Switching Jobs? Don't Leave Money on the Table

NEW YORK (MainStreet) — With the specter of the Great Recession shrinking and unemployment rate now officially at 6.6%, many Americans are either finding new jobs or finally contemplating a switch. But not so fast. Too often, say career experts such as Russell Herring, CEO of Atlanta-based recruiting firm Strategy Source, people leave money on the table or make crucial mistakes during the job transition that cost them dearly.

Although the lure of higher pay and new opportunities can be exciting, managing your transition for maximum gain is nearly as important as getting a better job in the first place. Consider the checklist below.

Before the Offer

The Great Recession stymied wage growth, leaving many workers' salaries stuck in 2008 – or worse. If you haven't gotten a new job since the recession, it's time to re-assess your market value (websites such as Salary.com or GlassDoor can be helpful tools). You might be surprised to learn how much your experience now commands, and this information could be crucial to getting the best offer.

Also consider how to take advantage of existing benefits at your current employer. Vacation time, for example, often needs to be used prior to submitting your notice. (Note, too, that depending on your state or company policy, unused vacation or PTO may have cash value which can be paid out upon your departure.)

Your job departure, says Herring, should ideally be timed to maximize any bonus pay-out to which you're entitled.

"A common mistake is not knowing your employer's policy for bonus and/or commission payouts following a resignation," Herring said. "If your annual bonus gets paid in February, and you resign in January, make sure you are able to collect on the previous year's bonus at 100% or you could be very disappointed."

The same may be true of other perks, such as Health Savings Accounts or Flexible Spending Accounts. Any contributions made to an HSA are yours to keep, so leaving your job doesn't necessarily mean forfeiting the contributed funds. On the other hand, FSA contributions (including health FSAs – it's important to distinguish between these and "true" HSAs) operate on a "use it or lose it" basis. Funds don't roll over from year-to-year, and any unused monies are forfeited. Plan to use your remaining FSA funds prior to leaving your job.

During the Offer Negotiations

A higher salary can be enticing, say experts, but if it doesn't come with benefits equal to or better than your current gig's, the compensation package may not add up. Keep in mind that perks such as a 401(k) match, stock options or bonuses can add many thousands of dollars to the total value of your package. And health care matters, too, says Herring,

"Regarding health coverage, if your new employer has a 30, 60, or 90 day probationary period that prevent you from receiving insurance immediately, try asking for a sign-on bonus to help you pay your COBRA premiums."

In the case of stock options or 401(k)s, consider the vesting schedule. If you don't plan on staying at the company long enough for these to vest fully (usually over a period of three or more years), you may not enjoy their full value. Consider negotiating a higher base salary or bonus/commission structure, instead.

Don't overlook the smaller benefits, either, says Herring,

"Don't forget to ask about company paid cell phones, laptops, car allowances and vacation policy," he said.

And if you'd make use of perks such as free childcare, public transportation subsidies, HSAs, catered lunches or in-house doctors, these can save you significant sums, and effectively increase your bottom line, too.

Finally, Herring suggests that if you're moving for a new job, the topic of a relocation package needs to be broached during the negotiations. If this doesn't succeed, be sure you have enough cash on hand to cover the moving expenses – and that the job is still worth it, despite the increased cost to you. A local offer that pays $10,000 less may be preferable if it costs you as much to take the higher-paying job elsewhere.

Once You Have an Offer

With an offer in hand, it's time to begin planning the next phase of your finances. A higher salary should generally be viewed as an opportunity accelerate debt repayment, savings or investing.

  • 401(k): Remembering to roll-over your 401(k) is generally great advice. But not so fast: If your new employer's plan offers a limited selection of investment choices or high-fee funds, you might be better off avoiding the roll-over and keeping your money in your existing funds. Most employers will allow you to keep your money in their 401(k) after departure, assuming a minimum total invested amount threshold is met. Or, consider rolling over your funds into a self-directed IRA for better choices. A job change is also an ideal time to re-consider your 401(k) investment plan, and re-calibrate your investments based on your current goals.
  • Automatic Savings/Investments: Automatic savings or investment accounts are a good way to put your savings on auto-pilot. Consider opening a new account or re-calibrating your automatic contributions based on your new earnings level and financial goals. Try increasing your contributions amount to keep pace with any pay increases.
  • Stock, Options, Etc.: If you're lucky enough to have been granted company stock, stock options, bonuses or other forms of non-salary compensation, you should be aware of their implications when switching jobs.

    "Find out how much stock or long term incentive compensation you are vested in and the protocol for collecting what is rightfully yours," says Herring.

    Companies usually require you to exercise any stock options within a stipulated period after departure (usually 90 days). Cashing out stock and/or exercising options will also have tax implications, so be prepared for the bill.

  • In some cases, higher earnings can trigger larger monthly payments on certain kinds of debt. Many student loan re-payment programs, for instance, rely on your income as the basis for your monthly payment, so communicate with your lender to determine your new payment level. One more thing: if you're switching from the private to the public sector or an NGO/non-profit, you may qualify more quickly for debt forgiveness, so check with your lender.
  • A job change means more than a shiny new office or title. It can also put you on an entirely different lifetime financial path. Do your financial homework, and it's likelier to be more Stairway to Heaven than Road to Nowhere.

    Janet Al-Saad is the founder of the Five Ten Twenty Club, a website designed to help you improve your finances $5, $10 or $20 at a time.

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