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Changing Jobs

There are many reasons why you may find yourself changing jobs. Most job changes are voluntary, but some are not. How do you plan for a job change? If your job fits in with your life plan, you can pretty much predict when a change is in the offing. Job satisfaction is an important part of life planning. Why would you want to leave a job that provided you with lifestyle satisfaction? If a job is not satisfying, one of two things is likely to occur—you'll quit or you'll get fired. Sometimes a job is lost to company downsizing. This is often easily predicted. Jobs at companies about to downsize often become dissatisfying to the workers, especially as rumors abound. It could be a good time to polish the resume and scan the employment section of your newspaper.

You may also find that you are dissatisfied with the amount of income at your job. Perhaps you need to change companies or even careers. Likewise, if you are not happy with your co-workers or managers, a change should be contemplated.

It is estimated that a person will change careers six times in his or her lifetime. That's careers, not just employers. The reason? Job dissatisfaction. People grow. Sometimes they outgrow their current job and need a new career to provide the job satisfaction they crave. Sometimes this involves seeking more money, but not always. Sometimes it requires retraining or more education.

These issues are considered in lifestyle financial planning where one plans to have the resources necessary to provide a happy and fulfilling lifestyle. Here are some things to consider about changing jobs (or careers):

Before you are out of a job, you should plan to have adequate savings to cover your living expenses for the time you anticipate it will take you to get new employment. You are not going to be happy living on unemployment benefits (if you qualify), and your family and creditors are not going to be happy if you don't pay the rent or utility bills, or feed your family. You will have additional expenses when searching for a new job. These expenses might include the cost of new clothing, transportation to interviews, educational costs for retraining, or getting an advanced degree or certificate.

Most financial planners recommend that you have an emergency fund of about six months of family living expenses stashed away.

If you are fired, you might receive severance pay that could tide you over for a while. You could apply for unemployment benefits, but they will be a mere fraction of your normal income and are subject to rigid eligibility requirements for up to 26 weeks (see the US Department of Labor Website). If you quit, all bets are off—you are on your own. So, it is best to be financially prepared. Most financial planners recommend that you have an emergency fund of about six months of family living expenses stashed away to cover such a contingency. If you're planning a long retraining program, you may need more than that, including additional funds for education and training costs.

Expenses you incur in finding a new job may be tax-deductible on your federal tax returns (see IRS Publication 17). You may deduct the costs of certain expenses such as creating, printing, and distributing your resume, and for travel directly related to searching for a new job in your current occupation. Costs of retraining or searching for a new career are not deductible. If you have to move to a new location for your new job, your moving expenses may be deductible if you meet certain IRS requirements regarding the distance and timeliness of your new employment (see IRS Publication 521).

Before voluntarily changing jobs, check out your current company's retirement plan benefits, particularly your vesting rights and plan portability. If your employer has been contributing to your retirement benefits, you may not be eligible to receive all or part of the benefits unless you have "vested" rights. Vested benefits represent a percentage of the benefits paid by your employer that you "own" after a certain period of employment. For example, you may need to be employed by your present employer for five years in order to vest 100% of your employer's contributions to your plan. If you leave after only four years, you are not entitled to any of those benefits. You might consider staying another year before changing jobs to secure those benefits already paid by your employer. You are always 100% vested in benefits for which you paid through salary reduction agreements.

You also need to know whether you can transfer your current benefits to another employer's retirement plan or rollover IRA (individual retirement account) and whether you will have any financial consequences for those benefits you receive if you resign. Employers use different retirement plan vehicles, which pose different rollover and surrender problems when moving to another investment company. For example, you may find that you have to pay significant commissions or fees when transferring from one employer's investment company to another when different investment vehicles such as insurance annuities or mutual funds are used as the funding vehicles. Ask what the costs will be to transfer your plan. You might just want to leave it in place until you are ready to retire, especially if the costs are onerous.

If you are changing jobs or careers, you should consider the immediate financial ramifications of such a move and prepare for them. Take advantage of the tax breaks available to those who are changing jobs. But most important, make sure that your move fits in with your lifestyle goals.