As the economy improves and the unemployment rate declines, job prospects have begun improving for many Americans.
If you’ve been recently offered a new position – or if you’re even just looking – there are a number of important financial considerations you should keep in mind during the transition.
We’ve created this handy checklist to help ensure you maximize the financial benefits of your new gig.
HSAs & FSAs
Health Savings Accounts and Flexible Savings Accounts can offer tax-advantaged means to cover important budget items, such as health care, transportation, or dependent care.
Any contributions made to an HSA are essentially yours to keep, so be aware that leaving your job doesn’t mean forfeiting the contributed funds.
By contrast, FSA contributions (including health FSAs – it’s important to distinguish between these and “true” HSAs) operate on a “use it or lose it” basis.
Funds don’t roll over from year-to-year, and any unused monies are forfeited. Plan to utilize any remaining FSA funds prior to departing your job.
Many student loan re-payment programs, such as PAYE, IBR and income-sensitive plans rely on your income as the basis for your monthly payment.
A change in income due to a new job can impact this calculation – sometimes significantly. Communicate with your lender to determine your new payment level and adjust your budget accordingly.
One more thing: If you’re switching from the private to the public sector or an NGO/non-profit, you may qualify more quickly for debt forgiveness, so again, check with your lender to make the most of this benefit.
The 401(k) is the first financial item most people remember when contemplating a career move, and we’ve all certainly heard the (generally) good advice about rolling over your 401(k) to your new employer’s plan.
But not so fast: If your new employer’s plan offers a limited selection of investment choices or high-fee funds, you might be better off avoiding the roll-over.
Most employers will allow you to keep your money in their 401(k) after departure, assuming a minimum total invested amount threshold is met (this threshold is usually under $10,000, but check with your employer for exact figures).
Or, consider rolling over your funds into an IRA; it’s self-directed, so you can select the precise investments you’d like, and can often minimize associated fees.
One final word of advice: A job change is an ideal time to re-consider your 401(k) investment plan.
Consider whether it’s time to switch your investments from less to more aggressive allocations (or vice versa), depending upon your risk tolerance and financial goals.
Automatic savings or investment accounts are a great way to ensure your finances stay on track.
Starting a new job presents an excellent opportunity to either open a new account or re-calibrate your automatic contributions based on your new earnings level and financial goals.
If you can, consider increasing your contributions amount to keep pace with any pay increases.
Stock, Options, Etc.
If you’re lucky enough to have been granted company stock, stock options, bonuses or other forms of non-salary compensation, you should be aware of their implications when switching jobs.
Stock and stock options generally vest over a period of time, so know what (if any) percentage of this compensation will be available to you upon departing your current job.
Many companies require you to exercise any stock options within a stipulated period after departure (usually 90 days).
Cashing out stock or exercising options also have tax implications, so be prepared for the corresponding bill.
A career change can have more far-reaching implications, too, such as changing your tax bracket and placing you on a different lifetime earnings path.
Consider how each of these impacts your daily budget and overall financial picture before making the switch.
Janet Al-Saad is the founder of the Five Ten Twenty Club, a website designed to help you improve your finances $5, $10 or $20 at a time.