Financial Planning Opportunities to Prioritize When Changing Jobs

Financial Planning Opportunities to Prioritize When Changing Jobs

They call it the Great Resignation.  With more jobs available than Americans looking to fill them, recent months have presented a unique opportunity for those interested in finding something better.

But along with a chance to upgrade your career, changing jobs can also present other financial opportunities.  Because it is a busy time, it can be easy to miss those, which can mean a loss for your long-term financial situation.  This article provides some tips to help you spot opportunities and sidestep pitfalls.  

Avoid Snap Decisions.  When you change jobs, you’ll be dealing with many shifts and presented with many different options.  Dealing with all of this at once can make financial decisions even more challenging.  So understand that it is best to slow down and research everything properly instead of making hasty decisions.  Ideally, schedule a time to meet with a financial planner to review it all in detail so you can maximize your choices.     

Carefully Consider Retirement Plan Options.  If you’re offered a 401(k) or similar plan, you may have the choice of a regular or Roth account (or even both).  What’s the difference? The regular (or pre-tax) retirement account gives you the benefit of a tax deduction this year.  Then you will pay income tax on all withdrawals from the account in retirement.  The Roth option, on the other hand, has you forgo the savings now.  Then all of your withdrawals during retirement will be tax-free.  Given that tax rates are historically low now and likely increasing, choosing a Roth for all or part of your retirement savings can be a move worth considering.   

Seize the Opportunity to Save Painlessly.   If your job change involves a salary increase, you have a pivotal opportunity:  to save more without the pain of cutting back.  Usually, it is best to first increase your 401(k) plan withholding since that comes with maximum tax benefits, but don’t stop there.  Why not put any remaining difference into a regular savings account (or directly into a taxable investment account)?  You can even set up an automatic deduction from your checking account for this purpose.  These opportunities in life don’t come around often.  Mentally it is easiest to save this way, so you’re not forced to cut back on spending.   

Revisit your Tax Withholding.  Of course, a higher salary can mean higher taxes.  That’s where maximizing your retirement plan contribution can help.  If you elect a pre-tax contribution, you can take the tax deduction now.  You may also have other tax deductions available if you choose a Health Savings Account versus a regular health plan.   

Whatever you decide with your retirement plan, be sure to contribute enough to get your employer to match if one is offered.  That’s free money, so you should not miss out on that unique offer.   

Then, it’s good to run through your tax withholding and see if those need to change.  While it sounds good to get a refund at the end of the year, in reality, you’re simply providing Uncle Sam with an interest-free loan.  Instead, it’s better to try to get the amount you owe close to zero or even a small tax liability, so you can keep that money working for you.   Especially if you have any debt, you’re much better off paying that than waiting around for a refund of your own money.  Talk with your CPA to determine the right withholding and tax payment strategy for you. 

Choose Your Health Plan Carefully.  Today’s health insurance plans can do a lot more for you than just offer medical care.  Health Savings Accounts can be great savings tools, especially if you’re not a big user of medical services.  If you’re healthy, consider one, as these can provide significant tax and retirement savings benefits.  If you have a family or are a frequent user of medical services, pairing an FSA (Flexible Spending Account) with a traditional policy might be best.  Take your time, weigh the costs and benefits and choose carefully.   

Check Out Other Benefits.  You’re busy when you’re changing jobs, so looking over a thick benefit guide can seem like an unnecessary distraction.  But don’t overlook this, as it can provide some interesting opportunities with long-range benefits.  Often you’ll have only 30 to 60 days to make initial choices, so do carve out time to review your options. 

This is a great time to evaluate your insurance needs.  By purchasing your insurance as part of an employer group, you can often save money.  This is especially applicable if you have a health issue that would make getting insurance on your own more expensive.   

Disability insurance is essential for many people, especially if you are the sole breadwinner for your family.  This insurance will replace your salary if you’re sick or injured.  Often, you can get disability insurance much more cost-effectively through your employer than on your own. 

When it comes to life insurance, you’ll usually get a flat, low amount as an employee, with an option to buy more coverage.  However, if you’re healthy, you can likely get more coverage for less by going outside of your workplace in most cases. 

Larger companies often offer other benefits that might be beneficial to you.  For example, you may get a free gym or online fitness membership or free legal help, which can provide significant savings.  More companies are offering tuition reimbursement as well, so if you’re thinking of furthering your education, it may be worth exploring.   

Don’t Forget Your Old Plans!  Recent research by Capitalize estimates that job changers have leftover $1.35 trillion behind in forgotten retirement accounts.ii  Don’t let that be you!  If you have a 401(k) at your current job, you can either transfer it to your new employer’s plan or an IRA.  This process is called a rollover.   

If you have a Health Savings Account, you can likewise move it to another independent provider or combine it with a new HSA at your new employer. 

Keep on Planning 

By following these steps, you’ve done important work to improve your financial future. But remember that financial planning is not a one-time event.  Check-in with your financial plan (or get one done for you if you don’t have one yet) periodically so you have the best chance of creating the financial future that you want.  


Questions and Consultations

If you have questions or if you’d like to schedule an appointment to discuss your finances, contact us today.

Want more information? Sign up to receive our monthly e-newsletter here.

Partnership Wealth Management is a comprehensive financial services company. We are committed to providing our clients with financial planning and wealth management services to help them make the most of their investments. At Partnership Wealth Management we have a long history of working with the LGBT community. Among our many services, we offer financial planning for gay couples and lesbian couples as well as estate planning for gay couples and lesbian couples. Financial planning is an important part of preparing for the future, contact us today to get started: We always try and provide the best information – We are not responsible for information on third-party sites. Thanks for reading!