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Planning on Making a Career Move?

Want to make more money? Looking for a higher degree of flexibility or more vacation time? Feeling a little… stuck?

Although I’m married to a Human Resources expert, I am not one, and I won’t pretend to be. That is to say, I’m not going to try to give you salary negotiation advice or teach you how best to update your resume - you’ll have to go elsewhere for that.

However, there are some financial considerations around making a career change, whether you’re looking to get a different job in the same field, try out a new field, or start your own business. I know, hard to believe that decisions regarding your main source of income can be financial in nature. You can blame me - I tend to find the financial ramifications of everything.

So, what should you be thinking about? There are a few categories, and as with everything, they vary depending on your situation.

Income Disruption or Change

I find that people often need to hear this: It is perfectly okay for you to take a pay cut to take a job that’s better for you. In fact, that’s exactly what I did when I started my business. I was paid well, but I decided that running my own firm would be better for me and my wife… which brought my pay to zero starting out.

That said, if you’re going to be taking a pay cut or starting a business, you should plan for it. Tracking your spending is step number one. You need to know exactly how much money you need coming in the door to make sure you don’t end up in your parents’ basement (not that there’s anything wrong with a familial safety net). If you find out that you need more than what you think you’ll ultimately be bringing in, you’ll need to save up for this change.

Alternatively, maybe you’re switching to a profession that’s going to be much more lucrative. A sudden increase in pay is great, but you should make sure you understand the tax ramifications and plan for where those dollars will be going. You may need to change your tax withholding, and depending on your pay, you may no longer be eligible for certain tax credits or savings strategies (like Roth IRAs).

Retirement Savings

There are a few different types of employer retirement accounts. For more prevalent, non-pension accounts, I’ve listed the most common options below. As with everything, they don’t all apply to everyone, and they’re not mutually exclusive, meaning you may be able to do a little bit of each.

  1. Withdraw the funds.

    1. You may pay taxes plus an early distribution penalty - usually not the best option.

  2. Leave it where it is.

    1. This isn’t always an option, but if it is, it’s good to consider the costs involved.

  3. Roll it into your new employer’s plan.

    1. Again, not always an option. You’ll want to compare costs and investment lineups.

    2. This is a common way to simplify and keep your accounts consolidated.

  4. Roll it into an IRA/Roth IRA. I have a bit more to say on this one.

    1. This may give you a broader investment lineup to choose from; you won’t be limited to just the options provided by your employer’s plan. This could be good or bad, depending on how you feel about evaluating investments.

    2. This could make the funds less accessible - some plans allow you to make penalty-free withdrawals at age 55 or even younger whereas the age requirement is 59 ½ for IRAs.

    3. If your income is too high to make Roth IRA contributions, this may prevent you from making backdoor Roth contributions.

    4. If you’re working with an advisor, and they get paid if you roll it over to them, just keep that in mind when making your decision. They should be providing you with more services than just investment management if you’re going to pay them with these additional assets.

At the end of the day, you should gather information on your retirement plan at your current employer as well as information on your new employer’s plan. Keep in mind, even if you’re not fully vested, that just means you may not get all of what your employer contributed. You always have control and ownership over your own contributions.

Insurance and Other Benefits

In my first ‘real’ job out of college, they would give us a ‘total rewards’ statement that showed not only our salary, but also the match in the 401(k), the amount they paid toward insurance premiums, and other non-salary items. I remember thinking it was a bit gimmicky at first, but after working through a few financial plans and seeing the variety of benefits at different employers, I started to see the true value of those benefits.

If you’re planning on making a career move, consider whether your new employer will provide similar benefits or if it’s feasible to hop on your spouse’s benefits. For instance, when I started my Preece Financial Planning, I lost access to the following benefits from my previous employer:

  • 401(k) - they had contributed 5% of my salary through match and profit sharing

    • I’ll be using a Roth IRA until my firm grows enough to support a retirement plan

  • Health insurance - they covered a large portion of premiums

    • I was able to get coverage through my wife’s employer for a higher premium

  • Disability insurance - they covered the full premium for STDI and LTDI

    • I decided to self-insure for short-term disability and obtained long-term coverage

  • Life insurance - they paid for 1x my salary of benefit

    • I had obtained a 30-year term policy for adequate coverage years earlier

Now, starting a business is kind of a radical example, but it does illustrate how much can change. You may see an even bigger change if you work somewhere that offers a pension, equity compensation, or other unique benefits.

What do all of these things have in common? That’s right, working with a financial planner can make it all easier - having a plan in place beforehand means that when you come across big changes like starting a business or switching careers, all you need to do is adjust the plan. The legwork of building the plan is the hard part, so it’s best to do it before you have any big decisions to make. That said, if you’re finding yourself with questions in the middle of a big life decision, there’s no shame in starting now. Always feel free to reach out. I’ll be happy to help.


As always, keep in mind that you don't have to go it alone. Check out my website to see what it's like to work with me and reach out if you have any questions.

If you found this post helpful, help spread the word! Share with friends and family that you think may benefit as well. But remember, this is solely for educational purposes - it's not advice.

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