I filed bankruptcy in 1990. I know exactly what the first 30 days after a financial crisis feel like — and I know the mistake that costs people the most money during that window.
Reuters is reporting that Meta plans to cut approximately 8,000 jobs starting May 20, with more cuts coming later in 2026. If you’re one of those workers — or if you know someone who is — what I’m about to tell you could save you hundreds of thousands of dollars.
What You Need to Know
Meta is executing its next round of layoffs beginning May 20. That’s 31 days from now. Workers in the layoff window are making decisions about severance packages, health insurance continuations, and retirement accounts right now.
The news will cover the layoff numbers. LinkedIn will fill up with “open to work” posts. Nobody is going to tell you the one thing that matters most:
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Your 401(k) is one of the most protected assets you own. Don’t turn a protected asset into gone money.
Why You Need to Know It — From 30 Years of Watching This Happen
I’ve watched thousands of people go through exactly what Meta workers are about to face. And the pattern is always the same.
Within the first 30 days of a layoff, the panic sets in. The credit card minimums are still due. The mortgage doesn’t care that your income just stopped. So people do what feels logical in the moment — they raid their 401(k) to stay current on their bills.
The Most Expensive Mistake: Cashing out your 401(k) to pay credit card minimums. You’ll owe income tax on the full withdrawal plus a 10% early withdrawal penalty — and you just converted a federally protected asset into gone money to protect a credit score that bankruptcy could have reset in 60 days.
Here’s what nobody tells you: your 401(k) is fully shielded under ERISA in bankruptcy. A creditor cannot touch it. A court cannot seize it. But that credit card balance you’re panicking about? It’s dischargeable debt that can be wiped clean.
So the math looks like this: you’re destroying a protected, tax-advantaged asset that could grow to $400,000+ over the next 20 years — to temporarily keep current on a debt that could legally go away.
Things to Consider
This isn’t just about Meta. And this isn’t just about layoffs — the entire system for helping people make retirement decisions is broken, from AI chatbots to government agents who won’t stand behind their own answers. Bankruptcy filings spiked 14% in Q1 2026. The tech layoff cycle is accelerating. If you work in any industry doing reductions right now, this applies to you.
A few things I want you to think about before May 20:
- Your 401(k) is covered under ERISA. Confirm this with your plan administrator. ERISA plans are fully protected in bankruptcy — not partially, not mostly. Fully.
- Your state has exemptions too. Every state lets you keep certain personal property in bankruptcy. Look up your state’s wildcard and personal property exemptions at your state court’s website so you know where you stand before you need to.
- Credit card debt is unsecured. That means in bankruptcy, it gets discharged. Your credit score takes a temporary hit, but Federal Reserve research shows bankruptcy filers recover faster than people who try to grind through debt for years.
- Don’t sign anything under pressure. Severance packages sometimes include clauses about retirement account rollovers or lump-sum options. Take the full review period. You have time.
What to Think About Doing
If you’re in the Meta layoff window — or any layoff window — here’s what I’d tell my own family:
- Do NOT cash out or take a 401(k) loan to cover credit card minimums. You’d owe income tax on the withdrawal plus a 10% penalty if you’re under 59½. You’re converting a protected asset into gone money.
- Calculate your actual monthly obligations versus your severance. How many months of runway do you actually have? Most people overestimate their urgency and underestimate their cushion.
- Talk to a bankruptcy attorney before you touch anything. A consultation is typically free. They can tell you exactly what you’d keep and what would go — and in most cases, the answer is “you keep almost everything, including your retirement.” The 2-minute bankruptcy quiz can give you a quick read on whether the math makes sense.
- If your debt feels unmanageable, look at all your options first. The debt relief options page lays out every path — including the ones nobody in your HR department is going to mention.
The bottom line: A layoff is a financial crisis, and financial crises make people do expensive things with their retirement accounts. Your 401(k) is protected. Your credit card debt is dischargeable. Don’t destroy the thing that’s safe to save the thing that can legally go away.
What if the debt isn’t that bad yet?
Then do nothing with your retirement accounts and monitor your situation. Seriously. “Watch and wait” is a legitimate financial strategy when your protected assets aren’t at risk. Retiring with debt is more common than you think, and the math often works out better than people expect.
What about rolling the 401(k) to an IRA?
Be careful. ERISA protects employer-sponsored plans. Traditional and Roth IRAs have different protection levels that vary by state. Before you roll anything over, understand what protections you might lose. This is one of those “talk to an attorney first” situations.
I’ve been doing this for over 30 years. I filed bankruptcy myself, and I’ve helped thousands of people navigate exactly this kind of moment. What I’m telling you here is what I’d tell my own kid: your retirement account is the last thing you should touch, not the first. Take my perspective as one informed voice — but only you know your full situation. Nobody gets to tell you what to do with your money. Not your former employer. Not me. Not anyone.
Dealing With Debt? Understanding your options is the first step. See how all your debt relief options compare — including ones most sites won’t tell you about. The Find Your Path quiz gives a recommendation based on your actual numbers, and the Scam-O-Meter checks any company’s complaint history before you sign. Federal Reserve research shows bankruptcy filers recover faster than those who don’t file.
