10 Financial Considerations During Employer Transition – Phoenix Tax Consultants

10 Financial Considerations During Employer Transition

By: Julia Brufke Wenger, “Your Transition Expert”

Although the economic crisis seems to be winding down and most are hopeful about the future, one major piece of uncertainty remains for few (or not so few, depending on which unemployment rates you read): how to handle a job transition. Job transition is a time of change, challenge and opportunity. Addressing a few key points can make the process easier, and in turn, allow you to maximize the outcome. After years of helping clients through this process, I have identified key areas to manage.  Keep these things in mind as they may help you navigate through the next few months, even if you aren’t in the middle of a job transition.

  1. Roll over your retirement plan using an advisor who can assist you in designing a retirement strategy to:
    • Gain control of your investment options
    • Eliminate the risk of having difficulty accessing your account in the future
    • Create the ability to access partial withdrawals if liquidity is needed while in transition
    • Design a customized strategy that will address not only accumulation of funds, but solve for how the funds will be distributed in retirement
  2. Review your options for health insurance, including COBRA. If you decide to transfer to another plan, do not discontinue your in-force plan until the new coverage is in effect. Continuation of coverage is important in qualifying for a new plan and minimizing rates.
  3. Life insurance is usually not portable and it is important to have some insurance outside of your employer. Begin research before changing jobs as the underwriting process may take several weeks.
  4. Inventory your existing assets and determine liquidity. Prioritize which assets you would use if you needed to access savings while taking into consideration taxation and penalties.
  5. If you have not secured new employment, create a budget that includes cash flow projections using sources that may include unemployment compensation, savings accounts and employer severance payments. This can help to make the transition period less stressful.
  6. If you have a job, review the choices available through the new benefit plan and make choices that consider the “big picture” and are also compatible with your existing portfolio structure.
  7. Project your tax liability for the year and adjust withholdings. Multiple jobs, large severance payments and unemployment compensation all take your tax withholdings off autopilot and shift them into proactive mode. Avoid surprises and make tax-minimizing choices by working with an advisor to make projections and adjust payments to the IRS.
  8. Consult an advisor if you have stock options and your company is being purchased or merged. Formulate a plan that includes a diversification strategy and determine the tax impact to maximize the opportunity.
  9. Review group benefits you may loose like disability insurance, pre-tax programs for childcare, access to a group long term care policy or education savings through payroll deduction and determine a gap strategy.
  10. If you are married and were using the plans provided by your employer, gather information regarding your spouse’s plans so you can compare them to your new options and make the best choice.

Though everyone’s situation will be different, a tailored and well-developed plan can provide you with the confidence needed to explore new opportunities and protect your assets during this journey.

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