Facing a Reduction in Force Severance Package? What to Do First (Before You Decide)
Facing a reduction in force at Harley-Davidson? Learn the key financial steps to take before accepting a severance package, including pension, 401(k), taxes and health insurance decisions.
With the recent *Harley-Davidson layoffs announcement and uncertainty around who will be affected, many employees may suddenly be facing one of the biggest financial decisions of their lives.
If you’re offered a severance package, the decisions you make in the next 30 to 90 days could impact your retirement for decades.
And the challenge? Most of these decisions—around your pension, 401(k), taxes and health insurance—can’t easily be undone.
Since 2019, I’ve worked with, and spoken to, dozens of Harley-Davidson employees who were over 50 and facing a Reduction in Force—or thankfully choosing a retirement on their own terms.
I’ve seen how these one-time decisions can either set up a strong retirement—or lead to costly mistakes.
Before you sign anything or make a quick decision, in my view, here are the first moves to make so you don’t miss something important.
Don’t sign your severance before you understand what you’re getting
While a severance isn’t optional, unlike the recent Voluntary Retirement Incentive Program, you still want to fully understand the timelines and financial pieces involved.
One of the biggest mistakes I see is people signing paperwork quickly—only to realize later they didn’t fully understand how their benefits worked together.
Map out your income for the next 12–24 months
Your severance might not start immediately. You might be unemployed for some time before finding your next job. You might even take this as your signal that it’s time to retire.
No matter your situation, I believe you need to do two things right away:
- Create a plan for where your income will come from for the next 12–24 months
- Make sure you have that plan in place before making any big financial decisions
Don’t assume the “obvious” pension choice is the right one
If you’re past age 55, you might be able to start your pension soon—but that doesn’t mean you should.
There are multiple options that affect your taxes, your health insurance costs (especially through the Affordable Care Act), and most importantly, how much income you and your spouse may have later in life.
The biggest mistake I see is choosing a pension option without doing the math.
Don’t take the lump sum just because your co-worker did. Don’t take the monthly payout today just because you need income today.
When it comes to pension planning, follow the math of your situation—not the myths you hear.
Be careful before rolling over your 401(k)
One of the first things people do, when working with a financial advisor, is roll their 401(k) into an IRA—but that could create a tax penalty you didn’t need to face.
You’ve likely heard that you “can’t take money out until age 59½.” In reality, that rule applies to IRAs.
For 401(k)s, there’s an important exception.
If you leave your job in or after the year you turn 55, you may be able to access your 401(k) without the 10% early withdrawal penalty.
Most people are surprised to learn that the key age for 401(k)s is 55—not 59½. If that’s you, check it out directly from the IRS.
Also, this rule only applies to the 401(k) from the employer you leave at age 55 or older. Older 401(k)s from previous employers still follow the 59½ rule.
Before making a rollover decision, make sure you understand how this rule applies to you.
Plan your health insurance before you lose it
Before you leave your job—even if it wasn’t your choice—you’ll want to know where your health insurance will come from.
The two most common options are COBRA and the Affordable Care Act (ACA).
COBRA isn’t necessarily “more expensive”—you’re just paying the full cost instead of your employer covering part of it. That often makes it feel two to four times higher.
The benefit of COBRA is that nothing changes. Same doctors, same deductible, same coverage.
The downside is the higher cost that you have to pay.
That’s why many people look at ACA coverage, where you may qualify for tax subsidies based on your income.
Be careful here: If your income goes over certain thresholds—even by a small amount—you could lose thousands in subsidies and have to pay that back at tax time.
** Special note for long-term Harley-Davidson employees
Some employees may have access to the Retiree Healthcare Account. Make sure you understand how reimbursements work—especially if you’re also planning to use ACA coverage.
Look for a one-time tax planning opportunity
With this reduction in force happening early in 2026, this could be a lower-income year for you.
While that’s not ideal, it may create some valuable planning opportunities:
- You may qualify for higher ACA healthcare subsidies
- You may be able to do Roth conversions at lower tax rates
- You may be able to sell investments at a 0% long-term capital gains rate
These opportunities don’t come around often, so when a Reduction in Force hands you a lemon, see if you turn it into sweet lemonade by using the tax code to your advantage.
