If you’re considering a job or career change, it’s important to do some homework before you make the leap. Many benefits from your current position could be tied to specific dates and time frames. Gathering the right information can help you strategically time your exit and set yourself up for greater success. Consider these steps before you resign:
1. Decide if you’d prefer to quit now or wait until you have an offer. This decision requires you to factor in how unhappy you are in your current position and whether you’re able to live off your savings for a while. If you’re in a traditional industry, such as sales, it might be better to find a new opportunity while you’re employed. But if you’re in high-tech, biotech, private equity, or a similar industry, there may be less risk in taking some time off.
2. Check your employment contract and noncompete agreement. Have a labor attorney review any legal documents you signed when you were hired to evaluate their terms and enforceability. Some contracts may require you to pay back relocation money, education grants, or bonuses if you don’t stay for a certain period of time. Others include “golden handcuffs” that mean you will lose unvested options, restricted stock, deferred compensation, and other benefits upon resignation. Still others may require waiting for a specified length of time before taking a job with a competitor.
3. Review your retirement benefits. Check the vesting schedule for your employer’s 401(k) contributions and profit-sharing contributions to see how long you have to work to claim your portion of the money. Many plans require you be employed on the last day of the plan year to get employer contributions for that year. You may want to wait until after the plan year ends before you terminate employment so you don’t lose those contributions.
4. Check the terms of stock options, restricted stock, or other forms of non-salary compensation. You may want to delay your departure if a valuable number of options will vest in the near future. If you’re already vested, find out if you’re still subject to the same trading windows and how much time you have to exercise your vested options once you resign. In many cases, options expire if they aren’t exercised within a certain time frame—typically 90 days after your departure.
5. Manage your health insurance. If you don’t already have a new position or if your new employer’s health plan has a waiting period, figure out where you will get coverage to fill the gap. If your company has 20 or more full time employees, you’ll be able to keep your current plan for up to 18 months after you stop working under the federal law COBRA (you’ll likely have to pay your share and your employer’s share of the premium). You may want to compare those costs with coverage available on the government’s health insurance marketplace. Remember, if you live in a state with a health insurance mandate and you can afford but do not purchase coverage, you may have a tax penalty.
6. Spend your FSA accounts. If you put pretax money into a flexible spending account (FSA), try to spend down the account before you resign. FSAs typically operate on a use-it-or-lose-it basis (though you may be able to extend with COBRA). In contrast, if you have money in a health savings account (HSA), that money is yours to keep.
7. Consider a group life and disability insurance conversion. If you have life or disability coverage through your employer, you may be able to convert your group policy to an individual policy. Often you have a short window after your resignation to apply with the insurer for continued coverage. This can be an especially good option if insurers consider you a risk because of your age or medical condition.
8. Consult a Financial Adviser. Whether you’re planning to take some time off or go right into to a new job, an adviser can provide valuable financial guidance through the transition.
This article was written for Wells Fargo Advisors and provided courtesy of John Marshall, Financial Adviser in Washington, DC at 202-861-4458.
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