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Financial factors to consider when changing jobs

Changing jobs can be a good opportunity to evaluate your finances and maximize your benefits.

Tags: Budgeting, Healthcare, Life events, Planning
Published: January 30, 2019

If you’re transitioning from one job to another, you may need to reorganize your budget and financial accounts to accommodate your new salary.

Here are some things to consider if you’re switching jobs.

 

Handling your retirement accounts

Generally speaking, you have four options for your old 401(k):

  • Cash out your earnings
  • Leave your money in your former employer’s plan
  • Transfer your money into your new employer’s plan
  • Roll your money directly into an outside IRA, such as a robo-advisor platform

There are pros and cons with each option, so you may want to consider talking with a financial professional to help you navigate your options and provide guidance on how to allocate assets in your account.

 

Compensation considerations

Look past the salary when evaluating a new job and examine the compensation as a whole. Does the bonus or commission structure mirror your previous role, or will you need to adjust your budget?

Don’t forget about bonuses tied to stock. Stock options can offer company shares at discounted prices but may have a “vesting” period, meaning they aren’t actually available to purchase until you’ve worked at the company for a certain period of time.

If you have stock options that you haven’t yet exercised, you’ll likely want to determine if they will expire when you leave. Carefully examine your vesting schedule so you don’t miss out. If your stock options will vest soon or you’re about to receive a cash or stock bonus, you may want to time your exit to best take advantage of those opportunities.
 

Covering insurance and other benefits

Think about how your benefits will change as you transition to a new job.

A new position might have a higher salary on paper, but if the employer offers fewer benefits, it could cost more in the long run.

Make sure you’re noting any benefits you may be losing or gaining as you reorganize your finances for a new job, such as healthcare, other insurance coverage or subsidized daycare. Any benefits that you may have to cover yourself should factor into your budgeting.
 

New employer, new location

New jobs sometimes come with new expenses. These may be small, such as a change in your daily commute, or large, such as relocation. If relocation is required, be sure to carefully evaluate any relocation offer. Some companies may be willing to pay for some or all of your moving and relocation expenses. This can be done via a lump sum payment to you or by directly paying movers. Be sure to look at the tax and income considerations of any relocation package you review. 

If you do relocate, also remember to account for changes in cost of living, including potential changes in your state or local tax code, which could affect your take-home pay.
 

Get advice from a professional

Employment changes are often a good time to re-visit your broad financial plan, as compensation adjustments can impact the timeframe you’ve established in working toward your goals. Additionally, having the ability to consolidate assets outside of your former employer’s retirement plan might enable you to qualify for a wider range of investment choices. A financial professional can help you think through these considerations.

 

As you transition to your new job, consider these eight steps to choosing a health insurance plan.