How to Safeguard Your Investments After Losing Your Job

Layoffs are a hard fact of life, especially in 2025. During the first five months of the year, there was an 80% increase in job cuts compared to the same period last year.

If you get laid off, it’s important to begin thinking strategically from day one to make sure you get to the other side of this challenging time with minimal long-term financial damage. And experts say the last thing you want to do is sell your long-term investments.

Below, we’ll walk you through some options to help minimize the financial damage after a layoff.

Assess Your Finances

Your first step after getting laid off is to get a clear view of your finances. To get started, answer the following questions:

• How much cash or cash-like savings do you have?
• Will you need to budget for a COBRA health insurance plan or buy insurance through the Affordable Care Act?
• How much do you expect to receive in unemployment benefits?
• How much are your essential monthly expenses?

Add up your estimated monthly costs, subtract any monthly income (like unemployment benefits, if any), and divide your cash on hand by that number. A safe cushion is three to six months of expenses. If you have that much, you’ve bought yourself some time. If you have only two months of expenses or less, you may need to act fast. But be prudent. Start by cutting all non-essential expenses and then look for ways to raise cash, according to the priorities outlined below.

What Should You Do With Your Investments?

Ideally, people should do nothing with their long-term investments after a layoff because they have a sufficient emergency fund in place, said Nate Hoskin, a certified financial planner based in Denver.

“That’s why it’s always so essential to have an emergency fund,” Hoskin told Investopedia. “It protects you from short-term hiccups, so you never have to dive into other investments at the worst possible time.”

There are other reasons not to sell long-term investments after a layoff. Layoffs often happen during recessions and market downturns, meaning you could be selling somewhere near the bottom of the market. This means you’ll have less invested when the market recovers and fewer dollars compounding over time.

In addition, withdrawing money from long-term retirement accounts like 401(k)s will usually mean paying both an early withdrawal penalty and income tax.

How to Avoid Raiding Long-Term Investments

What about the many Americans who don’t have an emergency fund to cover them before they find another job? “Use cash and taxable brokerage accounts as your first resource, with retirement accounts as a last resort,” Hoskin said.

Here’s how to prioritize raising money to cover expenses:

• First, use your final paycheck and any severance.
• Then turn to whatever cash reserves you have.
• Next, turn to taxable brokerage accounts. You may have to take a loss (which could actually help you come tax time) or pay a capital gains tax, but you’ll face no early withdrawal penalty.
• Then look to retirement accounts that don’t have an early withdrawal penalty, such as Roth IRAs.
• As a last resort, turn to other retirement accounts. Some 401(k)s and IRAs allow penalty-free early withdrawals under specified circumstances, including health insurance premiums and medical expenses. You may also be able to take out a loan from your 401(k).

The Bottom Line

The threat of losing a job is real. That’s why experts advise limiting your debt and putting aside three to six months of living expenses in a dedicated savings account for emergencies. Raiding investments after a layoff should be a last resort. Financial advisors say pausing contributions is okay, but you should try not to make withdrawals, especially to long-term investments.