Whether you leave your employer or your employer leaves you, changing jobs can be one of those money triggering events when you begin to take stock of where you are financially. Job changes often bring along new responsibilities and challenges, and experience tells us that analyzing and maximizing your new benefits package normally goes to the bottom of the barrel. This makes a ton of sense as typically the first three to six months in a new position you are immersed with the learning curve of a new role at a new company. Having a financial advisor by your side can be a valuable resource to make these important decisions. Here are five financial moves to make when you change jobs.
- Get all of your 401(k)’s in one backyard– When you hop from job to job, you may have left your 401(k) at your former employer. I often refer to these as orphan 401(k)’s because most participants don’t pay attention to these once they leave their employer. It is really important for you to make sure you either get old 401(k)’s all rolled over into one Individual Retirement Account or get them all into the 401(k) of your new employer. You should consider investment choices and think about whether or not you may need to borrow money from your 401(k) at some point, but I believe getting all of your 401(k)’s in one backyard is a key financial decision to make upon a job change.
- Review your health insurance plan– Your health insurance plan is your most important piece of your overall risk management plan. You need to spend time reviews the pros and cons of different offerings your new employer has for health insurance. Should you choose the low deductible plan or is it time for an HSA? Is the dental and vision coverage really worth the cost? How far into the deductible were you with your old plan? Is your family pregnant and expecting a new child? All of these are major concerns to consider when you make a job change.
- Do You Need More Life Insurance– Most large employers will have a benefits plan that will offer some sort of basic life insurance, usually 1x your base salary. You will have the option of applying for some sort of multiple of your salary for additional life insurance which makes it a good time to determine if your family needs more coverage. Your new employer may also offer spousal and/or children’s life insurance which could be another opportunity to take advantage of as well. One trap that people fall into is signing up for insurance such as accidental death and dismemberment due to its low cost, but not really analyzing whether you really the insurance or not.
- Legal Plan– A job change could trigger the opportunity to revisit your overall estate plan. Since your last job, did you add a new addition to the family? Did you go through a divorce or recently get remarried? Did you move to another part of the country and held your old property located in another state? Often, large employers will offer some sort of legal plan that you can sign up for which would allow you to cover some basic legal service such as drafting up a new will (or basic trust). You need to read the fine print on these plans, but this may not be a bad idea to review when you make a job change.
- Income Protection– An important part of any overall financial plan is making sure you have adequate disability insurance. An easy item to gloss over is doing a detailed review of your income protection plan. Most employers will offer disability insurance to cover roughly 60% of your salary. Remember, employer coverage will normally cover salary ONLY and not your total income including bonus, retirement plan contributions, and commissions. When you make your job change, consider buying any supplemental short term and long term disability that your new employer may offer.
Making smart money moves can be the key to success or failure in your overall financial plan. Use these five tips when you make a job change to help make sure you have a bulletproof financial situation!