These six financial considerations can help set you up for success.
Career change is a hot topic as we emerge from the coronavirus pandemic. That comes as employees are quitting their jobs in droves — or what’s been referred to as the “great resignation.” The percentage of Americans leaving employers for new opportunities is at its highest level in more than two decades.
Before you make the decision to move on, review this checklist of important financial considerations. Some involve making sure your personal finances are in order, while others can help you explore all the implications of leaving your current job.
1. Review your current retirement benefits. Check the schedule for your employer’s 401(k) and profit-sharing contributions to see how long you have to work to claim any matched funds. If you’re close to being fully vested (meaning you’re entitled not just to the dollars you contributed but also to the dollars your employer did), it may be worth sticking it out a little longer.
Keep in mind that many plans require that you be employed on the last day of the plan year to get employer contributions for that year, even once you are vested. You may want to wait until after the plan year ends before you terminate employment so you don’t lose those contributions.
2. Manage your health insurance. If you don’t already have a new position lined up or if your new employer’s health plan has a waiting period, figure out where you will get coverage to fill the gap.
If your current company has 20 or more full-time employees, you’ll be able to keep your current plan for 18 to 36 months after you stop working under the Consolidated Omnibus Budget Reconciliation Act (COBRA). (The length of time depends on a variety of factors.) Keep in mind that you’ll likely have to pay a lot more because you will pay both your share of the premium and what your employer used to pay. If that’s the case, you may want to compare costs to coverage available on the government’s health insurance marketplace.
Another thing to consider is that if you live in a state with a health insurance mandate and you do not purchase coverage, you may have a tax penalty (depending on your income).
3. Spend your FSA accounts. If you put pretax money into a flexible spending account (FSA) to pay for health care or child care, try to spend all the money in the account before you resign because FSAs typically operate on a use-it-or-lose-it basis (though you may be able to extend it with COBRA). In contrast, if you have money in a health savings account (HSA), that money is yours to keep.
4. Consider a group life and disability insurance conversion. If you have life or disability coverage through your employer, you may be able to convert your group policy to an individual policy that you can take with you. Check with the insurer to see if that’s the case. Often you have a short window after your resignation to apply for continued coverage. This can be an especially good option if insurers consider you a risk because of your age or medical condition.
5. Check your employment contract and noncompete agreement. If you signed any legal documents when you were hired, have a labor attorney evaluate their terms and enforceability.
Some contracts may require you to pay back relocation money, education grants, or bonuses if you don’t stay for a certain period. Others include “golden handcuffs” that may indicate you will lose unvested options, restricted stock, deferred compensation, and other benefits upon resignation. Still others may require waiting for a specified length of time before taking a job with a competitor.
6. Check the terms of stock options, restricted stock, or other forms of nonsalary compensation. The vesting schedule is key because you may want to delay your departure if a valuable number of options will vest in the near future. If you’re already vested, find out if you’re still subject to the same trading windows and how much time you have to exercise your vested options once you resign. In many cases, options expire if they aren’t exercised within a certain time frame — typically 90 days after your departure.