Pink-slip checklist

File for unemployment benefits

Go to your nearest state unemployment office or the agency's Web site to apply. Unemployment payments start only after you apply for benefits, not on the date you lose your job. And be prepared—there might be a two- to three-week lag time from when you file your claim to when you see your first check.

Under the recently passed economic stimulus package, you will receive an extra $25 per week. The stimulus package also allows laid-off workers to collect an additional 20 weeks of unemployment benefits on top of the usual 26 weeks. People who live in states with high unemployment rates—such as California, Michigan, and Rhode Island—may be eligible for an additional 13 weeks of benefits.

If you are or will be receiving severance pay, find out from your local unemployment office how that will affect your application for unemployment benefits. Some states allow you to collect both at once.

Collect severance

If you are lucky enough to get a severance package from your employer, you have some decisions to make. Packages vary widely, but most workers can expect one or two weeks of salary for every year of service. It might be difficult to negotiate terms, especially when layoffs are wide-scale, but it never hurts to ask for something you want.

Typically, companies let you choose to receive your severance in a lump sum or as a series of payments. If you think your company is still financially sound, consider taking the payments. That will continue to provide you with regular income for a time. While you are receiving payments, some employers might also allow you to keep contributing to your 401(k) plan and maintain your health insurance, life insurance and other benefits.

If your employer is on shaky ground, a lump sum is a safer bet. Be aware that if you take the lump payment late in the year, it could bump you into a higher tax bracket for that year.

Get health coverage

If your spouse or partner has health insurance, you might be eligible to join his or her plan. Losing your coverage because of job loss is generally considered a qualifying event, so you usually don't have to wait until the open-enrollment period. If that isn't an option, you might be eligible for COBRA coverage, which allows terminated employees to continue insurance for a time under their former employer's health plan. You usually have 60 days to decide whether to sign up. Coverage generally lasts 18 months and may last longer under certain circumstances. COBRA coverage, however, is not cheap. But under the economic stimulus package, if you are eligible, the federal government will pay 65 percent of your premium for up to nine months if you lost your job, or took a buyout, between Sept. 1, 2008, and Dec. 31, 2009.

Don't abandon your retirement plans

Cashing out your 401(k) should be considered a last resort. If you do, you will be draining your retirement savings and you'll have to pay income taxes on the money you take. The Internal Revenue Service might also impose a 10 percent early-withdrawal penalty if you are younger than 59½. Exception: If you lose your job during or after the year you turn 55, you can take the money from the 401(k) plan from that job with no early-withdrawal penalty, but you'll still owe income taxes on the distribution.

Employers will generally allow you to leave your 401(k) funds in the plan as long as you have more than $5,000 invested. Check with your human-resources department to see whether you'll be charged additional fees. Otherwise you can roll the money into an individual retirement account (IRA). You have 60 days to do so. If your employer cuts a check instead of moving the money electronically, make sure it's made out to the new account's trustee. A check made out to you will be treated as a withdrawal by the IRS, and unless you transfer the money within 60 days, you'll owe taxes on the total and have to pay the early-withdrawal penalty.

Consider life insurance

Your employer might allow you to continue on the company's group life insurance plan if you pay your own premiums. You might be able to find cheaper options by applying for insurance on your own, but you will have to submit to a medical exam for acceptance. Bear in mind that life insurance might not be worth the expense if you have no dependents or if your children are grown and self-sufficient.