The recent layoffs at tech giants such as Google, Amazon, Meta, and Microsoft have affected many hardworking, successful individuals and their families. This can be a challenging and uncertain time, but with a strategic plan in place, you can navigate this transition with confidence and security.
“You don’t want to be the last one to sit during musical chairs.”
Here are 9 immediate financial steps for tech employees facing layoffs:
- Review and update your 401(k) contribution options to maximize your corporate match. If you have a 60–90 “Notice Period” you can still defer your paychecks into your 401(k) and if you don’t immediately need the cash flow, you’ll want to max out your 401(k) before your last official day with the company. Large tech firms like Google match up to $11,250 and is money left on the table if the funds are not directed into your 401(k). Update your contribution percentage or dollar amount now as it can take a week or so to update in your payroll. The corporate match from the largest technology firms is typically much higher than you will find in other companies, so use it before you lose it!
- Most of the large tech firms also offer “after-tax” contributions which can be rolled into a Roth IRA. The employer and employee retirement account maximum for 2023 is $66,000. This means if you max out your employee contribution of $22,500 and you receive the company match of $11,250 which equals $33,750, you can allocate another $32,250 into the after-tax contribution. While you do pay taxes on this amount in 2023, you will be able to roll it into a Roth IRA and you never pay taxes on the money again and your estate will also receive 10 years of no taxes on the funds as they grow.
- Assess your stock vesting options and make informed decisions about your equity holdings. If 2022 taught anything to technology investors, it’s that diversification is your friend. Most of the large technology firms are “accelerated vesting” large balances of company stock as part of the employee severance packages, which will leave individuals with large concentrated stock positions in their former companies. The smart move is to diversify these taxable stock positions into a custom index of individual stocks designed to track a passive benchmark with tax-loss harvesting. Remember, diversification is your friend and be aware of the power “status quo” investor biases can play on your decision making.
- Maximize your Health Savings Account (HSA) during your Notice Period and be sure to capture your employer contributions which were likely paid in January. If you are on a high-deductible family plan, your 2023 max HSA contribution traditionally is $7,750 but this amount may be reduced for partial year eligibility, thus you’ll want to ensure you are putting as much away in the HSA as possible during the “Notice Period.” These funds provide tax free entry, tax free growth, and tax free exit when withdrawn for medical purposes later in life. These are a great tool for reducing taxes and long-term financial planning. For the “use it or lose it” Flexible Spending Accounts (FSAs) you’ll likely want to ensure you get the potential dental work done or glasses/contacts ordered during the “Notice Period.”
- Download PDF copies of all your past pay stubs, W-2s, bonus, and stock compensation history. It is wise to keep copies of these outside of the employee portal.
- Cancel any upcoming vacations in your HR systems as you’ll be paid for any unused vacation days at the end of your employment and you can continue accruing vacation until your termination date. Vacation days generally match out around 300 hours depending on your state of residence.
- Enroll in COBRA insurance shortly after your termination date to maintain your healthcare coverage if you do not land another job with insurance benefits right away. You have 60 days after termination to elect COBRA coverage and you’ll pay retroactively back to your end of employment. Most technology firms are paying 4–6 months worth of the COBRA insurance premiums in up front cash payments in severance packages. If you do not land a new job with coverage within 60 days of termination date, be sure to apply this money to COBRA insurance to ensure you remain covered. A lapse in health insurance can be catastrophic for families.
- Take care of both your mental and physical well-being. The unexpected news and change in life can weigh heavily on traditionally high producing and highly active technology employees. Use the newly found flexibility to keep your mind and body healthy through group fitness, walks with spouses/friends, and to stay connected with your close ones and network.
- Start preparing for new job opportunities by updating your resume and networking. Have calls scheduled every single day. Post about the elimination of your role on Linkedin and other social media outlets. While the post can feel uncomfortable, your network of colleagues past and present, customers, and friends can be your best resource to help you find the next opportunity. Some are saying “use this time to travel and reflect’’, however my recommendation is look for the next opportunity immediately as you don’t want to be the last one to sit during musical chairs. Update your resume in a unique way, create a website of your experience with recommendations, and get referrals into new companies from existing employees rather than applying blindly online. These are the best steps to stand out from the crowd and to land your next big opportunity.
Don’t forget to take a deep breath and approach this transition with a positive attitude. The future is bright and filled with opportunities.
At Old Vine Capital, we help clients navigate all the important financial decisions they face in good times and in bad through a fiduciary lens.
