6 Things to Plan Before You Quit

The financial impact of job changes can include a variety of things such as benefit levels, 401(k) loans, and a drain on your emergency fund. Plan for these six things before you quit your job.
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asian-young-professional-manAmericans are quitting their jobs at the highest rate in years, and with good reason. The unemployment rate is low. The number of job openings has been climbing for nearly nine years and is now at near-record levels.

A job market like this presents people with opportunities to find better jobs; and beyond those positive opportunities, other reasons to quit your job are often all too clear — boredom, an unreasonable boss, physical wear and tear, disagreeable co-workers, etc.

Yet while reasons to quit your job may be obvious, the reasons to stay may be less apparent. The financial impact of job changes sometimes include things you may be taking for granted or haven’t even considered yet.

6 things to think about before you quit

  1. Is your emergency fund in good shape?
    In particular, if you haven’t lined up your next job yet, it is essential to make sure you’ve set aside enough money to cover several months’ worth of expenses. Even if you are moving directly to a new job, beefing up your emergency fund before a job transition is a good idea in case things don’t work out as you’d planned.

    By the way, since interest rates are rising, you might also benefit from checking that the rate offered by your savings account or money market account is still competitive. As you build up this war chest, you have more to lose by settling for less-than-competitive savings or money market rates.

  2. Do the benefits stack up?
    It’s easy to be tempted by a juicy salary bump, but make sure you also take into account any difference in benefit packages.

    Compare how much a prospective new employer would match 401(k) contributions to how much you get from your current employer. Also consider whether these employers kick in for health benefits, and whether they offer high deductible health plans and health savings accounts to help you save on healthcare expenses. Also consider the value of perks such as parking or daycare.

    In short, be sure to adjust any salary difference for the difference in economic value of the benefits offered.

    Make your benefits pull double duty. Read: How to use a health savings account to build retirement wealth

  3. Will you leave any benefits on the table?
    Another aspect of employee benefits to think about is whether you will leave any unvested portions of retirement plan contributions behind if you change jobs. This may be a one-time cost that you would eventually recoup, but if you could avoid or at least reduce the loss by waiting till your next anniversary date, that patience may pay off.

    Leaving my employer: What to do with 401(k) money?

  4. Do you have a 401(k) loan outstanding?
    If you have borrowed against your 401(k) balance, before you quit your job check your plan’s requirements for loan repayments upon leaving the company.

    Some plans require immediate repayment upon leaving. If that’s the case with your current 401(k) loan, you’ll need to make sure you have the resources to cover repayment. If you fail to repay a 401(k) loan when required, the IRS will consider the unpaid amount to be a distribution from the plan, which will have tax consequences plus could also carry a 10 percent penalty if you are under age 59 1/2.

    Need more information? Read 401(k) loan – borrowing from or robbing from yourself?

  5. Are you planning to apply for a loan?
    Loan underwriters like job stability. Unless you wouldn’t qualify for the loan you want at your current wage level, it may be worth it to hold off on any job change until you’ve been approved for that loan.
  6. Will you need to replace any equipment?
    Mobile phones, laptops, cars – these are all examples of equipment that come with some jobs. You may be so accustomed to having the use of these things that you take it for granted; but before you change jobs, think through what it will cost to replace any employer-issued equipment.

Quitting your job can be a very satisfying decision, but also a scary one. If you think through the full financial impact of job changes and thoroughly consider your next opportunity, you can enjoy the thrill of quitting without the cold feet.

More resources on benefits

Health or Wealth: Juggling HSA and 401(k) contributions

401(k) contribution limits for 2019

Planning your job change? Try our retirement calculator

About Author
Richard Barrington has been a Senior Financial Analyst for MoneyRates. He has appeared on Fox Business News and NPR, and has been quoted by the Wall Street Journal, the New York Times, USA Today, CNBC and many other publications. Richard has over 30 years of experience in financial services. He has earned the Chartered Financial Analyst (CFA) designation from the Association of Investment Management and Research (now the “CFA Institute”).