Jan 24, 2017

Things to Consider When You Change Jobs

By Byron Ellis

Is it time for you to move on? You are leaving your old job and beginning a new one. You are excited yet a little apprehensive but feel good about your future. For now, however, let’s make sure you don’t trip up with some of the financial details of moving from one employer to another. Here are the 5 financial things to take care of when you change jobs:

  1. Make sure you continue your health insurance coverage.

    Most of us get our health insurance coverage through work. This should be an easy transition for you but make sure you take care of it. You will need to select your new policy by looking at the available coverage, cost and medical providers. This may be a good time to analyze different types of coverage. You might consider moving to a high deductible plan if you are the type that does not visit your doctor that often. If you plan on having a gap between jobs, make sure you continue coverage by coordinating with the company you are leaving. In most cases you should have the option to continue coverage through a Cobra option even though you may end up paying a higher premium than you did while you were working.

  1. Lock in other insurance benefits.

    You probably also have some life and disability insurance through your employer. One of the big problems with this type of coverage is that you most often lose it when you lose your employment with that company. This can especially be troublesome if you don’t go directly to work for a new company or worse yet start your own business. That coverage that you most likely need to keep in place can all of a sudden go away. If you are going directly to a new job with similar benefits then you may be able to keep a blanket of protection. If not, you may want to consider getting some private coverage that you can carry from job to job. We have found that in many cases we can get a more economical term life insurance policy going straight to the insurance company versus paying for group coverage. This may be a good time to set that up.

Disability coverage may be a harder thing to replace if you don’t have a new job yet. Hopefully, your new benefits will include a disability policy that can pay you monthly income should you become disabled. If you have a gap between employers, you may be “uncovered” until you get that new job. You see, a disability policy is designed to protect your income. Because of that, there is no way to get a new policy if you currently don’t have any income.

  1. Take care of our your old retirement plan.

    If you have a 401(k), Simple IRA, or a SEP (Simplified Employee Pension) you most likely will have the option of leaving it as is or rolling it over to the firm of your choice. You may have other investments already set up somewhere and might find it beneficial to house things together. You will most likely not be under the gun to make this change, so with all the other things that are going on you might want to put this off until things settle down. You also may have the option to roll your old plan into your new one at your new employer if you find that the plan options are good ones.

  1. Sign up for your new retirement plan.

    Don’t let your retirement contributions stop because you forget to sign up for your new plan. If you are getting paid more than your prior job, consider increasing your savings percentage. Review the new investments options and use this time to fine tune how you have your money allocated. If you are over 50, don’t forget to learn how you can increase your contributions by taking advantage of the “catch up provision” and if your plan allows for after tax contributions, consider taking advantage of that.

  2. Be aware of annual limits.

    When you work for a company, they help keep track of things like how much you have contributed to your 401(k), how much of your Social Security has been taxed, and how much you have added to your Health Care Savings Account (HSA) or Flexible Savings Account (FSA). A problem may arise when you work for two companies in the same year. For example, let’s say that you have already hit your annual maximum contribution limit on your 401(k) plan at your old company. Your new employer is most likely going to assume you have a clean slate and allow you to contribute as if you are just starting out for the year thus creating a case where you over contribute to your 401(k) for that year. The same may go for your Social Security taxes. The government only taxes up to a certain amount of your income when it comes to Social Security. You could actually have hit that amount at your first job but then start paying again because your new employer is starting back at zero. Another thing to be aware of is that if you are contributing to a HSA or FSA, both of which have annual limits, you will need to communicate what you have already done to your new employer. The bottom line is that most of these annual limits will be worked out in the end, but it might be easier to prevent them from happening instead of clean them up the next calendar year.

So congratulations on your new job! But with any change comes some things for you to do. Don’t hesitate to let us know if we can help with any of your transition.

Byron Ellis

Byron Ellis

United Capital Financial Advisers, LLC (“United Capital”), is an affiliate of Goldman Sachs & Co. LLC and subsidiaries of the Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management and financial services organization. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.

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