Are you ready to begin a job search or launch a career transition? Here are suggestions to manage your finances wisely before making the change to new employment.
Plan your income stream. Check for a gap in pay dates and make plans to have enough savings set aside to tide you over. Include increased commuting or healthcare costs in your calculation of how much money you’ll need to make the transition. Ask whether a salary increase will trigger changes in your student loan payments.
Review health care and insurance options. Will your deductible change at the new job, or will you experience a delay in eligibility for medical benefits? Consider the timing of vision and dental exams, optional procedures, and prescriptions before changing jobs. Also, decide what you’ll do with the remainder of your Flexible Spending Account.
Learn about 401(k) and pension choices. If your current job offers a pension, you may have to decide whether to receive the funds as an annuity or as a lump sum. You have several options for your 401(k) funds, such as leaving your account with your current employer, transferring the balance to a self-directed IRA or to your new employer, or withdrawing the balance. Since these decisions have tax and potential penalty implications, talk to us before you take action.
Budget for loans and mortgages. Do you have a 401(k) loan? To avoid having to report the amount you still owe as income on your tax return, you’ll have to repay the outstanding balance when you leave your current job. If you’re considering a new home, anticipate that lenders will generally require two years of income verification for mortgages.
Changing jobs is exciting as well as stressful, and applying an appropriate level of financial review and forethought can ease the transition.
If you have questions about being financially prepared to switch jobs, please contact us at Cisco & Co CPAs. We can help you get prepared and make your job transition a financial breeze.