If you find yourself starting or in the middle of a career transition, you aren’t alone. “The Great Resignation” was a phrase coined in 2021 due to the increased number of career transitions in the American labor force during that time. Many of these career transitions came through workers exiting the work force by choice to retire, by lack of choice through business shutdowns and layoffs, or perhaps leaving to provide care for a loved one. Fueled by several factors – a changing workplace environment with increased labor mobility, supply chain issues, or limited consumer spending – many businesses were forced to decrease their labor costs.
Nevertheless, you may be wondering if you have checked all the boxes or thought through all your options in selecting a new position. Here are a few points to consider from a financial planning perspective when making your decision.
The Transition Begins: What to Consider Before Leaving Your Current Employer
Severance Package: In the event you are being laid off by your employer, you may have a severance package to review, and possibly negotiate. These agreements will cover unused sick/vacation time, insurance offerings, and wages. This compensation is taxable and should be reviewed for accuracy before signing.
Retirement Benefits: Depending on your employer, you likely had the opportunity to contribute to a retirement plan, such as a 401(k), 403(b), or SIMPLE IRA. Your employer may have also been contributing to this plan. Be sure to know how to log into your retirement account, gather a statement, and review your vesting schedule. You will have options on whether you can leave your balance in the current plan, rollover to your new employer’s retirement plan or an IRA, or distribute your balance in cash. When making this decision, seek advice from a trusted financial professional to discuss the fees, potential income taxes, and other aspects of each option.
Insurance Benefits: In the event you’re leaving your employer, you will have the opportunity to utilize COBRA benefits, which provide a continuation of your medical insurance benefits for a specified period. This isn’t your only option for medical coverage, however. Seek help from an insurance or financial professional to weigh the pros and cons of utilizing COBRA versus a private insurance option.
The Search Begins: What to Consider in a New Employer
Typically, when shopping for a new position, many individuals will focus only on the cash compensation questions – how much is the salary, what is my hourly rate, is there a bonus structure opportunity? The answers to these questions are crucial as this is what helps keep bills paid and future financial goals funded.
However, there are other compensation offerings to tune into such as insurance benefits. Will your new employer pay for a portion of your premiums? Is there a Health Savings Account contribution option? Another important benefit to review is their retirement plan offering. Is there an employer match and if so, how much? Will they offer profit sharing opportunities? In the event you have children or other dependents, does your new employer offer Dependent Care Reimbursement options? How about the opportunity to fund a college savings account like a 529 through payroll contributions?
Making a Decision: What to Keep in Mind
Lastly, we think that good, long-term decisions are made when you keep your personal values and priorities in mind:
What are my values in life and how can I be sure to align these with my employer? For instance, if community involvement is a high priority for you, does your new employer offer time off to volunteer at a non-profit? Do they offer matching opportunities to charities you support?
When I think about my ideal and productive workday, what did I accomplish? Does a productive day mean connecting with a new prospect or client? Perhaps it means you’re teaching colleagues or providing mentorship. Consider your idea of a productive and fulfilling role and ensure your new job description aligns with it.
What do I envision my 3-year, 5-year, and 10-year growth track to be? As you look to develop in your career, will your current employer provide that growth opportunity? Do your goals align with their expectations for your role?
Making a career transition comes with numerous considerations. In the event you’re looking for someone to chat with, feel free to reach out to our team. We help our clients through life transitions every day and would be happy to help you through yours. Check out this podcast episode if you’re looking for more conversation on career transitions!
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