By Michelle Crouch – Lifescapes
Are you considering a job or career change? Regardless of the reason why, it’s important to do some homework before you make the leap, says James McKown, First Vice President and High Net Worth Strategist for Wells Fargo Advisors.
Why? Many benefits from your current position could be tied to specific dates and time frames, he says. Gathering the right information before you leave can help you strategically time your exit and set yourself up for greater success. Follow these steps before you resign:
1. Decide if you’d prefer to quit now or wait until you have an offer in hand. This is a highly individual decision that 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, the consensus is that it might be better to find a new opportunity while you’re employed, says Skip Freeman, CEO of executive search firm Smart Industry Careers and author of Headhunter Hiring Secrets 2.0. “But if you’re in high-tech, biotech, private equity, or a similar industry, there is less risk in taking some time off,” he says.
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, Freeman says. 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; if you’re close to being fully vested, it may be worth sticking it out a little longer. Keep in mind that many plans require that you be employed on the last day of the plan year in order to get employer contributions for that year, McKown says: “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. The vesting schedule is key here, as well: 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 current company has 20 or more employees, you’ll be able to keep your current plan for up to 18 months after you stop working under the federal law COBRA. Keep in mind that you’ll likely have to pay a lot more because you will pay both your share of the premium and what your employer used to pay. If that’s the case, you may want to compare costs with coverage available on the government’s health insurance marketplace.
6. Spend your FSA accounts. If you put pretax money into a flexible spending account (FSA) to pay for health care or childcare, try to spend down the account before you resign because 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 that you can take with you. Check with the insurer to see if that’s the case. Often you have a short window after your resignation to apply 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 Advisor. Whether you’re planning to take some time off or go right into to a new job, an advisor can provide valuable financial guidance through the transition, McKown says. “For example, an advisor can run the numbers to compare your new compensation offer to your current compensation while factoring in benefits,” he says. That information can provide valuable insight during salary negotiations. An advisor can also help counsel you on the transfer of your retirement assets, help you plan for a period of no income, and discuss the effect of your career change on your long-term financial health.