So, you're getting ready to move to the next step in you life by moving on from your current employer.
Before walking out the front gate, there are many things to do and keep track of - you must turn in all of your security badges, papers/records, equipment, and computer. In addition, you must make sure that all of your projects are in a state that are ready to be handed off to the person that will complete them.
Yet another very important aspect that often gets taken too lightly (in my opinion) when leaving an employer is making sure all of your finances are taken care of.
In order to give this topic its due respect, I wanted to share some of the action steps I have taken financially over the past few weeks in order to ensure a smooth transition from leaving my current employer and going to graduate school this fall.
After thinking about what I would need to do for several minutes, I decided that the best places to start are...
- 1) My current paystub
- To create action plans for each of the current income deductions on my paycheck.
- 2) Notify employer's benefits center of your new address (if you are moving)
- This is pretty self explanatory: you want your benefits provider to have your current address on file in the event that they need to contact you or send reimbursements.
- 3) The My Personal Finance Journey Account Hierarchy
- To ensure that all of my needs are covered, according to the proper priority order.
While #2 above is self explanatory, let's take a look at #1 and 3 in a little more detail:
1) Analysis of Current Paystub
According to my latest paystub, the following items were deductions made either before or after tax. Below each item, I have listed the considerations I went through to decide what (if any) action steps are needed upon leaving my employer.
According to my latest paystub, the following items were deductions made either before or after tax. Below each item, I have listed the considerations I went through to decide what (if any) action steps are needed upon leaving my employer.
- Federal and state withholding taxes
- Someone once told me that, "There are only two things certain in life - death and taxes."
- Accordingly, no action is needed, as I am sure that Uncle Sam will find me and charge me taxes on my income in graduate school.
- On a side note, if you haven't already, take a look at a previous post I wrote about what taxes graduate students pay. Pretty interesting!
- Health insurance premium (PPO) - see previous post about deciding between the different types of employer sponsored health insurance plans for more information.
- Health insurance is an ABSOLUTE MUST for everyone.
- I am lucky in the fact that my graduate assistantship is going to be paying for my health insurance coverage through the University-sponsored plan.
- However, the University health insurance coverage doesn't start until August 15, and as such, I need to make sure I am covered during the interim period of unemployment.
- To remedy this, I had to contact my employer's benefits department and request COBRA insurance, which is a type of insurance law that allows for health benefits to be extended to individuals for a short period of time after leaving an employer.
- Even though this type of insurance will require that I pay 100% of the premium (much more than what I paid with my past employer), it will still be better than being caught without healthcare coverage.
- Vision insurance
- Vision insurance is much less obligatory than general health insurance coverage because it typically only covers one annual optometrist visit and a pair of glasses or contacts.
- The general rule of thumb is that you should not seek out vision insurance unless it is offered very cheaply through your employer.
- Because of this, I do not need to take any action on obtaining vision insurance.
- Dental insurance
- Dental insurance falls in the same general category as vision insurance in that it is not totally obligatory because it generally covers a limited set of operations and routine maintenance.
- Because of this, I do not need to take any action on obtaining dental insurance, unless it is offered at a good price through the University plan.
- 401k retirement contribution (monthly)
- My, my, my - how I will miss my past employer's 401k plan. It even had a matching program!!! Twas' sweet!
- The University that I will be attending for graduate school does not offer a 401k plan that I am aware of.
- Therefore, I will most likely have to settle for just contributing to my Roth IRA. In all honesty, this should be sufficient since I will be making approximately 67% less income as a graduate student than in my past job.
- However, I do need to take some action regarding the 401k that I currently have with my previous employer. What I need to do is roll-over the 401k funds to a Rollover IRA account that I will create with Vanguard.
- I am inclined to do this because Vanguard IRA mutual funds are far superior to 401k mutual funds, stemming from the lower expense ratios/fees and a greater selection of index funds.
- For more information on the reasons for creating a Rollover IRA and transferring your 401k funds, please read a previous post I wrote at the following link - What do you do with your 401k funds if you are leaving your employer?
- Flexible HealthCare Spending Account (FSA)
- A Flexible Spending Account, or FSA, is another one of those "nice-to-have's" that some employers offer. If you're not familiar with what this type of account is, click the following link - My Personal Finance Journey - Flexible Spending Accounts and Should I Sign Up For One?
- Because of this, I don't need to actively seek out obtaining one, unless it is provided by the University health insurance plan that I will under.
- However, I do need to take some action with my existing FSA account to make sure that I have spent all of the money in the account. If I do not spend the money I have deposited thus far this year, it will be lost at year end. This is undesirable, obviously.
- To take care of this, I simply log in to my FSA account online, view the balance, and mark myself a reminder on my Outlook Calendar to spend some of the money each month on a qualified expense.
3) My Personal Finance Journey Account Hierarchy
- Priority 1 - Health insurance - Check
- This will be covered by my University assistantship.
- Priority 2 - Emergency fund - Check - not directly affected by leaving my employer.
- However, since I will have much less income, I will need to monitor the level of my emergency fund to ensure that I keep 6-9 months worth of expenses on hand.
- Priority 3 - Get rid of credit card debt - Check
- I have no credit card debt.
- Priority 4 - Pay monthly mortgage payment - Check - not directly affected by leaving my employer.
- This is something that I will make sure to do going forward.
- Priority 5 - 10 - Investing in a 401k and IRA accounts. - These topics were covered above.
- However, one thing I will have to make sure that I do is to not contribute greater than the combined $5000 limit for both my Roth IRA and Rollover IRA (now that I'll have both).
Key Takeaways and Summarized Action Plan
So, I have gone through a lot of my thought process in this post. However, all of the actions I need to take can be summarized in to 6 simple steps below:
1) Sign up for the University health insurance plan.
2) Obtain temporary COBRA insurance from my previous employer.
3) See if University health plan offers dental or vision insurance.
4) Roll-over 401k to a Rollover IRA with Vanguard.
5) Exhaust Flexible Spending Account funds by December 31, 2010.
6) Monitor level of my emergency fund to ensure 6-9 months of expenses are included.
Did I miss any financial action steps that I need to look at with leaving my employer? How about you all? Have you had any interesting experiences with this process?
If so, please share by commenting below!
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