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4 financial considerations before changing jobs

When you’re considering a new job, salary is only one part of a larger financial picture.

Tags: Budgeting, Healthcare, Life events, Planning
Published: April 02, 2021

If you’re looking to transition from one job to another, it’s important to factor in all the changes that come with it. Beyond a new salary, you’ll likely have different retirement plan, insurance and other benefit options. You may even have a different dress code or commute (or no commute at all). And all of these can impact on your financial plan.

Here are 4 financial factors to consider before you change jobs.


1. Workplace retirement plans

Does your new job come with access to an employer-sponsored retirement plan, such as a 401(k), 403(b), or IRA? If so, what is the vesting period? And what is the company match, if one is offered?

If you have a 401(k) at your current employer, generally speaking, you have four options for what to do with it:

  • Cash out your earnings
  • Leave your money in the current retirement plan
  • Transfer your money into your new employer’s retirement plan
  • Roll your money directly into an outside IRA, such as a robo-advisor account*

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.

Regardless of whether you’re starting fresh or rolling over existing funds, opening a new account gives you an opportunity to evaluate your risk tolerance. Does this new job, its salary and your employment outlook trigger any changes in your long-term retirement plan?


2. Full compensation package

Look past the salary when evaluating a new job and examine your 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 available to purchase until you’ve worked at the company for a certain amount of time.

If you have stock options that you haven’t yet exercised, you’ll likely want to determine if they’ll 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.


3. 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 work-from-home flexibility, paid time off, health insurance, short- and long-term disability, other insurance coverage or subsidized daycare. Any benefits that you may have to cover yourself should factor into your budgeting.


4. 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 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 in choosing a health insurance plan


*A rollover of qualified plan assets into an IRA is not your only option. Before deciding whether to keep an existing plan, or roll assets into an IRA, be sure to consider potential benefits and limitations of all options. These include total fees and expenses, range of investment options available, penalty-free withdrawals, availability of services, protection from creditors, RMD planning, and taxation of employer stock. Discuss rollover options with your tax advisor for tax considerations.