Thinking About Changing Jobs in 2022? Take These 5 Financial Steps Now
- A lot of people are changing jobs during the Great Resignation, which can affect many aspects of a person's financial life.
- Considering your retirement accounts and health insurance options are some of the financial steps you should take before making a career change.
Check these tasks off your to-do list if you'll be taking part in the Great Resignation.
Millions of Americans have changed jobs recently, or are planning to do so soon. The pandemic forced changes in the labor market, including allowing more employees to work remotely. And many employers are having difficulty finding skilled workers, so there are ample opportunities for those with the right qualifications.
So many people are actually making a career shift that the phenomenon is being referred to as the "Great Resignation." If you'll be taking part in this movement, though, there are a few key financial steps you should be sure to complete before switching to a new position.
1. Increase your savings rate
A job change can cause disruption in your financial life, even if the switch is voluntary.
You may have a period when no paychecks are coming in, for example, since your new employer may have a different pay schedule than your old one. Or your new job may not work out as planned and you may even find yourself facing a period of unemployment.
You don't want to find yourself in debt because of your job change, so be sure you have plenty of emergency money saved in case there is a disruption in your income.
2. Learn your 401(k) vesting rules
If your employer at your old job contributed to your 401(k), you need to know if those contributions are fully vested. If they aren't, then you may lose some of the contributions your employer has made to your account if you change jobs too soon.
You'll want to know up front what impact the career change will have on your retirement savings so you can take this into account when deciding if a switch in jobs right now makes financial sense.
3. Decide what to do about your retirement accounts
You'll also need to decide what to do about your retirement plan with your current employer if you're moving into a new position.
You may be able to roll over the account to a new employer's 401(k) if one is offered. But you may also prefer to make a different move, such as leaving the money where it is or opening a brokerage account and rolling over your 401(k) into it so you have more investing options.
You don't want to forget about your hard-earned retirement funds, so evaluate your options and make the appropriate arrangements for what will happen to your retirement money before you leave your current job.
4. Look into your health insurance options
Many people get health insurance through an employer. If your current company provides your coverage and you'll be switching jobs soon, make sure you know what your options are.
You may be able to simply get covered at your new job, but sometimes there is a waiting period before eligibility kicks in. In this case, you'd need to decide if you should keep your current coverage through COBRA or find another solution, such as buying an individual plan or getting covered by your spouse's employer.
You should also compare coverage options offered by your new employer. If the new coverage isn't as good, this could potentially affect whether your switch to the new company is a smart financial move.
5. Consider your future financial plans
If you're planning to make certain financial moves, such as getting a mortgage to purchase a home, a job change can interfere with this plan. Mortgage lenders like to see stable proof of income.
You may want to think about trying to complete your home purchase or making other big changes before your career switch so you don't have to worry about the impact a job shift can have on these plans.
By taking all of these steps, hopefully you can make certain your career change goes off without a hitch. It's best to be prepared in advance so you aren't faced with unexpected surprises that derail your finances when you're switching to a new position.
Alert: highest cash back card we've seen now has 0% intro APR until nearly 2025
If you're using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.
In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2023 The Ascent. All rights reserved.