Five Smart Money Moves to Make When You’re Between Jobs

Lately, many companies across industries have been making difficult decisions — and layoffs are once again making headlines. For those affected, it’s more than just a career disruption; it’s a financial and emotional one, too. Over the past few weeks, we’ve been hearing from more individuals navigating this kind of transition and asking the same question: What should I do next?

Periods of uncertainty can easily lead to financial missteps, especially when emotions are high. The good news is that with the right steps, and the right guidance, you can regain control and set the stage for long-term stability.

We’ve decided to comprise a list of five smart money moves to make if you find yourself between jobs:

1. File for Unemployment Benefits Promptly

If you’ve lost your job through no fault of your own, you may qualify for unemployment benefits. Don’t delay this as benefits often take a few weeks to process, and filing early helps bridge the gap in income. Check your state’s unemployment website for eligibility rules and filing instructions, and be sure to keep records of your job search to stay in compliance.

2. Revisit Your Investment Strategy

When your cash flow changes, your investment approach should, too. Take a close look at your portfolio and consider whether your current allocations still make sense. This might be a time to pause new contributions or shift to a more conservative stance until your income stabilizes. The goal isn’t to stop investing, it’s to make sure your strategy aligns with your current reality.

3. Handle Your 401(k) or ESOP Rollover Carefully

If you have a 401(k) or Employee Stock Ownership Plan (ESOP) with your former employer, you’ll face several choices about what to do next. It’s important to proceed carefully as emotional or hasty decisions can create unnecessary tax bills or penalties.

Here’s a closer look at your main options:

Option 1: Leave the Money in Your Former Employer’s Plan
If your account balance is above a certain threshold (typically $5,000), you may be able to keep it in your old plan. This allows your investments to continue growing tax-deferred and avoids triggering any immediate taxes or penalties.

Tax impact: None — your funds remain in a tax-advantaged account, and you won’t owe anything until you take withdrawals in retirement.

Option 2: Roll It Over to a New Employer’s Plan
If your new employer offers a 401(k), you can typically roll your old account directly into the new one. This keeps your retirement assets consolidated in one place and maintains their tax-deferred status.

Tax impact: None, as long as the rollover is done directly from trustee to trustee (the funds move from one plan to another without passing through your hands).

Option 3: Roll It Into an IRA
You can also move your 401(k) or ESOP balance into an Individual Retirement Account (IRA). This gives you a wider range of investment options and may simplify management.

Tax impact:

• A direct rollover (from your plan to an IRA) is not taxable and avoids withholding.

• An indirect rollover — where the plan sends you the check — can cause problems. The plan administrator must withhold 20% for federal taxes, and you’ll need to deposit the full amount (including that 20%) into the IRA within 60 days to avoid it being treated as a distribution. Failing to do so can trigger income taxes and a 10% early withdrawal penalty if you’re under age 59½.

Option 4: Take a Cash Distribution
This is the most tempting, and unfortunately most expensive, option. Taking the money in cash might feel like a relief in the short term, but it can significantly reduce your retirement savings.

Tax impact:

• The entire distribution is treated as ordinary income in the year you take it.

• If you’re under 59½, you’ll typically owe a 10% early withdrawal penalty in addition to income taxes.

• Because your employer must withhold 20% for federal taxes, you’ll receive only 80% of the balance — but still owe taxes on the full amount when you file your return.

Bottom line:
Each option carries different consequences for your taxes and your future retirement income. The safest approach is to consult a financial professional before making any decisions. A calm, informed rollover strategy can help preserve the savings you’ve worked hard to build — and keep your long-term plan on track.

4. Reassess Your Risk Tolerance and Insurance Coverage

A job transition is also a good time to evaluate your overall risk exposure. Review your emergency savings and insurance coverage, especially health, disability, and life insurance. If your benefits ended with your employment, explore COBRA coverage or marketplace plans to avoid gaps in protection.

Your risk tolerance may also shift when your income changes. Revisit your investment mix to ensure it matches your current comfort level and short-term liquidity needs.

5. Use This Time to Build a More Resilient Financial Plan

Being between jobs can offer an opportunity to reset. Use this period to revisit your broader financial goals — from budgeting and debt management to long-term savings and career growth. Transitions can be unsettling, but they can also clarify what truly matters and where you want to go next.

Financial transitions are when the biggest mistakes often happen,  but can also be when the right advice can make the biggest difference. Working with your financial professional can help you navigate this period thoughtfully and position you for long-term stability once you’re back on your feet.

8504794.1 10/27