A Financial Checklist for When You’re Starting a New Job

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Accepting a new job offer is awesome, but before you leave your old job, there are a few things you’re going to want to do to avoid leaving money behind and make starting a new job relatively seamless.

Here are six helpful tips when you’re starting a new job.

1. Use the money in your FSA before leaving your old job

The money you contributed to an FSA won’t follow you to your next job. Consult your plan about FSA-eligible expenses you could spend your money on. Prescriptions, co-pays and eyeglasses are generally items you use these funds for. 

2. Make a plan for health insurance

If you expect to be without health insurance between jobs, you may be able to keep the health insurance you have with your to-be-former employer’s healthcare plan for 18-36 months using what’s called COBRA coverage. It’s a federal program that allows eligible employees (and their dependents) to continue with their health insurance benefits under certain circumstances, such as if they are laid off or leave their jobs for reasons other than gross misconduct

There is a timeline to consider. You’ll have at least 60 days – beginning on the date you are given an election notice or the date you would lose coverage, whichever is later – to decide if you want to continue your health insurance coverage through COBRA. 

Also important: You could end up paying more per month as an ex-employee, particularly if your employer previously contributed to your insurance coverage. 

Alternatives to COBRA

Buying health insurance through the Health Insurance Marketplace could be a way to get covered. Like COBRA, you have 60 days to choose a marketplace plan and enroll.  

Alternatively, if your spouse or domestic partner has insurance, they may be able to add you to their policy, depending on their plan. In all instances, you’ll want to look into how soon you need to apply for coverage to qualify.

3. Consider buying life insurance

Some plans may include the option to keep your life insurance coverage after you leave an employer. However, you’ll probably be responsible for fully paying the entire premium yourself, because your former employer will not be contributing any money. 

If your new employer offers life insurance, pore over details including coverage limits and monthly premiums. You may also wish to consider buying a policy on your own.

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4. Budget for gaps between paychecks

If you know you’re going to have an income gap between jobs, figure out how much you’ll need to save to cover your living expenses, including insurance, rent and any relocation costs.

5. Manage your 401(k) retirement accounts (if you have one)

We’ve got a full article that goes into the details on how to roll over your 401(k), but here’s a snapshot of some options:

  • See if you can move your 401(k) balance to your new company’s retirement plan. If your new employer’s plan allows rollovers, you can request a transfer of funds from your former retirement account to the new one. 
  • Leave your money where it is. You may be able to keep your money in your former employer’s plan. However, if you do this, you won’t be able to add money to your account.
  • Roll your 401(k) into an IRA. You can transfer the money in your existing retirement account to an Individual Retirement Account (IRA) of your choice. If you can, request a “direct rollover,” which is when money goes directly from your current account to the new one. Direct rollovers have a number of benefits including: you don’t have to worry about moving the money yourself, and you avoid the taxes that come with having those funds distributed to you directly.
  • Know what kind of IRA you’re rolling your money into. It’s important for several reasons, including potential taxes you may incur if you roll over to a Roth IRA vs. a Traditional IRA, and how long you may have to keep your money in the new retirement account without tax penalties (Roths generally have a 5-year rule). 
  • Take out a lump sum. You can cash out the money in your account if needed, but be warned: If you choose to do so you’ll have to pay income taxes. In addition, you may also be subject to early withdrawal penalties if you’re not at least 59½. You can read about IRA distribution rules on the IRS website.

6. Reevaluate your withholding

The fresh paperwork that comes with a new job makes it a good time to change things up on your W-4. (Though you don’t have to change jobs to update your preferences. Ask HR at your current office if you are staying put.)

How much should you withhold from your paycheck? Review last year’s tax return

  • If you received a considerable refund, you may want to consult with a professional on if you should dial things back, because withholding too much means you don’t have access to money until you receive your tax refund. 
  • If you ended up giving money to the IRS last year, you may want to consider having more taken out of your paycheck.

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