Earlier this year, Lowe's announced plans to reduce certain corporate and support roles nationwide, affecting employees in North Carolina and elsewhere. For Lowe's employees in the Mooresville and Charlotte areas, as well as those working remotely throughout the state, a job loss can quickly create questions about severance, health insurance, retirement accounts, taxes, and the financial decisions that come next.
Layoffs are difficult because several important financial decisions can arrive at once. Should you leave your 401(k) with your former employer, roll it into an IRA, or move it to a new employer's plan? How should you manage cash while searching for your next position? What happens to your health insurance? And how might severance, stock compensation, or other benefits affect your taxes? The good news is that you do not have to make every decision at once. Taking a methodical look at your finances can help you understand your options, avoid rushed decisions, and develop a plan for the next chapter.
Lowe's Retirement Plan Overview
Possible Options for Your 401(k)
If you are leaving Lowe's, one of the decisions you may face is what to do with your 401(k). Depending on your circumstances and the terms of the applicable plans, you may have several options. Each has different considerations related to investment choices, fees, services, taxes, withdrawal rules, and convenience.
Roll Over the Account to a New Employer's Plan: If you begin working for a new employer, its retirement plan may allow you to roll your Lowe's 401(k) into the new plan. Not all employer-sponsored plans accept incoming rollovers, and each plan has its own investment options, fees, services, and distribution rules. Consolidating retirement accounts may make them easier to manage, but it is important to review the new plan before deciding whether a rollover makes sense for you.
Roll Over the Account to an IRA: Another option may be to roll your 401(k) into an Individual Retirement Account (IRA). An IRA may provide access to a broader range of investment options and, depending on how the account is managed, may allow you to incorporate the assets more directly into your overall investment strategy and financial plan. However, an IRA is not automatically the better choice. Fees, investment options, available services, creditor protections, and withdrawal rules can differ from those available through an employer-sponsored retirement plan. These factors should be considered before deciding whether a rollover is appropriate.
Leave the Funds in the Existing Lowe's Plan: Depending on the terms of the Lowe's retirement plan and your account balance, you may be able to leave your retirement assets in the existing plan after leaving the company. This can provide continuity and may allow you to postpone a rollover decision while you evaluate your employment and financial situation. Before choosing this option, consider the plan's investment choices, fees, services, distribution rules, and any restrictions that apply to former employees.
Take a Cash Distribution: You may also have the option to withdraw some or all of the money from your retirement account. However, doing so can have significant tax consequences. Generally, the taxable portion of a distribution that is not rolled over is included in your income. If you are under age 59½, a taxable distribution may also be subject to a 10% additional tax unless an exception applies. Importantly for someone who has recently lost a job, the IRS provides exceptions to the 10% additional tax in certain circumstances, including some distributions from an employer plan after separating from service during or after the year you reach age 55. If an eligible rollover distribution is paid directly to you rather than transferred through a direct rollover, federal income tax withholding may also apply. A direct rollover to another eligible retirement plan or IRA generally avoids withholding on the amount transferred. Because taxes, penalties, and rollover rules can vary depending on your age and circumstances, carefully evaluate the consequences before taking money out of a retirement account.
Additional Checklist Items
In addition to reviewing your retirement account, consider taking care of several administrative items during the transition:
- Review Lowe's former-employee resources and the documents provided as part of your separation.
- Before access to company systems expires, download and securely retain important documents such as your separation agreement, final pay statements, benefits information, retirement account statements, beneficiary information, equity award documents, and relevant tax records.
- Review your health insurance options and compare the costs and benefits of COBRA, coverage available through the Health Insurance Marketplace, a spouse's employer-sponsored plan if available, and coverage through a future employer.
- Review any company stock, equity compensation, deferred compensation, or other benefits that may be affected by your separation.
- Understand the timing and tax treatment of severance pay, unused paid time off, bonuses, or other compensation you may receive.
Considerations for Your Next Role
When evaluating future employment opportunities, it can be helpful to look beyond salary alone. Consider factors such as:
- Commute and quality of life
- Career advancement opportunities
- Workplace flexibility
- Company culture
- Retirement plan and employer contributions
- Healthcare coverage
- Other employee benefits
- Overall compensation
- Long-term financial implications
A new position may offer greater compensation, flexibility, career growth, or work-life balance. Taking the time to evaluate the entire compensation and benefits package can help you compare opportunities more meaningfully.
Personal Financial Planning Considerations
A job transition can also be a natural time to revisit your overall financial plan. If you do not currently have a financial plan, consider working with a fiduciary financial advisor to develop one. A well-thought-out financial plan can help you evaluate questions such as:
- How much do I currently spend each month on essential expenses?
- How long could my existing cash reserves support those expenses?
- Which discretionary expenses could I temporarily reduce?
- What other sources of income are available during the transition?
- How will the loss or reduction of employment income affect my taxes this year?
- Should major purchases or other financial commitments be temporarily postponed?
- How does this transition affect my retirement savings strategy?
- How would different employment scenarios affect my long-term financial goals?
Having answers to these questions can help turn an uncertain period into a more structured decision-making process.
Final Thoughts
Losing a job can be one of life's most stressful financial events, especially when it involves a company where you have spent many years building your career. It is natural to feel uncertain about what comes next. However, periods of transition can also create opportunities to reassess your priorities, explore new possibilities, and strengthen your financial foundation. By taking a thoughtful approach to your budget, retirement accounts, benefits, and long-term goals, you can better understand where you stand today and identify the steps that may help you move forward with confidence.
For individuals nearing retirement or considering a major career change, a personalized financial plan can help quantify the potential impact of different decisions through “What-If” scenario planning, turning uncertainty into a clearer path forward. Working with a knowledgeable fiduciary financial advisor can also provide guidance during a period of transition and help you evaluate financial decisions in the context of your goals, values, and long-term financial plan.