Leaving a job to pursue a new opportunity is an exciting step forward, whether you’re aiming for career growth, better work-life balance, or a new industry entirely. Making this transition successfully requires more than just updating your resume and LinkedIn profile – it’s also about ensuring your financial well-being stays on track. At Mercer Advisors, we’re here to help you navigate this change with confidence and a solid plan.
1. Know your financial foundation
Before making the leap, take stock of your financial situation. A well-prepared exit strategy includes:
- Building a financial cushion – Experts recommend having at least three to six months of living expenses saved before transitioning jobs. This can provide security as you adjust to a new role or potential gaps in income.
- Understanding your compensation package – Before leaving, review your final paycheck, accrued bonuses, and unused vacation days to maximize any benefits.
- Managing debt and expenses – If possible, pay down high-interest debt and minimize unnecessary spending to help maintain financial flexibility during your transition.
2. Plan for your retirement accounts
One of the biggest financial decisions you’ll make when changing jobs is what to do with your retirement savings. Here are your options:
- Leave your 401(k) with your former employer – Some plans allow you to keep your funds in place, but you won’t be able to contribute further.
- Roll over to an IRA – This option gives you more control over your investments and typically offers a wider range of investment choices.
- Transfer to your new employer’s plan – If your new job offers a strong 401(k) program, consolidating funds may simplify your financial picture.
- Cash out (not recommended) – Withdrawing funds early can lead to significant taxes and penalties, reducing your long-term savings potential.
3. Review your health insurance options
A job transition often impacts health insurance coverage. Consider:
- Employer-sponsored health plans – If your new job offers health benefits, review the waiting period before coverage starts, or joining a partner’s plan could be a cost-effective option.
- Deductible reset – The deductible paid into your old company plan may not transfer to your new employer plan.
- Marketplace plans – Health insurance through the government marketplace can provide flexible options during the transition period.
- Health Savings Account (HSA) options – If you have an HSA, those funds remain yours even after leaving your employer, and you can use them for qualifying medical expenses.
4. Review your workplace benefits
Your new employer’s benefits package may differ significantly from your current one. Take into consideration:
- Life insurance – Consider the need for new or additional life insurance coverage if your new job does not meet your coverage needs.
- Disability insurance – Similar to life insurance, consider the need for additional coverage if you are underinsured.
- Additional coverage – If additional coverage is needed, start with your existing insurance provider to benefit from multiple line discounts (auto, home, life, disability).
5. Maximize your stock options and equity compensation
If you have stock options, restricted stock units (RSUs), or an employee stock purchase plan (ESPP), take the time to understand:
- Vesting schedules – Ensure you know when your shares vest and what that means for your finances.
- Exercise windows – If you have stock options, check how long you have to exercise them after leaving.
- Tax implications – Selling company stock may result in capital gains taxes, so consult a financial advisor before making moves.
6. Review your employment contract
Before leaving your position, review your employment contract to understand any specific terms or obligations you might need to fulfill, including:
- Required notice periods – Most employment contracts specify a required notice period that you must give your employer before leaving. This period can vary depending on your role, length of service, and company policies. Failing to comply with the notice period can lead to legal complications or loss of certain benefits.
- Non-compete clauses – Many contracts include non-compete clauses that restrict your ability to work for competitors or start a similar business within a certain timeframe and geographic area after leaving your job. It’s essential to understand to understand these restrictions to avoid potential legal disputes.
- Other obligations – Your contract may outline other obligations, such as returning company property, maintaining confidentiality, and settling any outstanding financial matters.
7. Budget for the transition and beyond
A new job often brings salary adjustments, changes in benefits, and different costs (commuting, relocation, or professional fees). Consider:
- Tax implications – A salary increase might push you into a new tax bracket, so adjust your W-4 form accordingly.
- Income gaps – If there’s a delay between jobs, factor that into your budget planning.
- Negotiating your compensation – When accepting a new role, look beyond salary and evaluate the full benefits package, including bonuses, retirement contributions, and work flexibility.
8. Maintain long-term financial goals
Career transitions are a great time to reassess financial goals. Ask yourself:
- Are you still on track for retirement?
- Do you need to adjust savings for a home, education, or other major expenses?
- Is it time to meet with a financial advisor for a holistic review?
Thinking about a career move? Let’s plan for it together. At Mercer Advisors, we’re committed to helping you find success when you switch jobs or careers. Our advisors can help create a personalized strategy that supports your financial well-being through every stage of your career. If you’re not a client and want to learn more, let’s talk.
Mercer Advisors Inc. is a parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER® certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
