Money Matters

Financial Tips for the Great Resignation

“The Great Resignation,” also known as “The Big Quit,” is a phenomenon that has many workers resigning from their jobs after months of being at home and reflecting on what is truly important to them. Are you dreaming of joining this movement? Perhaps you already have. As the pandemic life of work from home and flexibility gradually fades for many workers in San Diego and other parts of the U.S., people are rethinking their long-term plans for work, including how they are valued and how they choose to spend their time. This has led to a significant number of resignations according to the Labor Department. At CCMI, we are here to help you make informed decisions at critical junctures in your life, especially as it relates to your financial plan. If you are considering joining the four million other people who have purposefully quit their jobs during the pandemic, here are a few things to consider before, during and after your Big Quit.

  • Your Financial Plan:  
    • Make sure your financial plan supports an early retirement or a change in salary. This is especially important in areas like San Diego, where costs of living may be high. It would be a good idea to reach out to a CFP® so you understand how much of a salary you would need.
    • Revise your budget. Consider what expenses will decrease or be eliminated completely if you stop working, such as gas for your car, work clothes, lunches, etc.
    • Consider what expenses will increase, such as medical and dental insurance, a gym membership that was a workplace perk, a company car, etc.
    • Look for areas in your budget to reduce discretionary spending, if needed. San Diego has good weather year-round, so perhaps your expensive gym membership can be traded for hiking boots.
    • Increase your emergency fund reserves before you leave your job. Understand how long these emergency funds will last without income.
  • Workplace Compensation You Don’t Want to Lose:
    • Spend the money you have saved in your Flexible Spending Accounts (for healthcare and dependent care) unless you have a Health Savings Account (HSA), which will not need to be spent in the current year.
    • Understand what compensation you are entitled to if you quit (such as back pay, sick pay, or vacation pay).
    • Consider how your travel budget might be affected if business-earned perks have been a big part of your travel plans. Although the hassle of business travel will go away, so too will the perks associated with all the points you have the potential to accumulate. 
    • Understand the non-financial benefits, including the policies around working remotely, if this is something you desire in your new opportunity.
  • Medical Coverage:
    • Understand what options you have with COBRA. If you worked for a company with 20 or more employees, you may be eligible for COBRA, which will typically allow you to stay on your employer’s health plan for 18 months. You will have an election period of 60 days to decide. 
    • Consider making sure you are up-to-date on medical and dental exams and any medical procedures before your group health insurance ends.
    • Educate yourself on the cost of a private health insurance plan for you and your dependents. Are your current medical professionals part of the plan you are considering? Is that important to you?
    • If you are married and your spouse has a plan through their employer, you may be able to join that plan.
    • If you are over age 65, you may be eligible to sign up for Medicare if you haven’t already. The Special Enrollment Period for Part A and B is an eight-month window, beginning the month after the earlier of the end of your employment or the end of your employer-provided health insurance. You can do this online or in person at one of the multiple Social Security offices in San Diego or in the city where you live.
  • Company-Sponsored Retirement Plan:  
    • If you will be seeking employment elsewhere, will your new employer offer a retirement plan such as a 401(k) or 403(b)?  
    • If so, when will you be eligible to participate in this new retirement plan? 
    • Is it possible to max out your current retirement plan before leaving your current employer?  
    • Does your employer match your contribution to your retirement plan throughout the year or at the end of the year?
    • What is the comparison in company match for the retirement plans?
    • Are your matching contributions fully vested, or do you risk losing some of the employer-provided contributions if you leave?
  • What To Do With Previous Employer Retirement Plans:
    • If you are at least age 55, you may be eligible to begin distributions from your retirement plan at work without incurring a penalty. 
    • If you are looking for work elsewhere, you may consider rolling your old retirement plan to your new company-sponsored retirement plan (if the new company plan allows it) to keep things simple. 
    • You can also consider rolling your old retirement plan to an IRA or Roth IRA, which may give you more control over your investment strategy. Consider your time horizon for these funds along with any taxes or penalties that may occur before making any final decisions.
    • Does your old retirement plan have company stock as an investment? If so, you can consider a Net Unrealized Appreciation strategy, which is designed to lower your taxes.
  • Unvested Company Stock Awards:
    • Review post-termination exercise periods, which are usually about three months from your last day of employment (but in some cases you must exercise the options before your departure).
  • Deferred Compensation:
    • Review plan documents to understand the distribution schedule and the distribution option selected, such as yearly or lump sum.
    • Determine if your deferred compensation may be payable to you immediately upon termination and how that impacts your tax situation.
  • Stock in a Private Company:
    • Consider the impact of the shares being illiquid and if there are any clawback or repurchase rights.
  • Lost Wages:
    • Are you giving up lost wages during a time when you are at your highest earning potential?  
    • Are you walking away from a bonus you have counted on for cash flow?
    • Will there be changes to your pension income later if you leave work now? What are you leaving on the table? Understand how you obtain pension credits before making any final decisions about leaving your employer.
  • Tax Strategy in Retirement:  
    • If your Great Resignation plan is to retire from earned income, consider Roth conversions while your tax bracket is low and before required minimum distributions start at age 72. If you have the cash available to pay the resulting income tax, doing a Roth conversion in a low-income tax year could be beneficial in the long term.
    • Consider working a few months into the new tax year for earned income. This provides the opportunity to potentially contribute directly to a Roth IRA and/or make a deductible contribution to a traditional IRA if you are below the phaseouts.

For many people, nothing is more gratifying than the ability to fully control how they spend their time, whether that is in a new job with a new employer that values their talents or more work/life balance that allows them to spend more time with loved ones or enjoy the beautiful weather we have in San Diego. Time is a precious, finite resource. The pandemic lifestyle has helped employees realize there are many possible ways to live a fulfilling life, whether that is retiring earlier than planned or working from home indefinitely in a job that values personal balance and ingenuity. 

As CERTIFIED FINANCIAL PLANNER professionals, our expertise is to ensure your financial resources will support your goals. We also know you need to be mentally prepared for your Great Resignation plan. We find the financial planning process helps you imagine your future when you have the freedom to choose how you spend your time. If you are considering being part of the Great Resignation movement and crafting a more perfect scenario for yourself, please give our team a call if we can help you through this important transition.

CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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As a CERTIFIED FINANCIAL PLANNER™ professional, Tina guides clients in investment and financial planning to achieve their personal goals and objectives. With an extensive background working with registered investment advisors, Tina holds a wealth of knowledge in portfolio strategy, investment selection and best practices, competitive analysis, and building complex financial plans. She has also obtained her Behavioral Financial Advisor designation.

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