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Changing Jobs

IF YOU CHANGE jobs, it’s likely for a more enjoyable or more senior position—and it may mean more money. But don’t focus just on the size of your new paycheck. Also give some thought to your new job’s health, life and disability insurance, as well as the retirement benefits.

Health insurance. If it will take a few months before you are eligible for health care coverage at your new job, you might be able to continue your old employer’s health benefits by taking advantage of so-called COBRA coverage.

Life and disability insurance. You’ll want to consider what sort of disability and life insurance coverage your new employer provides, and whether you should supplement this with individual policies. You can read more about life, disability and health insurance in the safety net chapter.

Your old employer’s retirement plan. If your current employer has a vesting schedule for its retirement plan contributions, see if delaying your job change by a few weeks will garner you additional retirement money. Also, be sure to pay back any 401(k) loans—or you could find yourself facing income taxes and tax penalties.

Consolidate retirement accounts. Got money in your old employer’s retirement plan? You could transfer these savings to an IRA, which will simplify your finances, give you more investment choice and may lower your investment costs. If you move your 401(k) to an IRA, be sure to do a trustee-to-trustee transfer or you could end up with a nasty tax conundrum.

Before moving the money, give some thought to how this will affect future Roth conversions, what it means for creditor protection, what’s the best strategy if you have your old employer’s stock in the plan—and whether your old 401(k)’s investment choices are so good and so inexpensive that you shouldn’t move the money. All of this is covered in detail in the tax chapter.

Your new employer’s retirement plan. Your new employer may automatically enroll you in its retirement plan. But if you sign up yourself, you may get into the plan more quickly and at a higher contribution rate. If your new employer’s plan is top-notch, you might even transfer your 401(k) balance from your old employer to the new plan.

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