Your Microsoft Layoff Roadmap: Seven Smart Financial Steps to Take Now

Being laid off—especially from a company like Microsoft—can be both jarring and full of unknowns. Whether your next chapter is another tech role, a sabbatical, or something entirely new, the financial decisions you make now can set the tone for your long-term security and flexibility.

Here are seven smart financial steps to take if you’ve recently been laid off from Microsoft:

1. Cash Flow and Emergency Reserves

• Severance Pay: Review your severance package carefully. Microsoft typically offers a lump sum based on tenure. Understand the tax implications and when the payment will hit your account.
  If you have questions about the terms, consider having an employment attorney review the agreement before signing.
• Unemployment Benefits: Apply for state unemployment benefits as soon as possible.
• Monthly Budget: Reevaluate your spending. Maximizing how long your cash can last is essential while you assess your next move.
• Investment Portfolio: Review your current investment portfolio with a financial advisor to ensure your asset allocation and liquidity are aligned with your current situation. You may want to adjust your mix or earmark funds in case additional withdrawals are needed.

2. Healthcare Coverage

• COBRA: You may be eligible to extend Microsoft’s health insurance for up to 18 months via COBRA. Although more expensive, COBRA coverage will likely be more comprehensive than most marketplace plans, as it extends coverage of your existing health insurance plan. It also allows for continuity in care if you’re currently managing ongoing health needs.
• Marketplace Plans: If COBRA is cost-prohibitive, explore your options through the health insurance exchange. Subsidies may be available depending on your income level and there are a range of options at different price points, making this potentially more affordable.
• Spouse’s Plan: If you have a partner with employer-sponsored coverage, this might be the most cost-effective and straightforward solution.

3. 401(k), HSA, and ESPP

• 401(k): You can keep your Fidelity 401(k) account where it is, roll it over into an IRA, or move it to your new employer’s plan.
  If you’ve made after-tax contributions, be sure to roll the after-tax dollars directly into a Roth IRA and the pre-tax portion into a traditional IRA. This can help you avoid unnecessary taxation and keep your retirement strategy intact.
• Health Savings Account (HSA): You own this account. You can keep it, invest the balance, or transfer it elsewhere—but watch for account fees and investment limitations if you leave it with the plan administrator.
• Employee Stock Purchase Plan (ESPP): If you participated in Microsoft’s ESPP, you likely own company shares purchased at a discount. You can continue to hold these shares or choose to sell them—but be sure to review the tax implications, as ESPP shares have special tax treatment depending on how long you’ve held them.

4. Deferred Compensation and Bonus Considerations

• Deferred Compensation: If you participated in Microsoft’s Deferred Compensation Plan (DCP), review your distribution elections carefully. Many employees elect to begin payouts “at termination,” which means distributions could start immediately upon leaving the company. This could result in a significant tax liability without proper planning. It’s crucial to coordinate these distributions with your overall income and tax strategy to avoid unexpected tax burdens.
• Annual Bonus Timing: Microsoft bonuses typically correspond with the fiscal year. If your layoff occurs before July 1, you’re unlikely to receive a bonus unless specifically included in your severance.

5. Equity Compensation

• Restricted Stock Units (RSUs): Review the vesting schedule and what has vested prior to your termination date. Unvested RSUs generally forfeit upon termination.
• Tax Planning: If you received a large RSU vest, this may significantly impact your taxable income for the year—plan accordingly.

6. Long-Term Care Tax Exemption

If you previously opted out of the Washington State Long-Term Care (WA Cares) program and were granted an exemption, be sure to provide a copy of your exemption letter to your next employer. Employers are required to withhold the WA Cares premium unless they have that letter on file—even if you’re already exempt.

7. Plan What’s Next

• Career Goals: Consider whether this is a time to pivot, rest, or double down on your expertise. Build a short-term and long-term plan that reflects your goals.
• Alumni Network: Microsoft has a strong alumni network—use it for networking, leads, and support.
• Emotional Reset: A layoff is a major life event. Make time for rest, reflection, and routines that support your mental and emotional health.

How We Can Help

We work with many Microsoft professionals before, during, and after transitions. From severance strategy and tax planning to benefits and investment decisions, we’re here to support you in building a confident next chapter.

*Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® and Certified Financial Planner™ in the U.S.

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