Before You Quit: Financial Moves To Make Ahead Of A Job Move
We all know what happens when someone is looking for a new job. It starts with a recurring case of the Monday morning blues spent reading the messages we usually ignore on Linkedin. Next we polish off that dusty old resume and wordsmith the time we cleaned the company refrigerator into an epic example of team spirit. Finally, we forego the usual khakis for our sharpest suit because we really need to impress at our lunchtime “doctor appointment”.
In the midst of all this not-so-stealthy planning, our focus goes to a few things: keeping up our job duties, keeping up appearances and daydreaming about how life will be when we have more money, more vacation, more flexibility, a shorter commute, a better boss or whatever is driving our desire to move on to greener pastures.
As fun as it is to imagine how we might spend our higher salary, it doesn’t leave us much time to focus on the less obvious ways a job change can impact our financial lives. If our new employer doesn’t offer certain benefits, or if we’re embarking on the journey to self-employment, it’s critical to give ourselves more than two-weeks’ notice to prepare. If you’re thinking about a move, consider this checklist for what to do – and when – ahead of changing jobs.
6-12 Months Before You Leave:
Check the Vesting Schedule of Your Retirement Accounts
While the money you contribute to your retirement account always belongs to you, the timing of when you leave your job impacts whether you will have to give back some or all of the contributions your employer made to your account. Their contributions are usually subject to a vesting schedule which spells out how long you must work for the company before their retirement contributions become yours for good. For example, a 3-year cliff vesting schedule means 100% of their contributions are yours after 3 years. If you have significant employer contributions in your retirement plan or the next vesting date is just around the corner, you may want to put off your job search until the money vests.
3-6 Months Before You Leave:
Consider Individual Life and Disability Insurance Policies
Many companies offer life and disability insurance benefits. The upside to purchasing insurance on the company’s group plan is that it’s cheap and you typically get to skip the medical review that is required when you buy your own policy. The downside is that the insurance usually goes away or becomes more expensive after you leave. You may be able to replace coverage with your new employer’s benefits, but you should be sure to find out if you will qualify for the coverage you need. For example, you may need life insurance equal to 5 times your salary, but the new employer may only offer 2 times.
Purchasing your own policies gives you more control over the coverage amount and ensures you can keep your coverage no matter where you work. Medical underwriting, which often involves a couple interviews, a blood and urine test and a review of your medical records, can take several months to complete. It’s especially important to start the application process early if you will be self-employed as it will be much easier to qualify while you still have a salary.
2-3 Months Before You Leave:
Refinance or Get a Home Equity Line of Credit
One of the factors considered when approving candidates to refinance their mortgage or get a home equity line of credit is employment history. A new job in the same field with a similar salary usually won’t hurt your chances of qualifying but if you’re changing fields or becoming self-employed, it is worth handling your debt financing while still at your current job to avoid raising a red flag to the loan underwriter.
A home equity line of credit can also serve as a resource for cash flow if you have time between your last paycheck at your old job and your first paycheck with your new employer.
1-2 Months Before You Leave:
Spend Down Your Flexible Spending Account
When you leave your job, unused dollars in your FSA are forfeited to your employer. Let’s say you agreed to contribute $2,000, or $167 per month, to your FSA this year and you leave in June. By midyear you will have accumulated $1,000 in your FSA, which you can use on qualifying medical expenses any time before you quit. If not, the rules allow your employer to keep any unused benefits.
While you might think you are limited to spending only what has been contributed to your FSA, you can actually use the entire annual amount you allocated even before that money has been contributed to your account. In our example, that means you could get reimbursed for $2,000 of expenses before June, leave your job and never have to repay the extra $1,000.
Right Before You Leave:
Gather Your Statements
Many employers now deliver paystubs, W-2s and retirement plan statements to electronic portals that you may not have access to after you leave. Whether your advisor is evaluating how much to withhold in taxes, how much more you can contribute to a retirement account or how to roll over your retirement plan to an IRA or Roth, both of your lives will be easier if you take a few minutes to pull this information together before your departure.
Pursuing a new job opportunity is about improving your quality of life. If you have the innate desire to better your situation, then you already have what it takes to tackle the items on this list. So how do you go from good intentions to great outcomes? You just have to apply.
As originally published on Forbes: