How to Prepare and Protect Your Finances Before Starting a New Job

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Starting a new job can be both exciting and daunting, as it often comes with a laundry list of tasks. If you're making the leap to a new role, it's essential to make sure you're taking the necessary steps to protect your finances beforehand.

You may be tempted to jump ship without planning ahead, but doing so could leave you in a precarious financial position.

What about your 401k? What happens to your company shares? What measures do you need to take in order to ensure your new job offers a stable transition period? We've got you covered with all of that information and more. 

How to Prepare and Protect Your Finances Before Starting a New Job

Before putting your two weeks in, consider the circumstances and how you can prepare for them.

How to Handle Your 401K

Your 401k is a valuable asset and one you don't want to leave behind. Generally, when leaving a job, you have several options: you can choose to roll over your 401k into your new employer's plan, or you can consolidate it with an IRA or other account of your choosing.

Depending on the rules of your previous employer's plan, you may also be able to keep your 401k where it is.

Withdrawing the money could bring with it both taxes and penalties, so it's important to understand the implications of your decision before you make a move. For instance, if you're under 59 1/2 years of age, you could be penalized 10% for early withdrawal. It's always advisable to speak with a financial planner or advisor before taking any action.

You might have the option of leaving your 401k with your former employer. Some employers allow former employees to leave their 401ks on the books and continue to receive contributions, although you may be charged a maintenance fee.

What to Do About Stocks and Investments

If you own stock with your current company, you might have the option of exercising your vested options. Depending on your plan's rules, you may be able to sell the stock immediately or hold onto it for a period of time.

If you choose to sell, make sure you understand any tax implications related to selling the stock and how they will affect your overall financial picture.

It's also important to remember that if you leave before vesting is complete, you will forfeit any remaining stock options. Incentive stock options create an even more significant challenge in this case. Again, it's critical that you speak with a financial advisor or planner to understand the implications before making a decision.

Typically, however, you can't take the stock with you when you leave. Your best option is to exercise your vested options and either sell the stock or hold onto it until it matures.

How to Switch Your Health Insurance

Health insurance is one of the first things you'll need to handle when starting a new job. It's important to understand the company's policy and ensure you're covered before taking action.

If your current employer offers health insurance, check to see if you can stay on the plan until you start a new job. Many employers allow employees to continue their coverage for a period of time after their employment ends, though it typically comes with fees.

If that's not an option, make sure you have a plan in place before leaving your old job. Look into private insurance options or inquire with your new employer to see what type of coverage they offer. Your health and well-being should be the top priorities for any major employment transition.

How Long You Have to Make These Decisions

Deciding on a course of action for your 401k and other benefits can be overwhelming. It's important to take the time to research your options and make an informed decision that best fits your financial needs.

Typically, you will have 30-60 days from the date you leave your job to decide how to proceed with your 401k.

If you're concerned about going without health insurance, it's best to make a decision as quickly as possible. Speak with your new employer and discuss their policy before making a move.

If you're having trouble deciding, talk to a financial advisor or planner. They can help explain the various options and provide advice tailored to your specific situation. Ultimately, ensuring you have a solid plan before transitioning from one job to another is crucial.

The best thing you can do is take the time to make an educated decision about your benefits and financial future. Doing your research, preparing for the transition, and receiving professional guidance are all key steps in managing a successful transition. With careful planning and consideration, you can enjoy a smooth transition into your new job with peace of mind.

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