The Brooklyn FI Guide To Leaving Your Job
Jason and Mishaela's webinar covers the always relevant topic of how a job change affects your financial plan; giving tips on information to gather or what you must understand before you send in that resignation letter. (If you haven't seen the Forbes article yet, they predict the Employees will soon have the power.)
Here is a preview of some of the items covered:
The Brooklyn FI Leaving Your Job Checklist
1. Paychecks. Log into your payroll system and download your last TWO paystubs. These will be useful for your tax and/or financial professionals to project your tax bill and calculate additional 401(k) contributions allowed in the year, if any. We also suggest you download any paychecks for the specific time periods you disqualified stock options. You will likely LOSE access so this step is super important.
2. 401(k). Make sure you know how to access your 401(k) or other benefits and bookmark them. You will likely just LEAVE the 401(k) as is until there is an active 401(k) at a future job to roll it in to. Just let it hang for a while.
3. Address change contact. You will receive a W-2 from this employer at the end of the year; OFTEN these forms are only mailed as a paper copy. So be sure you have the HR contact and keep them updated if your address changes. There may be other tax forms or information you need to request in the future, so having their contact will surely come in handy!
4. Stock options. If you have stock options, please be sure to review the expiration and exercise terms to make sure you don't miss any deadlines. A fairly common deadline is that you will have 90 days (three months) from departure to exercise any outstanding options. If your ISOs do not expire after 90 days or you are able to extend them, watch out for the IRS regulations that state ISOs will be disqualified (turned into NQOs) 90 days after your employment ends. Either way - don't wait until the last moment, an exercise can take weeks with all the paperwork and payment back-and-forth.
5. HSA. If you have an HSA you can leave it as is or roll it over to your new employer's plan. There's no immediate action needed.
6. Health Insurance. Speak with HR to understand your options for health insurance. Remember, going without health insurance is NOT an option :). Keep in mind that your new role may have some sort of waiting period so COBRA could be an option for a month or two. COBRA is often very expensive and only makes sense when you are dealing with existing medical conditions. If you're generally healthy, the state health insurance marketplace is probably your best bet. (Link: NY Health Insurance)
Special Cases
1. Mega Back Door Roth. If you have been contributing after-tax dollars to your 401(k), make sure that you are able to convert the funds to a Roth BEFORE you leave. This is called an "in-service" withdrawal and is much easier while you're still employed. Call your custodian (Vanguard or Fidelity, for example) to handle this. Super important!