As The Great Resignation continues to unfold, have you been tempted to put in your own two weeks’ notice? Perhaps you’ve even fantasized about your own version of the moment that JetBlue flight attendant announced his resignation over the PA system and exited his plane in glorious fashion.
But before anyone else grabs a couple of beers and deploys their aircraft’s emergency evacuation slide as a direct path into career freedom, may we humbly suggest taking a moment for a few more practical considerations?
If you’re anything like our clients, you might’ve been thinking about taking a sabbatical, or moving on to a job that pays you more or improves your life or career trajectory. We help our clients think through all the considerations related to leaving their jobs, to help them figure out if it’s indeed what they want, and also to make the transition as logistically easy and financially beneficial as possible.
Can we please do the same for you, below?
First, Think About The Big Picture.
In some ways, it’s easier—albeit a bit overwhelming—to start by diving into the tactical issues involved when you prepare to leave a job.
But we encourage you to pause for a moment and reflect on the bigger-picture questions that often get overlooked in the excitement of transitional moments like these. You might find that these questions are best answered by putting pen to paper as journaling prompts, or in conversation with a trusted friend or family member.
What are your reasons and goals for leaving your current job?
Is leaving your job the best way to accomplish those goals?
If you leave, how do you plan to stay accountable to yourself with regard to those goals?
How does your decision to leave your current job play into your long-term career strategy?
How does your choice to have your next job lined up—or your conscious choice to not have another job lined up—align with that strategy?
You might also be yearning to leave your job, but feel stuck in decision-making limbo for one reason or another. If that describes you, you might find inspiration in a recent guest post from Molly Belvo, a project manager who worked in tech and digital marketing before taking her own sabbatical.
Molly does a wonderful job outlining the hurdles she had to overcome on her way to actually taking her sabbatical, and her advice might help you clear them yourself.
Next, Think About Your Finances.
Making the financial preparations to leave your job can feel like A Lot. But it’s worth the effort! Once you’ve thought through the impact of these items on your finances, you’ll be able to feel truly confident your last day on the job.
What money will you live on?
If you have a gap between your current job and your next one, you’ll need cash to pay your bills—those are the facts of #adulting! Ideally, you’ll be able to maintain your emergency fund during your time off.
Do you know how much you’ll need to cover your expenses? Have you saved up enough cash saved up already—and if not, where do you plan on coming up with this money? Do you know if you’ll receive a severance package, and what kind of payments you might expect from that?
How will you maintain your health insurance coverage?
This is nonnegotiable. Fortunately, you’ll likely have several options here!
Your old employer’s coverage. First, remember that the timing of your last day on the job will impact the end date of your employer’s healthcare coverage. Often, staying through the 1st of a new month means your coverage will remain in effect through the rest of that month. (As with all of these considerations, though, your employer might handle things differently, so you’ll always want to investigate the details of your particular situation.)
After that, COBRA continuation coverage might be available to you for 18 (most of the country) or 36 months (in California), depending on the event that precipitated your exit. COBRA is typically an expensive option, but also usually the best coverage you can get.
Sneaky COBRA strategy. If you’re moving on to a new company but will have a short (i.e., less than 60-day) gap in coverage between your current and new companies, here’s a COBRA strategy to consider:
- Get your COBRA paperwork (which likely won’t even arrive for some time after leaving your company).
- Fill it out and keep it accessible so that someone else could mail it in. Tell that person ahead of time what you’re doing and where the paperwork is.
- Don’t mail it in right away! Reserve it only in case you end up needing health insurance.
- If, all of a sudden, you require medical care and can’t mail in the paperwork yourself, “that person” can do it for you.
If your former employer is large enough to offer COBRA continuation coverage, you can enroll retroactively for up to 60 days after your termination date. So even if you don’t enroll (and incur the associated expense) immediately, you still retain the eligibility to do so during that 60-day window in the unfortunate event that you need to use health insurance for something major and unexpected.
For example, you can:
Day 1, leave your company
Day 20, be involved in a car accident on Day 20, followed by
Day 21, have surgery
Day 30, mail in your COBRA paperwork
and—because you’ve mailed it in within 60 days—your Day 21 healthcare needs will be covered by COBRA.
Affordable Care Act coverage. You can also seek coverage via your state’s marketplace, although if you plan on traveling during your sabbatical, you should know that these plans usually provide very little coverage outside of state lines. It’s even possible that you might qualify for Medicaid coverage in your state.
The best way to investigate questions (for free!) about state marketplace coverage is to enlist a Healthcare Navigator. (Surprisingly enough, we’ve had very good experience talking with navigators, getting prompt and useful information from them!)
Your partner’s coverage. If you have a romantic partner, consider investigating their health insurance coverage. You might get on their policy, if you don’t plan to have your own coverage for a while.
Will the timing of your last day affect vesting compensation of any kind?
