Accepting a new job offer is awesome, but before you take off, there are a few things you’re going to want to do to make your job switch relatively seamless. You’ll want to dot your i’s and cross your t’s — or you could risk leaving money behind.
Here are six helpful tips when you’re changing jobs:
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.
Use the money you contributed to an FSA at the company you’re leaving because it won’t follow you to your next job. Consult your plan about FSA-eligible expenses you could spend your money on.
If you expect to be without health insurance between jobs, you could be covered by your to-be-former employer’s healthcare plan for 18-36 months using what’s called COBRA coverage, which is a federal program that allows eligible employees (and their dependents) to continue with their health insurance benefits in the event that they lose their job or experience a reduction of work hours.
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.
Important to know: Although you’ll have the same health coverage through COBRA as you did with your employer, you could end up paying more per month, particularly if your employer previously contributed to your insurance coverage.
COBRA alternatives: In addition to COBRA, buying coverage through the Health Insurance Marketplace could be an option. If your spouse or domestic partner is covered by a policy that could cover you as well, being added to their plan could be an additional way to get health insurance. In all instances, you’ll want to look into how soon you need to apply for coverage to qualify.
Some plans may give you the option to keep your life insurance coverage after you leave an employer. However, you’ll likely be responsible for fully paying the premiums yourself – without whatever help your former employer may have provided.
If your new employer offers life insurance, pore over the details on the coverage limits and associated monthly premiums. You may also wish to consider purchasing an independent policy.
If your new employer’s plan allows rollovers, request a transfer of funds from your former retirement account to the new one.
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 two benefits: 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.
It’s important to know what kind of IRA you’re rolling your money into for several reasons, including the tax bill you can expect if you rollover to a Roth IRA instead of a traditional IRA and how long you may have to keep your money in the new retirement account (Roths have a 5-year rule).
You may also be able to keep your money in your former employer’s plan, typically as long as your balance is at least $5,000. However, you will no longer be able to add money to your account.
You can cash out the money in your account. However, you should be warned: If you choose to do so, then you’ll be required to pay income taxes on the amount. You may also be subject to early withdrawal penalties if you are younger than 59 ½.
You don’t have to start a new job to revise how much money is being withheld from your paycheck, but the fresh paperwork that comes with a new job makes it a good opportunity to change things up on your W-4.
So step one is to review last year’s tax returns.
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 back during tax season, you may want to consider having more taken out of your paycheck.