Leaving a Job
If you find yourself in an unexpected career transition, focus on the steps to actively manage your finances, maintain your health insurance coverage, and explore new opportunities.
Potential Direct Financial Impact
- Short-term amount needed to subsidize your lifestyle from savings, debt, and/or other income sources like unemployment benefits or temporary work.
- Potential lump sum deposit if you were granted a severance package as a result of any company layoffs and/or restructuring.
- Medical costs associated with COBRA, other health insurance premiums to ensure you and your family maintain coverage or out-of-pocket medical bills.
- Lost dollars held in a Flexible Spending Account held with your previous employer (unless you spent the funds before changing jobs or elected COBRA continuation coverage of your FSA and prior health insurance).
- Health Savings Accounts (HSAs) transfer to another HSA needed to maintain your tax-free savings.
- Direct rollover needed from your former 401(k) plan to your new 401(k) plan or a Rollover IRA
- Long-term lost growth opportunity and implications on your overall financial security if you depleted your savings and/or relied on debt to get by during this transition period.
- Financial costs around exercising vested equity and potential taxes owed
Potential Secondary Impacts
- Lifestyle impact and reallocation of household cashflow after postponing, eliminating, and/or reducing any unnecessary expenses during this transition period.
- Need to update your financial plan to reflect any changes to your compensation, account balances, and goals once you start a new job.
Self Completion/Execution Risks
- Missing the potential opportunity to negotiate your severance package and period your employer pays for your COBRA coverage.
- Losing benefit coverage and/or Flex Spending Dollars during the transition period.
- Missing out on savings and future growth of an unvested 401(k) match from your prior employer.
- Missing out on the potential growth of dollars that could have otherwise been saved or invested.
Situations Where Expertise Adds the Most Value
- Tax Adviser
Consulting a tax adviser any time your compensation, benefits, and/or employment status change can be beneficial to determine if you should make any changes to your future withholdings and ensure that you’re aware of any new deductions, including deductible expenses related to a job search or consulting income.
- Legal Adviser
Depending on the complexity of your situation, it may be advantageous to seek legal representation to assist with any negotiations related to severance package negotiation and/or employment protections.
- Financial Adviser
During this transition period, a financial adviser may be able to help you create a realistic budget that accounts for any changes to your cash flow and the best sources to draw from if you need to leverage savings for current expenses. A financial adviser can also help you think through the costs and tradeoffs of potential equity exercises or sales connected to your departure.
- Tax Adviser