Planning to Quit Your Job? Don't Forget to Check These Tasks Off Your To-Do List
Don't end up regretting your decision to leave the workforce because you weren't ready.
- Quitting a job can have far-reaching financial implications.
- Preparing for the monetary consequences of quitting is important to avoid disaster.
- You should also take steps to prepare for getting your next position before quitting.
Across the United States, many people are taking advantage of a tight labor market to quit their current jobs and look for a different opportunity. If you are one of the millions who is considering switching careers, there are four tasks that you should be sure to check off your to-do list as you prepare to give notice and move onto your next step in your career path.
Here's what they are.
1. Decide what to do about your 401(k)
You have a few choices with your workplace 401(k) if you were investing in one. You can keep the money with your current company in most cases; can move it to your new employer's 401(k); or can move the cash into a rollover IRA.
The best choice depends on your situation. Keeping your money with your current company is the simplest approach but you may not want to do that as you could end up with too many different 401(k)s open as you leave each job. If your current account has few investment options, investment options with high fees, or high management costs, this may not be the best option either.
Moving money into your new employer's account can also be a simple option, and one that allows you to keep most or all of your retirement money in one account if you'll also be contributing to the 401(k) at your new job. But, you may also find that the new 401(k) doesn't offer many investment options or has high fees associated with it. And if you don't already have a new job lined up, this won't be possible since there won't be a new employer 401(k) to move money into.
Finally, you can move the money to a rollover IRA with any brokerage firm you want. This gives you more control over what you invest in and the chance to shop for a no-fee IRA that allows access to a wider array of assets.
What you don't want to do is withdraw the funds, because you'll jeopardize your retirement and could end up with a big tax bill. This may include penalties for early withdrawals and taxes on the distributed funds.
2. Shore up your emergency fund
Leaving your job could mean an interruption in income, even if you have new work lined up, since there may be a lag before your new paycheck comes in. And, there's always a chance your new position won't work out since not every transition is perfect.
Of course, if you don't have a new position already, you'll also face the uncertainty of not knowing when you'll find new work.
In any case, you'll want to make sure you have plenty of money saved for emergencies in case an interruption in income does occur. You don't want to be caught off guard and unable to pay the bills in this situation.
3. Update your resume
Whether you have a new job lined up or will be looking for a new position, it's time to update your resume.
Keeping this document current can help you seize new opportunities as they come up. An updated resume can make it easier for potential recruiters to find you if you're using online networking to find work. It's especially crucial, of course, if you're quitting before you have a job offer since you'll need to show any potential employers your most recent up-to-date skills.
4. Check into your health insurance options
Finally, you'll need to consider how you'll get health insurance coverage if your employer was previously providing your insurance.
You may be able to get covered by your new company if you've already found employment, but sometimes there's a waiting period before insurance kicks in. And you won't have a new employer's plan if you haven't found work yet.
COBRA allows you to stay on your current employer's policy but the costs generally go up if you do that since your employer will no longer subsidize premiums. Finding an individual policy on the ObamaCare exchange could also be an option, and you may be eligible for subsidies if you don't have much income yet.
By making sure you maintain health coverage, saving a hefty emergency fund, updating your resume, and making smart decisions about your 401(k), hopefully your career switch won't derail your financial security -- and will end up having a positive impact on your future.
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