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Changing Jobs

In many cases, the need for attention to our finances doesn't occur until we are in times of transition.  One of the most consistent transition points that get people focused on their money is the process of changing jobs.  This can be a time of stress and concern but can also be one of great opportunity if managed well and prepared for in advance.  If your job transition is unplanned, this can be a particularly trying time. What to do? You don’t have your past income, you may not have my medical benefits anymore, your bills keep coming, you have to find a new job and you need to decide what to do with my old work-sponsored retirement plan. It’s quite a list. Generally, it is the most pressing need of finding new employment that captures people’s most direct attention. While this is—of course—critical, there are other important and valuable decisions to be made while in job transition that can sometimes take the pressure off a little bit. Some need to be made immediately while others may be secondary issues. Working with an unbiased third party like a financial advisor can help you sort through these time-sensitive priorities.

If your job transition is unplanned, this can be a particularly trying time. What to do? You don’t have your past income, you may not have my medical benefits anymore, your bills keep coming, you have to find a new job and you need to decide what to do with my old work-sponsored retirement plan. It’s quite a list. Generally, it is the most pressing need of finding new employment that captures people’s most direct attention. While this is—of course—critical, there are other important and valuable decisions to be made while in job transition that can sometimes take the pressure off a little bit. Some need to be made immediately while others may be secondary issues. Working with an unbiased third party like a financial advisor can help you sort through these time-sensitive priorities.

In regards to health insurance, you may have several options that you are not aware. You may be able to take a COBRA continuation of your previous plan or jump onto a spouse’s plan. Other emergency short-term insurance plans are also available and so looking into private health coverage can be the answer.

Even for those who have a financial cushion, the pressure of forthcoming bills and costs while not generating their usual income can be very stressful and make it hard to stay objective. We work with our clients to break down their costs and budgets into priorities so they know immediately where they can save money on a monthly basis should they come into a cash flow crisis. By breaking down your monthly cash flow into must-haves, preferred and discretionary costs, you will generally be able to adjust your costs substantially. You may also be able to notify some of your creditors of your job loss and in doing so have them abate your payments for a short period of time.

Finally, what should you do with my company-sponsored retirement plan? Hopefully, you will not need to access these funds to bridge the gap between jobs. If you are younger than 59 1/2 years old, the Internal Revenue Service (IRS) will assess a 10% penalty plus ordinary income taxes on any monies that are distributed. If you are older than 59 1/12 years old, then distributions would be taxable as ordinary income without the 10% early withdrawal penalty. This is where a financial professional can help with guiding you through any distribution process you may choose.s.

Changing jobs is not an easy life event. There are many things to consider if and when this happens. Most people will change jobs at least once in their lifetime but may often happen several times as well based upon one's industry, job type or special skills that one might possess. Hiring a professional to help you can during this transition can take a lot of the stress out of the financial decisions that need to be made.

Questions to Consider:

If you have steady work today, are you setting up an emergency funds account to protect you in case of a sudden loss of income?

Do you carry short and long-term disability insurance to protect you in case you should be unable to work for unexpected health reasons?

What are your options for continuation of health insurance coverage? Did you receive the COBRA options from your previous employer?

Do you have all the information on how to access and potentially rollover your previous employer-sponsored retirement plan?

Are you working with an objective third party to help you sort through key decisions in this transition?

 

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