If you have any kind of “lumpy” income, from RSUs to a bonus to an ESPP purchase, you’ll always experience the “golden handcuffs” of knowing that another payout is just around the corner.
You don’t want those handcuffs to be the determining factor in your next move, if you can afford it, but maybe moving the timing of your last day slightly could positively affect your compensation. Could you stay just a few days more and reach another payout milestone like the ones listed above?
Sometimes—although it’s more rare—you have to stay for a certain amount of time to vest your company’s 401(k) match. If that’s the case at your company, you’ll be able to find the details in your 401(k) Summary Plan Description under the “Vesting” section. (It’s a pretty dry read, but an important one!)
And remember that even if your 401(k) plan has a true-up for its match, if you leave before the end of the year, you may not be eligible for that true-up in employer matching funds.
Will you lose any important workplace insurance coverage—life and disability in particular—when you leave?
If you aren’t immediately headed into a new role where you’ll receive adequate group disability insurance, you might need to pursue private disability insurance coverage. That’s a process that, ideally, should begin well before your last day at work. And if anyone in your life depends on your income, pursuing private life insurance might be necessary as well.
Sometimes, you can convert your employer’s group life (usually not disability) coverage to individual coverage, at least to tide you over for a while. It might not be the most cost-effective proposition, but it can be useful in a pinch when you don’t have private coverage in place.
And if you already have a private disability policy, remember that you’ll need to notify your insurance broker when you leave your job or otherwise lose your income.
Are there other employee benefits that you can take advantage of while you’re still employed?
These benefits might include a professional development budget, FSA funds, and other opportunities unique to your employer.
Fun fact: if you’ve elected to contribute to an FSA, you can use up your entire year’s FSA amount (which you chose during open enrollment) before you leave, regardless of how much you have contributed. Yay, loopholes! That said, you will generally lose any unused FSA contributions when you leave your job…so, get on that.
Have you considered All The Things surrounding your 401(k)?
Most urgently, if you won’t have immediate access to another employer retirement plan, one strategy might include ramping up your contributions now (especially to an after-tax 401(k), which are still kinda rare) to max out during your time remaining on the job.
Leaving your job will also trigger the countdown clock on repaying a 401(k) loan, if you’ve taken one out.
Less urgently, you’ll ultimately want to think about what you’ll do with your 401(k) after you leave. You can usually leave it where it is for a while, but eventually you’ll want to roll it into an IRA or into your next 401(k).
How will you handle your stock options, if you have any?
Often, stock options expire 90 days after you leave a job. If they’re ISOs, in some cases, they might convert to NSOs after 90 days and you’ll retain them far longer, just in the NSO form . Do you know if that’s the case for yours? Do you know what you want to do with these options so that you don’t unwittingly lose them?
If you’re working for a private company, and you’re at risk of losing your options because you can’t afford to exercise them all (and pay the associated taxes!), you can consider using a company like ESOFund, Equity Bee or SecFi to finance the exercise.
Sure, you’ll lose a meaningful part of the “upside” in the stock if it does eventually go somewhere (because those companies lay claim to some of that growth, in exchange for giving you the money to exercise). But you can arrange it so that you have no downside, you’re not putting any of your own money at risk, and none of your options expire unexercised.
This is a pretty complicated operation. We’ve only just scratched the surface here.
Are you due any payment for your unused-but-accrued paid time off?
If so, make sure you get it!
Finally, Think About The Administrivia.
So, we’ve already given you a lot to think through. And, having made it this far, you’ve already thought through the weightiest issues. A huge win!
Still, you’ll want to set aside an hour or so at some point before you leave to tackle a few more easily-overlooked (and largely administrative) considerations.
Before you say your final goodbyes and head out the door, we encourage you to collect information that might be hard or impossible to get later:
- Contact information for key departments and people at your soon-to-be-former company (HR, payroll, benefits, legal/stock compensation representative, employer verification, etc). Without this information, it can be tough to “get back inside,” as it were, to get any future questions answered.
- Personal pictures and files on your company computer and phone (if your company gave you a cell phone and you’ve used it for personal purposes).
- Copies of important documents, such as employment agreements, offer letters, and termination agreements.
- Benefits portal login information. And if this is tied to your employer email, you get bonus points if you’re able to change it to your personal email address.
- Stock compensation portal login information. Ditto re: bonus points for updating to your personal email address here.
- Information on compensation for vacation and severance pay.
- Health insurance coverage options.
These things can either make your life easier, or more difficult, down the road.
As you might imagine, we want your life to be easier, so that you can concentrate on sending us postcards from your sabbatical, or growing your career in that fabulous new job!
Do you want to embark on the next stage of your career, but you’re a little worried that you’ll forget to do or consider something important along the way? Reach out and schedule a free consultation or send us an email.
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Disclaimer: This article is provided for educational, general information, and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. We encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Flow Financial Planning, LLC, and all rights are reserved. Read the full Disclaimer.