Changing Jobs? Don’t Forget to Do These Five Things
Changing jobs can be exciting, but it also brings up many factors to consider. You need to adjust to a new set of responsibilities and a change in income and expenses. Plus, you have to figure out what to do with your old retirement plan, go over your new benefits package, and more. All of this can create a lot of money-related questions. With that in mind, this article will dive into five key steps to take when changing jobs to maximize your financial security and peace of mind.
1. Consider Your Retirement Account Options
If you have a retirement account with the employer you’re leaving, you must decide what to do with it. You have a few options. Be sure to consult a financial advisor to help you understand each choice and how it works with your situation:
- Keep it as is: You can do nothing and leave the account as it is. This can present challenges, especially if you change jobs often since you’ll have many accounts to keep track of.
- Roll it over to the new workplace plan: Rolling a workplace plan over to your new job means combining it with your new job’s workplace plan. You won’t have as many investment options as with an Individual Retirement Account (IRA), but you can still take out loans against your account if needed, and you get a higher contribution limit than an IRA.
- Roll it over to an IRA: IRAs are external retirement accounts you can open at banks, brokers, and online providers to roll your old plan into. Contributions are pre-tax, just like with workplace plans. Contribution limits are much lower, but you can invest in almost any traditional investment, such as stocks, bonds, and mutual funds.
Once you get to your new job, make sure to get acquainted with your new employer-sponsored plan and investment options so you can continue saving for retirement seamlessly.
2. Get An Individual Life Insurance Policy
Employer-provided life insurance doesn’t come with you if you change jobs. Even if your next job offers group term life insurance in your benefits package, many employers don’t offer more than $50,000 for tax reasons. So, it’s smart to consider getting an individual life insurance policy outside work.
Term life insurance lasts for 10 to 30 years and has no cash value growth component, but premiums are affordable. This could be a good option if you need the most coverage for your dollar and don’t need coverage forever.
Permanent life insurance costs more but offers lifelong coverage. These policies are also forms of cash-value life insurance, meaning you can build wealth in the cash value growth component with part of each premium.
As your cash value grows enough, you can tap into it as a source of savings through borrowing, withdrawing, and in some cases, paying premiums with cash value. If you decide you don’t need the policy one day, you can surrender it and receive the cash value minus surrender charges.
3. Change Over Your Insurance
Some companies let you get coverage under the employer plan on your first day. In that case, make sure you enroll and choose your coverage level as soon as possible. Plenty of other companies may make you wait 30 days before starting your health insurance coverage. If that’s the case, you can enroll in Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage.
This special kind of coverage lets you keep your old employer’s coverage temporarily while you wait to get your new benefits. You may have higher premiums for the same benefits on COBRA coverage, but this may be well worth the cost of a potential medical bill during this period.
4. Adjust Your Budget And Goals
If you move jobs, your salary could change. For example, a higher-level role could give you a salary bump. This offers you more income to cover your spending, upgrade your lifestyle, and accelerate progress toward financial goals. However, if you’re changing careers, you might end up with a lower salary at first. As a result, you might have to cut spending as you work on progressing in that career.
Your expenses may change as well. For example, you might have to relocate to a new job. This means you’ll need to pay to move and rent a new apartment or buy a house. If you don’t have to relocate but the commute is longer, you will have to spend more on transit and potentially buy a car if you previously used other transportation methods. Furthermore, the new job may require increased travel, a new wardrobe, or attending networking events. All of these can add expenses to your budget.
On the other hand, maybe your job is closer. That might save you money by letting you cut spending on gas or even sell your car.
5. Have Enough In Your Emergency Fund
Changing jobs can shake up your life a bit, especially if there’s a gap between your last day at your old job and your first day at the new one. Also, a new job always brings uncertainty. Regardless of the situation, it’s smart to set aside more in your emergency fund. This fund can help cover the costs of car repairs, unexpected medical bills, and other surprises.
The general recommendation is to have three to six months of living expenses saved, but consider setting aside an extra month or two. You can keep this in a high-yield savings account to earn more interest.
Change Jobs Safely And Securely
Changing jobs can be a busy time, but taking a few steps can offer you a lot of security as you make the transition. Start by figuring out whether you’ll keep your existing retirement account or roll it into your new employer plan or an IRA. Consider buying an individual life insurance policy as well to keep coverage regardless of job status.
Speaking of insurance, enroll in your new workplace plan as soon as possible. Consider getting COBRA coverage from your previous employer if needed to fill the gap. Furthermore, budget for the new job’s income and any changes in expenses, and add extra to your emergency fund just in case. Follow these steps to get peace of mind as you move into your new role.
This article has been published in accordance with Socialnomics’ disclosure policy.