Don’t make permanent decisions based on short-term emotions
Let’s face it—being impacted by a reduction in force can bring up a lot of emotions.
What I’ve seen over the years is that people sometimes make long-term decisions based on short-term feelings.
I’ve seen people:
- Claim Social Security earlier than they should
- Take their pension without doing the math
- Move investments out of the market at the wrong time
Often, those decisions are driven by fear or frustration—not a well-thought-out plan.
Try to separate the emotions from the math when making these decisions.
Don’t try to figure this out on your own
If you’re an employee of Harley-Davidson facing a layoff or severance decision, I’ve put together a Retirement & Severance Checklist specifically for you.
It walks through:
- Pension decisions (monthly vs lump sum)
- 401(k) and HOG stock strategies
- Health insurance options
- Tax planning opportunities
- Social Security timing
Email me at info@keilfp.com and I’ll send you the Retirement & Severance Checklist right away.
Next Steps
If you’re affected by the reduction in force, know that there is hope on the other side of this transition.
I’ve worked with many Harley-Davidson employees over the age of 50 going through similar situations since 2019.
I’ve seen people find jobs they enjoy even more—with better pay.
I’ve seen others use this as a turning point to retire—and love it.
And I’ve also seen people, without a plan, make fear-based decisions that cost them over time.
Frequently Asked Questions
Should I take the severance package?
You likely don’t have a choice—but you do want to fully understand the financial details before you sign.
What happens to my pension if I’m laid off?
If you qualify, this severance should not affect your pension, since it was frozen several years ago. There is a difference in your full retirement age for the pension, though, depending on if you get to qualify as ‘retired’ or if you are just ‘separated from service.’
Can I retire early if I get a severance package?
A severance package isn’t likely to be the extra money you need to retire—but you might be surprised at how well you’ve saved and that you could retire. Before you make any big life decisions make sure you have a well thought out plan in place.
What happens to my 401(k) after leaving Harley?
Your 401(k) is likely to stay at Fidelity unless you make a choice to cash it in or roll it over to an IRA. Before you do either of those make sure to understand the 401(k) rule of 55 compared to the IRA rule of 59 ½.
My Final Thoughts
You don’t need to have all the answers right away.
But you do want to make sure you’re asking the right questions before making decisions that could affect your retirement for the rest of your life.
Take the time to understand your options—and use a checklist to make sure nothing gets missed.
If you’d like help walking through these decisions, you can start by emailing info@keilfp.com for a copy of our Retirement & Severance Checklist or scheduling a simple intro call to see if we’re a good fit.
About the Author: Jeremy Keil, CFP®, CFA
Jeremy Keil, CFP®, CFA is a retirement financial advisor with Keil Financial Partners, author of Retire Today: Create Your Retirement Income Plan in 5 Simple Steps, and host of the Retire Today blog and podcast, as well as the Mr. Retirement YouTube channel.
Jeremy is a contributor to Kiplinger and is frequently cited in publications like the Wall Street Journal and New York Times.
Important Disclosures
Neither Alongside, LLC, Keil Financial Partners, nor the “Mr. Retirement” or “Retire Today” trademarks is affiliated with – nor endorsed by – Harley-Davidson. Harley-Davidson has not reviewed, nor given approval of the Firm’s advisory services or marketing materials.
While our advisers are familiar with the employee benefit and retirement programs of the referenced companies, this information is general in nature and may not address the full details of your individual circumstances. For complete and authoritative information about your specific benefits, please contact the respective company’s Human Resources department and/or retirement plan administrator.
This blog is provided for informational and educational purposes only and does not consider the investment objectives, financial situation, retirement objectives or particular needs of any client or prospective client. The opinions expressed are for general informational purposes only. Nothing in this blog should be construed as investment, legal, or tax advice, nor as a recommendation or solicitation to buy, sell, or hold any security or to adopt any investment strategy. Clients and prospective clients should consult their own qualified attorney, CPA, or other professional advisor regarding their specific legal and tax situations. Keil Financial Partners does not provide legal or tax advice.
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