Your Financial Guide for a Career Transition

Navigating a job change is a significant undertaking, especially for those with considerable assets and financial interests. This guide is designed for professionals, including executives, physicians, and business owners as they work through the intricacies of transitioning to new opportunities.

Here are some important things to consider:

• Review your compensation plan.

Understanding your compensation package is important, because compensation is usually a huge part of transition decision. Beyond salary, bonuses, and deferred compensation, it’s essential to assess the long-term value of your total package. For example, if you are re-locating, consider the impact of cost-of-living adjustments.

Don’t forget to evaluate non-monetary benefits such as professional development opportunities, wellness opportunities, and overall company culture. All of these can have a significant impact on your job satisfaction and overall well-being.

• Evaluate your retirement plan.

What do I do with my old retirement plan(s)?

Roll into an IRA: Working with a financial advisor can help you determine if rolling into an Individual Retirement Account makes sense. The benefits of this option include having more investment flexibility and control. Typically, you will have a broader range of investment options compared to an employer sponsored 401(k) plan. This allows you to diversify your portfolio while also consolidating accounts if you have multiple 401(k)s with previous employers. If you work with an advisor, you will have professional investment management as well as financial planning available. A good financial advisor will also be able to help with tax and estate planning matters, though he/she cannot replace your CPA or attorney.

or

Move your old retirement plan to your new employer: Most employer sponsored retirement plans allow for assets from previous retirement plans to flow into the new plan. This is certainly better than leaving the assets with your old employer’s plan, but this option likely does not include the investment options and flexibility as well as professional management and planning found if you roll assets into a managed IRA. That said, it may be your lowest cost option.

• Understand changes to your health insurance.

Be aware if there is a waiting period for health insurance with your new employer. If that is the case, look into extending your previous employer’s coverage through COBRA if there is a gap.

Have a solid understanding of the different health insurance plans offered by your employer and consider factors such as the network of providers, deductibles, co-pays, coverage for prescription drugs and preventative care to name a few.

Take advantage of  tax-advantaged accounts like Flexible Spending Accounts (FSA)s and Health Savings Accounts (HSA)s if your employer offers them.  These accounts can help you save money on qualified medical expenses. Additionally, HSAs can serve as an additional retirement savings vehicle.

• Review Stock Options and Equity Compensation Programs.

If your previous employer offered stock options or equity, be sure to understand the vesting schedules and the implications of leaving.

Equity compensation can significantly increase your wealth, but also add complexity to your financial and tax planning picture. For example, the decision to exercise stock options should be timed to optimize tax implications and align with your broader financial goals, risk tolerance, and time horizon. Working with a financial advisor can help you make an informed financial decision.

A job transition is an important time and opportunity to reassess your financial strategy. By taking a look at your compensation, retirement planning, healthcare options, and equity compensation, you position yourself for both peace of mind and long-term success.

If Confluence can be a resource to you during this transition, please reach out. We are happy to help!