Changing jobs? 12 things you can do with your money before you go
Whether you’re looking for a new job, settling into a new one, or kicking off your retirement, here’s a checklist to make sure your finances are in order as you make the transition.
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 benefits terminate—the day you leave, the end of the month? Then find out when your benefits take effect at the new company (Day One, 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 foreseeable future, schedule appointments before you leave. Need new glasses or contacts? Check!
- Life insurance: If you bought or were provided extra life insurance coverage (called a voluntary policy) through your employer and want to keep it, start the paperwork to convert it from a group to an individual policy, if that’s offered. You’ll pay the premium directly to the insurance company, rather than having it payroll-deducted.
- Retirement: You could have decisions to make about your retirement plan, such as a 401(k) or 403(b). More on that below.
2. Look into your health insurance 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 your coverage through work. COBRA can be pricey because you’ll pay the full premium (rather than having your employer covering part of the cost), but an unexpected health issue could have huge financial implications if you don’t have insurance. If you have dental and/or vision insurance in your old job, that’s included as part of COBRA, too.
An alternative is a Health Insurance Marketplace plan. Available plans vary from state-to-state, and depending on your household income, it could cost less than COBRA. Visit healthcare.gov to learn more.
If you’re retiring and under age 65, you may have retiree medical coverage through your employer, or you may be able to join the insurance plan of a spouse/partner. (Usually you need to sign up within 30 days of your last day on the job, so don’t delay.)
If you’re age 65 or older, you’re eligible for Medicare coverage. When you sign up through Social Security to elect Medicare, you’ll be offered options like a prescription drug plan and Medicare supplemental coverage. We have info on healthcare in retirement if you want 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, or you’re retiring, you can generally leave any remaining funds there and use as needed for future eligible healthcare expenses.
Tip: If you use HSA funds for unapproved expenses, there are tax implications.
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, but check with your employer. Then you can generally choose among these four options:
- Roll your savings from your 401(k) into an IRA. Combining retirement accounts gives you flexibility in decision-making to help ensure your assets are supporting your goals. 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 may be a downside to that, including immediate tax consequences. It may be tempting to have the extra money now, but there are better options for emergency cash than an early 401(k) withdrawal. Thanks to the CARES Act, you may have the option to make a penalty-free withdrawal if you’ve experienced adverse financial consequences as a result of specific COVID-19 hardships.
6. Know what will be in your last paycheck.
It could include back pay, vacation/sick days, commissions, severance, or a bonus.
7. Revise your household budget.
Budget for that lag time between your old job and your next paycheck. This might mean spending less in the weeks before you leave your job so you build up more in your savings. If you run short, you could tap your emergency fund, but try not to use credit cards to finance your day-to-day living expenses.
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. If you have stock options or restricted stock awards, find out the rules for vesting, what you get when you leave, tax implications, and so on.
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. Don't get caught unaware!
11. File for federal or state assistance, if needed.
If you were laid off, apply for unemployment benefits, welfare, or temporary assistance, or other programs and services that can help if you’ve lost your job. Learn more at usa.gov. Each state runs its own unemployment program; you may be able to file online, by phone, or in person.
12. If you’re retiring, elect your pension if that’s a benefit available to you.
If your current or previous employers offered a pension plan (also called defined benefit plan), you may have some decisions to make about how your pension will be paid. HR staff will likely help you with this.
- Need a financial professional 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 or see if an IRA with Principal may be a good fit for you.
- If you have a Principal retirement account or insurance from your employer, log in to 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.
The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.
Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., 800-247-1737, member SIPC and/or independent broker-dealers. Principal National, Principal Life, Principal Funds Distributor, Inc., and Principal Securities are members of the Principal Financial Group®, Des Moines, IA 50392. Principal Global Investors leads global asset management and is a member of the Principal Financial Group®.
Principal, Principal and symbol design, and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
©2020 Principal Financial Services, Inc.