Starting a New Job

When effectively transitioning from one company to the next, there are several considerations to weigh carefully for your financial and tax planning.

  1. Potential Direct Financial Impact

    • Potential lost income due to any gap in employment between jobs
    • Total compensation increases (or decreases) as a result of switching employers
    • Costs associated with COBRA or other health insurance premiums if there’s a gap in coverage before your new benefits start
    • Out of pocket medical bills if there’s a gap in health insurance coverage
    • 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
    • Tax-free dollars maintained if transferred your Health Savings Accounts (HSAs) to another HSA
    • Balance transfer from your former 401(k) plan to your new 401(k) plan or a Rollover IRA
    • Potential outlay of cash needed to exercise any stock options and/or cover taxes related to equity compensation exercising or vesting.
  2. Potential Secondary Impacts

    • Lifestyle impact as a result of any changes to your take-home pay
    • Increased savings potential as a result of negotiating a higher salary, bonus and/or equity.
    • Tax benefits from maximizing pre-tax contributions to your new benefits (ie. Dependent Care FSA, Commuter Benefits, gym reimbursement etc.).
    • Cash flow changes due to an increase or decrease in your pre-paycheck deductions (premiums, 401(k), FSA or HSA, commuter benefits, etc.).
  3. Self Completion/Execution Risks

    • Missing the opportunity to negotiate a higher salary and ask for a signing bonus or equity to ensure your contributions are valued appropriately.
    • Exceeding the annual 401(k) plan limit set by the IRS by contributing to plans at both employers (if you typically max out early).
    • 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.
    • Leaving money on the table by not contributing enough to get your full employer match.
    • Missing the window and opportunity to exercise any vested stock options with your former employer within 90 days of leaving.
  4. Situations Where Expertise Adds the Most Value

    • Tax Adviser
      Consulting a tax adviser any time your compensation, benefits, and/or employment status changes can be beneficial to ensure that you are 1) withholding enough in taxes based on your new compensation, 2) reducing your taxable income as much as possible using any pre-tax benefits and/or tax advantaged accounts, and 3) maximizing all potential deductions.
    • Legal Adviser
      Depending on the complexity of your situation, it may be advantageous to seek legal representation to assist with any negotiations related to your compensation or employment protections with your new job.
    • Financial Adviser
      Working with a financial adviser to draft a realistic financial plan that illustrates the long-term benefits of keeping your standard of living the same to fund your goals can provide the motivation needed to make it happen. As part of this process, your planner can take into account any recent changes to your cash flow (increased or decreased take-home pay) to help you evaluate tradeoffs with competing priorities and goals based on your values.

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