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5 Money Decisions to Make When Leaving a Job

U.S. News & World Report - Money logo U.S. News & World Report - Money 27-05-2017 Geoff Williams
Businessman quitting job or switching offices.: Don't rush out of the door without considering these things. © (Getty Images) Don't rush out of the door without considering these things.

If you've left a job for another, it's often because you're taking a position that pays more money. But whenever anyone leaves a job, especially one with benefits, there are often ways to lose some hard-earned income in the process, even if the next position you take has far better compensation. In other words, changing jobs means paying attention to more than the paycheck. You also want to be thinking about the following five things.

Unused paid time off. If you have any PTO coming to you, mention that to your manager or human resources contact, says Jane Scudder, a career and life coach and owner of Never Settle Coaching in Chicago.

"Many states require a company to pay you out for this so be sure you track and share what you are owed," Scudder says.

She recommends sending an email to your human resources contact, alerting them about your PTO, and copying your personal email address a day or two before you leave.

You may find that you're owed more than you realize. It's common for employees to have extra paid time off. For instance, Project: Time Off, a travel industry group, concluded from a 2016 survey of 5,641 American workers that $272 billion of vacation time goes unused every year.

Stock shares or options. Some businesses have restrictions on when you can sell your shares, assuming you're fully vested. But whatever you do, if you have stock shares or options, don't forget about them.

And if you're still at your current job and negotiating to take a new one, you may want to bring up all of the unvested stock options you aren't going to be getting at your new company, says Susan Peppercorn, a life and career coach based out of Boston.

"Stock or options represent real money, especially in publicly traded companies," Peppercorn says, adding that she had one client who had a lot of money she would be leaving on the table, mentioned it, and the new company increased their offer to compensate for the money she would have lost.

Of course, this will probably only work if you get the sense that this new employer really wants to hire you.

Decide what to do with your 401(k). You can cash out the money, but this is often considered a bad idea because – if you're younger than 59 and a half – you'll have a lot of taxes taken out.

You can also leave your money where it is, but this is often a bad idea, too, says Edward Dressel, president of Trust Builders Inc., a Dallas, Oregon-based maker of retirement planning software for financial advisors to use with their clients.

What's wrong with keeping the money where it is? Nothing for now. The problem sometimes comes later on, according to Dressel.

"Many people forget about these old retirement plans, and if you aren't managing your investments or at least checking in periodically, your asset allocation can become skewed over time, exposing you to more risk," he says.

He recommends rolling your balance over into another 401(k) plan, possibly your new employer's, or you could roll over the balance into an IRA.

"Saving in an IRA will probably give you the most investment choices although you may pay higher fees," Dressel says.

Whatever you decide, if you aren't being shown the door in a hurry, and you have time, Scudder recommends figuring out what to do with your 401(k) before you leave.

"This way you can access your human resources team if you have any questions or concerns," she says.

Be careful about a health insurance gap. Even if you seamlessly move from one job to another, your new health plan may not kick in until you've been there for a month or two or even three. You'll want to check with your new and old company's human resources departments.

"If you have control over your last day, I suggest trying to time it to hit the first of the month so that you get credit for that month and thus your health care [is] covered," says Ryan Frailich, a financial planner based out of New Orleans.

If you have an unavoidable gap, you could pay for COBRA, which stands for The Consolidated Omnibus Budget Reconciliation Act of 1996. The law lets you purchase coverage from your employer-provided group health plan. But it isn't cheap.

"I've seen people assume their COBRA costs would be comparable to payroll deductions, but oftentimes it is three to four times as much without the help from the employer," Frailich says.

You also may want to try a plan through the Affordable Care Act and see if you can find a plan as a stopgap, especially if COBRA's price makes your jaw drop.

Save or spend your next raise? You know what the right answer is. If you're going to a new job that pays more, you should try to continue living the lifestyle you're currently living, Frailich says.

"Oftentimes, I see people start a new job, and their spending drifts right on up with the salary," he says.

Frailich usually recommends following an 80/20 plan, where 80 percent of the extra money you're getting goes to paying off debt or longer-term goals, like retirement or your kids' college fund. The other 20 percent, you let go into your checking account every month.

"This allows you to get some increase in lifestyle, but also ensures you're putting long-term goals first," he says.

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