Changing jobs is exciting, but it can also bring a whirlwind of to-dos. Between wrapping up your current role and settling into the next one, it’s easy to let important financial decisions fall through the cracks.
From managing your 401(k) to evaluating health insurance and employer benefits, the right choices during a job transition can help protect your savings and set you up for long-term success.
What Should You Do With Your 401(k) When You Change Jobs?
If your employer offers a retirement plan like a 401(k) or 403(b), you keep the vested portion when you leave. This includes your contributions, earnings, and any vested employer contributions. But what you do with that money next can have long-term implications. For additional information and what is suitable for your particular situation, please reach out to us.
👉 You can also learn more on our Retirement Planning page
401(k) Rollover Options: Pros and Cons
Leave it with your old employer (if permitted):
- Convenient if the plan has strong investment options.
- Typically only allowed if the balance is over $5,000.
Roll it over to your new employer's plan or an IRA:
- Consolidates your retirement accounts.
- May offer better investment options and lower fees.
🔔 Note: Not all employer plans accept rollovers.
Withdraw the funds:
- Often triggers income taxes and a 10% early withdrawal penalty if you’re under 59½.
- Could derail your retirement savings (loss of investing potential).
Should You Roll Over Your 401(k) to an IRA?
Rolling your old 401(k) into an IRA offers flexibility, but there are trade-offs.
Advantages:
- Typically more investment choices than a 401(k).
- Easier to manage multiple accounts with IRA-to-IRA transfers.
- More options for penalty-free withdrawals in special circumstances.
Disadvantages:
- RMDs (Required Minimum Distributions) start at age 73 for traditional IRAs.
- Some 401(k) plans let you delay RMDs until you retire.
- You may face higher account fees, and Roth conversions are taxable.
How to Handle Stock Options and Deferred Comp During a Job Change
If you have stock options or nonqualified deferred compensation, timing is everything:
- Stock Options: Vested shares may expire soon after departure. Know your deadlines.
- Deferred Comp: Leaving might trigger a distribution, potentially resulting in a large tax bill.
These plans often have strict rules, so check with HR or a financial planner before you make any decisions.
What Happens to Employer Life and Disability Insurance When You Leave?
In most cases, your employer-provided coverage ends when your job does. Here are your options:
- Convert to an individual policy: You might be able to keep your coverage, but premiums could rise.
- Buy your own policy: Now might be a good time to get life insurance that isn’t tied to your job. Visit our Life Insurance page to learn more.
What Are Your Health Insurance Options After a Job Change?
Your employer-sponsored coverage will likely end with your employment. You have a few choices:
- COBRA: Lets you continue your old coverage temporarily, but you pay the full premium (which can be expensive).
- Marketplace or individual plan: May be more cost-effective. Compare options carefully.
❗ Don’t forget to factor in your new employer’s waiting period before new coverage begins.
How to Make the Most of Your New Job’s Benefits
Once you’re settled in, take time to review your full benefits package:
- Health insurance options
- Retirement plan and employer match
- Flexible Spending or Health Savings Accounts (FSAs or HSAs)
- Disability and life insurance
- Tuition reimbursement or wellness perks
Be sure to update your beneficiaries and review your tax planning strategy if your salary changes.
💡 Pro Tip: Avoid lifestyle inflation. A bump in salary is great, but it can disappear quickly if new spending habits creep in.
Need Help Navigating a Job Change? Talk to a Financial Planner
A new job is a great time to hit reset on your finances. From 401(k) rollovers to insurance decisions, we can help you create a plan that fits your goals. Let’s explore your next steps -- schedule an introductory meeting to see how we can help.
Michael Nicoletti is a CERTIFIED FINANCIAL PLANNER® professional and works with clients throughout Connecticut and nationwide, offering financial planning and wealth management services. Based in Glastonbury and Wilton, CT, Michael helps families and individuals plan for their financial, insurance, investment, and retirement goals. Schedule a complimentary introductory meeting with Michael.
This information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete, it is not a statement of all available data necessary for making an investment decision and it does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision. Consider all of your available options and the applicable fees and features of each option before moving your retirement assets.