Are you looking for career change or planning to get a new job soon? If so, there’s a lot to look forward to — a new salary, new coworkers, and new duties. But you’ll also want to look into the financial considerations. Here are some of the most important things to keep in mind when changing jobs:
401(k)
If you had a 401(k) plan through your previous employer, you’ll need to decide what to do with it once you’ve joined your new employer. There are a few options. You could just cash it out, but you’ll pay taxes and possible penalties. If it’s allowed and if you have been happy with your plan’s performance, you could leave your 401(k) with your previous employer. You could move your 401(k) into your new employer’s plan, which might be a good choice if the new plan has lower fees and attractive investment options — be sure to ask whether the new employer offers matching contributions. You could also roll over your old 401(k) into a traditional IRA, which would give you more investment choices.
HSA/FSA
If your new employer offers a health savings account (HSA) as part of a high-deductible health plan, you may want to take advantage of it. Your contributions are made with pre-tax dollars, your earnings generally grow tax deferred, and your withdrawals are tax free as long as they’re used for qualified medical expenses. Plus, you can carry unused funds through retirement and still use them for qualified medical expenses. Your employer might also offer a flexible spending account (FSA), which can pay for a variety of health care costs, such as deductibles, co-payments, and co-insurance. Generally, if you’re contributing to an HSA, you can’t fund an FSA in the same year, except for a limited purpose FSA.
Waiting Period for Health Benefits
You’ll want to ask your new employer if there’s a waiting eligibility period to enroll in its plan for benefits such as health insurance, dental, vision, etc. If so, you may need to get Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage for a few months to continue your old plan, unless you can be added to a spouse’s plan. If you choose to take part in your new employer’s health care plan, make sure you know what it covers. Depending on your situation, you might want to add supplemental health insurance.
Life Insurance
When you leave a job, your employer-sponsored life insurance will end, unless you have the option to convert your group term life policy into an individual permanent cash value policy. So, you’ll want to be sure your new employer offers at least the same insurance coverage as your old one, but you should also determine whether the group policy offered by your employer is sufficient for your needs. Depending on several factors, such as your income, your spouse’s income, and the size of your family, you may need to supplement your employer’s policy with an individual term life insurance policy.
Other Benefits
Review your new employer’s benefits package carefully to see what’s available. Many employers offer tuition reimbursement for their employees, and some even provide college planning assistance for employees’ children. For example, your employer might offer matching contributions to a tax-advantaged 529 education saving plan, which can be used for college, some K–12 expenses, and some trade/vocational school programs.
Changing jobs can provide an opportunity to expand your career, learn new skills, and broaden your social network, and it can certainly be financially rewarding too, so make sure you know about and are making the best of all the benefits involved.
