Changing jobs? 10 things you can do with your money before you go
So you’re starting a new job. Congratulations! Before you pack your stuff and take the nice plant they gave you, check this list to make sure your finances are in order before you go. Bonus: We also suggest a few money and benefit items to cross off your to-do list when you start that new gig.
Quick tip: Browse your company intranet for employee benefits information. Still have questions? Call human resources (HR) or your benefits administrator.
1. Find out which employee benefits you’ll need to replace, and which you can take with you.
First, ask HR when your insurnce benefits terminate—the day you leave, the end of the month? Then find out when your benefits take effect at the new company (Day 1, or in 30 days, for example).
- Health insurance: Know how your current coverage compares to the new coverage. If you’re in the middle of treatment and not covered by insurance at your new job, plan and budget accordingly. (Examples: fertility treatment, specialty medications)
- Dental and vision insurance: If you have dental or vision insurance now, but won’t in the new job, schedule appointments before you leave. New glasses or contacts? Check!
- Life insurance: If you bought (or were provided) extra life coverage called a voluntary policy through your employer and want to keep it, start the paperwork to convert from a group to an individual policy, if that’s offered. You’ll just pay the premium directly to the insurance company, rather than having it payroll-deducted.
- Retirement: You could have decisions to make about your 401(k). More on that below.
2. Health coverage gap between jobs? Look into your options.
COBRA stands for Consolidated Omnibus Budget Reconciliation Act. Passed in 1985, it allows you and your family to continue health insurance for a while after losing group coverage. COBRA can be pricey because you’ll pay the full premium, but a health crisis could have huge financial implications if you don’t have health insurance. If you have dental and/or vision in your old job, that’s included in COBRA, too. An alternative is a Health Insurance Marketplace plan. Available plans vary from state-to-state, and depending on your household income, it may cost less than COBRA. Visit healthcare.gov to learn more.
3. Decide what to do with Health Savings Account (HSA) funds if you have a High Deductible Health Plan (HDHP).
If you expect to enroll in a HDHP at your new employer, you can often transfer a balance in your HSA. If you don’t plan to enroll in a HDHP, you can generally leave any remaining funds there and use as needed for future eligible expenses.
4. Check your flexible spending account (FSA) balance.
Brush up on the rules for your company’s FSA benefit and deadlines. Submit claims for dependent care or health care expenses through your termination date so you’ll get reimbursed. If you have a balance, what you don’t use, you lose. In other words, it's time to shop for FSA-eligible items. (Your employer has a list.)
5. Decide what to do with your retirement plan, such as a 401(k) or 403(b).
First, find out how long you have to decide. In most cases, you get 30–90 days. Then you can generally choose among these 4 options:
- Roll your savings from your 401(k) into an IRA. Combining retirement accounts can help you simplify your money. Learn how to start a rollover IRA.
- Move your money to your new employer’s plan. This is typically an option if you’re joining a company that offers a retirement plan and allows roll-ins.
- Keep your money where it is if it’s allowed under your old plan. Check with your former employer if you have a lower account balance. Some retirement plans force you to take out a balance that’s under a certain amount ($5,000 is common).
- Cash out your account balance. There are some downsides to that, including immediate tax consequences. Ouch. It may be tempting to have the extra money now, but there are better options for emergency cash than an early 401(k) withdrawal.
If you’re still unsure, read more about the pros and cons of each option.
6. Know what will be in your last paycheck.
It could include back pay, vacation/sick days, commissions, or a bonus.
7. Create a “transition” budget.
8. Be prepared if you have student loans with income-based repayment programs.
Log in to your student loan account to see if your monthly payment is based on your income. A new, higher income could mean a new, bigger payment. Visit the Federal Student Aid site for more information.
9. Find out the rules for vesting, what you get when you leave, tax implications, and so on, if you have stock options or restricted stock awards.
If you get non-salary compensation, know the vesting period and what percentage of compensation is available to you, if any, when you leave. Many companies require you to exercise stock options within a certain amount of time, often 90 days.
10. Check your company’s tuition reimbursement program if you’re taking classes.
If your last day on the job is in the middle of a semester, find out if you’ll be reimbursed for that semester’s expenses. Some companies require you to remain there for a certain length of time or you pay back the funds you received.
4 things you can do the first week in your new job
1. Enroll in a retirement plan, such as a 401(k) or 403(b), if it’s offered.
Some companies automatically enroll you. Even if they do, it should be a percentage of salary you want taken from your paycheck, especially if there’s a company match. (Who wants to turn down free money?)
2. Use an IRS withholding calculator before you do your form W-4.
New tax laws have affected withholdings. If you had a big tax refund or owed a lot money of this year, the IRS calculator can help you decide whether to make adjustments.
3. Check if your new salary puts you in a different tax bracket.
No sense being surprised by how it affects your income taxes. (Find out about 2019 tax brackets.) Plan ahead!
4. Find out what life and disability coverage you have in your new job and decide if you need to buy more.
Levels of life insurance and disability insurance offered in an employee benefits package vary by company. And it’s likely not enough. Use one of our calculators to find out how much you need.
- Need a financial advisor to help you figure out your next steps? We’ll help you find one.
- Interested in an IRA to keep saving for retirement? To learn more, read how to start a rollover IRA.
- If you have a Principal retirement account or insurance from your employer, log into principal.com to check it, learn about rollover options, access personalized planning, and sign up for our newsletter. First time logging in? Get started here. If you have questions about your insurance with Principal, visit our help page.
You should consider the differences in investment options and risks, fees and expenses, tax implications, services and penalty-free withdrawals for your various options. There may be other factors to consider due to your specific needs and situation. You may wish to consult your tax advisor or legal counsel.
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