account or insurance from your employer, log in to principal.com to check it, learn about rollover options and access personalized planning. First time logging in? Create an account.
  • If you’re interested in an IRA to keep saving for retirement, read how to start a rollover IRA or see if an IRA with Principal may be a good fit for you.

Investment advisory products offered through Principal Advised Services, LLC. Principal Advised Services is a member of the Principal Financial Group®, Des Moines, IA 50392.

Principal® does not make available products related to Health Savings Accounts.