Our Thoughts

What happens AFTER the Great Resignation?

By: Alexis Grason

Two full years of pandemic life has made many people stop to reflect on what truly matters to them. One result appears to be the Great Resignation.

“Employees between 30 and 45 years old have had the greatest increase in resignation rates, with an average increase of more than 20% between 2020 and 2021.” 1

There are many reasons for resigning – natural career changes delayed because of the pandemic, burn-out, changes in your family’s needs, or the desire for early retirement – but there are important financial ramifications to consider before you join the great resignation.

Your Lost Benefits

When you resign, it’s important to assess the benefits your employer provides and how you’ll address the gap. This includes the obvious ones like health insurance, but also the less obvious benefits that have a serious impact on your plan:

  • Life insurance
  • Disability income insurance
  • Wellness benefits
  • Retirement plan matching and/or profit-sharing contributions

Before you resign, outline your plan for these benefits and determine if COBRA coverage or coverage on the health insurance marketplace will be best for you. Health insurance agents can help you address your options.

The other lost benefits – financial and nonfinancial – may create the need to make up for the lost savings later or have additional cash on hand if a disability occurs.

You’ll need to make a plan for your non-financial benefits as well. These could include wellness offerings provided by your employer (gym membership, identity theft protection, etc.) or even something as simple as the camaraderie offered by a workplace community.

What To Do With Your 401(k)

When you make a career change, you’ll need to decide how to handle your 401(k) or other retirement savings vehicle provided through your employer. There are options for your previous employer’s retirement plan. These include:

  • Keep your retirement plan with its current provider
  • Rollover to your new employer’s plan
  • Rollover to an IRA (Individual Retirement Account)
  • Take a lump-sum distribution

Read here for more information on each. Taking a lump-sum, taxable distribution is rarely recommended unless there are financial hardships. There are also other strategies to consider like a direct Roth Conversion if your previous employer’s retirement plan balance keeps the tax created manageable for you.

The SEC and DOL continue to outline and enforce the legislative requirements of advisor’s recommendations from a retirement plan to an IRA. Whenever you are discussing the advantages and tradeoffs of this option, confirm your advisor is a fiduciary giving you advice in your best interests. For more information on types of advisors, read here.

Your Transition Plan

Someone once told me: “Whenever one door closes, another one opens, but it can be hell in the hallway.”

Change is hard. Pausing to process ahead of time sets you up for success both mentally and financially. Depending on whether you are going on to earn an income again or are now financially independent, this stage will take resources – time, energy, and money. As with any transition, think….

  • Do you have the safety net (liquid reserves) to keep you financially secure until uncertainty becomes certainty again?
  • Have you created contingency plans so you know what levers you can push and pull if things do not go according to plan?
  • Are others relying on you and have you addressed how your contributions may change – and for how long?

Money is the means to provide you with options and flexibility. If you have saved wisely and now desire to pivot, upgrade your position, or renegotiate your current one, answering these questions ahead of time puts you in a position of control and mental clarity.

Your Next Chapter….and the Financial Aftermath

Once you have made it through the transition, it is time to evaluate the comprehensive nature and changes of your next chapter. How drastically have things changed or are they somewhat back to normal?

Watch out for these!

  • Your spending plan – Does it need to be re-evaluated?
  • Your protection plan (insurance coverages and liquidity targets) – Does it need modifications based on changes to income, expenses, and long-term expectancy of career span?
  • Evaluate your benefits – If you have a new job, make sure you take full advantage of what is available to you.
  • Get back on track – If you took an off-ramp from the previous life plan, now is time to make sure you get back on track. Use this as an opportunity to develop a roadmap for the longer term. This keeps you in control of your financial future. If this is financial independence (a.k.a. Retirement), check out our Ultimate Guide for retirement planning!

Resigning leads to another chapter; it’s not the end. Refer to these steppingstones as a way to transition from one chapter to another and not leave any of the financials behind!

 

References:

    1.   https://hbr.org/2021/09/who-is-driving-the-great-resignation

This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.