Blog

Planning for a Successful Job Transition

Chase Hayhurst, CFP®, Senior Wealth Management Advisor | Kelli Burger, CFP®, Wealth Management Advisor, Partner | February 15, 2023

SHARE

During times of slowing growth and economic uncertainty the thought of one’s own employment can come into question. Whether you have another job lined up, are transitioning to retirement or planning to take a break between careers, there are several emotional and financial items to carefully consider. For some it’s an opportunity and others an obstacle to overcome. In either event, being prepared and having a plan of action will set you on a road to success. Once the decision is made, the next step is to take inventory of your financial life, including benefits offered by your employer.  

What is the financial impact of this change? 

If you have already sought out employment, is the move lateral or are you receiving a bump in salary and other benefits? If you are retiring or considering gap years before re-entering the workforce, do you have the assets and income to support your living expenses?  

The answers to these questions will impact your financial plan, which is a dynamic way to review multiple outcomes in your savings/spending equation.  

It’s also prudent to review your personal balance sheet and review opportunities to improve your debt-to-equity ratio. For example, if you were considering a financing home or car purchase, refinancing or obtaining a home equity line of credit (HELOC), you may want to take steps to secure a loan prior to making a change.  

If you were laid off from your employer, you may also be able to collect unemployment benefits.  

Take an inventory of the benefits provided by your current employer.  

Benefits include more than salary, retirement plans and health care coverage. Many companies also offer compensation in the form of stock options, bonuses, pension plans and deferred compensation. It critical to review the following: 

☐   Salary and bonus structure – are you able to receive severance pay or a partial bonus if the transition occurs mid-year?  

• • • Many employers also compensate for unused vacation and PTO days.  

☐   Retirement plans – did you max out your retirement plan contribution for the year? The current year contribution limits can be found on our website here.  

• • •  If you have an employer match, are the matches fully vested?  

☐   Stock options – vesting schedules also apply to stock options. There are numerous types of options and some of the more common types can be found here. Complexity and planning opportunities can vary per individual so it’s an opportunity to work with your advisor to help navigate. 

☐   Other executive compensation packages – incentive packages can also include things like pensions and deferred compensation. Depending on if you are retiring or leaving a job involuntarily, these benefits may be accelerated (paid out early) or eliminated. If benefits are paid out immediately upon retirement or resignation, this may create a tax liability for the departing employee.  

☐   Health care – if you are covered by your employers’ heath care plan and not moving immediately to a new company, you may be able to continue benefits under COBRA. 

☐   Parental and family leave – if you are considering growing your family or may need time off to care for dependents, it’s important to know what options your company supports for paid leave.  

There are also intangible considerations when moving to a new company.  

Tangible benefits, like those listed above, provide financial security. Intangible benefits offer personal fulfillment. It’s important to weigh the pros and cons of both benefit types when considering a change.  

Examples of intangible benefits include: 

• Company culture – do the company’s values align with your own values and ethics?  
  • Aside from strong values, many companies have well-being programs that are supportive of healthy living. 
• Opportunities for education and collaboration – many employers reimburse for higher education expenses and offer growth trajectories to advance careers.  
• Flexible work hours and/or hybrid work set up – after the abrupt shift to remote work at the start of 2020, many workplaces retained a hybrid work set up or offered flexible work hours so employees can maintain control their schedules. 
  • If you are required to work on site, and the company is located somewhere other than where you currently reside, what is the difference in cost of living?  
• Work/life balance – do the new company’s expectations and work place policies allow for a work/life balance? 

Be prepared for your current employer to counter your new opportunity if you are continuing in the workforce. Employers want to retain good talent, and they may be able to increase salaries or offer more benefits in order to do so.  

What to account for when transitioning from your prior employer 

Whether you’re transitioning to another employment opportunity or heading into the golden years there are various items to be aware of from a professional and personal standpoint that should be reviewed, including: 

☐    Open communication with your employer and manager.  

• • • Set time with HR  
    • Employers will often need to backfill your position which takes time and resources to train or hire your replacement and providing sufficient notice allows them to plan accordingly.  
    • This will also help ensure that you leave on good terms with the company and avoid burning bridges on your way out. 

☐    Archiving any personal or permissible resources. 

• • • Whether by design or accident people often commingle their personal life and work devices so it is important to review that you have transferred or saved these items elsewhere. 
    • Additionally, there may be useful company resources that may be allowed for you to take with you. Be sure to run these by HR to avoid any legal issues. 

☐    Employer sponsored plans and benefits to review with HR.  

• • • If you have a retirement plan or other benefits with the employer such as a 401(k), profit sharing or stock options for example it is important to review what options are available to you.   
    • In general, you can either keep retirement accounts within the company plan, roll it into an IRA, or transfer it to your new employer. 

☐    Stock options: Reviewing whether they are transferable or if they would need to be exercised prior to leaving. It’s likely unvested shares will be forfeited and should be accounted for in the pros and cons list we spoke to earlier. 

☐    Health Care: Life happens and it’s critical to ensure there is no gap in your health care coverage. 

• • • If you are leaving the workforce or have a gap in employment, be sure to review your coverage options. Common options available are COBRA, purchasing a plan through a private marketplace, or enrolling in Medicare if 65 or older. 
      • Premiums will vary between these options so it’s important to review based on your situation and level of coverage. 
    • If you have life insurance through your employer, it may be portable and allow you to continue coverage and take over premium payments. Check with HR if this option is available to you. 

☐    Review your final paycheck to verify that any accrued PTO or sick days have accounted for and that any pro-rated compensation is accurate.  

Considerations if you are Starting your own Business 

As small business owners ourselves, Weatherly works closely with entrepreneurs and business owners on their own planning.  

For solo practitioners, self-employed 401ks can be an attractive way to continue to build on retirement assets. Many expenses may also be deductible on your tax return, including home office square footage, utilities, and some health insurance premiums.  

Sailing off into the Sunset  

You’ve worked hard throughout your career and with retirement on the horizon there is much to look forward to. Many of the items we’ve touched on in this blog apply to retirees from running a Financial Plan, taking inventory of your assets, cash flow planning, and securing health care coverage post-employment.  

Social Security plays a critical role in the transition to part-time work or retirement. Be sure to review your retirement benefits and cash flows for planning opportunities such as claiming benefits at your Full Retirement Age or potentially delaying. You can review your eligibility and benefits at different ages here. 

Whether you’re retiring partially through the year or the end we often recommend individuals max out their employer sponsored retirement plans reducing taxable earnings and continue to build savings. You may need to change your contribution rate in order to max out the plan if you’re not working the full year. We also recommend checking in with your tax professional to confirm if any withholding adjustments are needed. 

An equally important aspect of transitioning to retirement and often overlooked is aligning the portfolio’s asset allocation based on the time horizon and risk tolerance. Many individuals will rely on the portfolio to fund their goals and expenses over their lifetime so it’s essential to ensure the asset allocation is appropriate for the needs of the investor.   

How Weatherly can help 

As we’ve outlined in this blog there is much to consider when transitioning either to a new employer or into retirement. While these are some of the more common topics to review, the dynamics of each individual’s professional and personal life will differ in some way. Weatherly is here to help bridge the gap and work with you to identify the impact of your options over the short and long-term.  

** The information provided should not be interpreted as a recommendation, no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above.