The days of working for a company for 40 plus years, being handed a gold watch for your tenure, and collecting a pension for the remainder of your life is long gone. It is more likely that today’s workers will hold ten to fifteen jobs, spending less than five years at each employer according to a recent report from the Bureau of Labor Statistics. In addition to the stress and anxiety associated with finding a new job, there are important financial aspects that should be reviewed with each change.
- Do you have a financial plan in place? It would make sense that you should have a financial plan in place, especially if you are looking to make a job change. Using the plan, you could easily determine how the employment change will ultimately affect your financial situation-whether positive or negative. Although you may not be changing jobs for financial reasons, it would be a good idea to know going in what the effects will be.
- How are you protecting yourself, and your family, from death or disability? You need to evaluate how you are covered for life and disability insurance. Often times we see younger employees, even older ones, only having group coverage through their employer. Many times this coverage is not portable and cannot come with you when you separate from service. It is a good idea to research if your new employer has these coverages available for you. Whether they make it available or not, it may make sense for you to explore obtaining your own individual coverage that is yours to have regardless of your employer. This is especially worthwhile if you plan on having the number of employers mentioned in the report above.
- What are you going to do with your retirement monies at your previous employer? It would not make too much sense to have ten to fifteen different retirement accounts when you finally look to retire. You may create a job just to keep track of where all your assets are, how they are invested and how they are performing. Upon leaving an employer, you usually have the ability to maintain the account where it is, unless you do not satisfy certain minimums and they force you to move it or roll it over. Typically you would want to roll these assets over and that can be done by rolling them into your new employer’s retirement plan, if the plan provisions allow, or into your own IRA. There are several things to consider when trying to determine which method to use when rolling over your assets. We will review this particular topic in a future post, as this is a topic of its own.
- Are you contributing to your 401(k) and changing jobs mid-year? It is important to note that there is a maximum, for 2019 it is $19,000 for those under 50 years of age and $25,000 for those over, that you can contribute to your 401(k) on an annual basis. You will want to make sure that you do not violate these thresholds if you contribute to both the old and new employers’ retirement plan. This amount is not a maximum per employer, but actually a maximum on the amount you can defer annually from your earnings. Putting too much in over the course of the year will give you extra work to unwind what was done and remove the excess amount.
- Are you in the process of looking for a new home and would need a mortgage to purchase it? Looking for a new home is a great experience and also a stressful one. Buying a new home ranks up there with looking for a new job, so you may not want to try doing both of these at the same time. In addition to saving yourself stress, you may not want to do both of these at the same time due to your need of a mortgage. It will be important that the mortgage company see stability in your work history and they certainly will want to make sure you are with your employer for a specific period of time. The time period they are looking for will be dependent upon the type of loan you would be looking to secure. It would be wise to consult with a mortgage consultant prior to making any job changes while in the home buying process. You certainly will want to make sure you are with your employer when you are about to close because the mortgage company will call them around the closing to verify you are still employed. You will not want to risk your home purchase over a job change, so it is important that you research this in advance.
Changing jobs brings a certain level of stress with it and there are certainly ways to mitigate it. Ideally you would want to have a financial plan in place, in advance of any change, and this will put you ahead of your fellow job changers. The advisor who helped you develop the plan will be in the unique position to walk you through these top five things you should review, as well as others not mentioned here. Having the right advisor on your side, that is a good fit, will alleviate much stress and make the transition go much smoother.
We have helped many clients through this process and would welcome the opportunity to help you or someone you know. Please feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know has plans of changing jobs in the foreseeable future or they simply want to put a plan in place. We look forward to helping you, and them, make this a smooth transition.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.