5 Things to Consider When Weighing a Job Change – Kiplinger’s Personal Finance

It’s no secret that it’s a job seeker’s market right now. As companies continue to search high and low in the race for talent, employees may feel overwhelmed about whether to change jobs – particularly when it comes to how it’ll impact them financially.

While a new base salary can be enticing, it is important to evaluate a new compensation package holistically in order to best weigh your options. Considering factors like insurance, retirement plans and stock options can be critical to your long-term financial health.

Here are five things you should consider financially when deciding whether you want to change jobs:

1. Have a plan for your former 401(k)

When you leave a job, there are four options for your 401(k) or similar retirement savings plan. You can leave the money where it is, cash it out, transfer the funds into a new retirement plan, or roll it into an IRA. Understanding the implications of each of those options is crucial.

Withdrawing retirement funds under the age of 59½ comes with a 10% penalty, and any tax-deferred distribution is taxed as ordinary income on top of that. It is better to keep the funds in a retirement account to benefit from the tax-deferred growth and compounded accumulation over time.  Leaving the money in the plan is a better alternative than taking it out.  However, we often recommend consolidating when you can.

We typically advise clients to transfer the funds into their new retirement plan or roll them into an IRA. Having fewer accounts will help you keep track of what you have saved. If you like your new company’s 401(k) investment options, transferring the funds there may be the best option.  It also leaves the opportunity for a more straightforward backdoor Roth IRA conversion.

2. Look at the fine details of the offered insurance plans 

Health insurance, dental and vision can be complicated, and they can differ vastly from employer to employer. Before you decide to accept a job offer, be sure to learn the details of the insurance plan you are being offered. If you are leaving a big company for a smaller one, confirm first whether or not they offer health insurance. Under the Affordable Care Act, employers with fewer than 50 employees are not required to provide health insurance. If your potential employer doesn’t offer insurance, now is the time to evaluate what private options you may have.

Once you know if the company provides insurance, it’s important to understand what you are responsible for paying in terms of premiums and deductibles, and to determine if treatments you may need are covered. For example, if you see …….

Source: https://www.kiplinger.com/personal-finance/careers/605080/5-things-to-consider-when-weighing-a-job-change

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