7 financial questions to consider when changing jobs

From assessing the new employer’s retirement plan to evaluating the total compensation package, make sure you’re financially ready to switch jobs.

If you’re thinking about changing jobs or already evaluating a job offer, it’s wise to consider the full financial impact first.

Even if the new position comes with a substantial salary bump, there are other financial factors to take into account (think stock options, benefits and how your pension may be impacted).

To help guide your evaluation, here are seven financial questions to consider when changing jobs. 

1. What are my new employer's retirement plans?

Does your new job come with access to an employer-sponsored retirement plan, such as a 401(k), 403(b) or IRA? If so, be sure to ask the hiring manager what the vesting period is and what the company match is, if one is offered.

If you have a 401(k) at your current employer, generally speaking, you have four options for what to do with it:

• Cash out your earnings
• Leave your money in the current retirement plan
• Transfer your money into your new employer’s retirement plan
• Roll your money directly into an outside IRA*

There are pros and cons to each option, so you may want to consider talking with a financial professional to help you navigate your options and provide guidance on how to allocate assets in your account.

Regardless of whether you’re starting fresh or rolling over existing funds, opening a new account gives you an opportunity to evaluate your risk tolerance. For example, you may be comfortable taking on more risk if you’re transitioning from an entrepreneurial role to a more established position. Does this new job, its salary and your employment outlook trigger any changes in your long-term retirement plan? 

2. What bonuses and stock options are on offer?

Look past the salary when evaluating a job offer and examine your compensation as a whole. Does the bonus or commission structure mirror your previous role, or will you need to adjust your budget?

Don’t forget about bonuses tied to stock. Stock options can offer company shares at discounted prices, but they may have a “vesting” period, meaning they aren’t available to purchase until you’ve worked at the company for a certain amount of time.

Also, make sure the size of your initial option grant and the exercise price are clearly stated. You’ll want to know if you’ll be granted options in the future, too. 

3. What about stock options from my current job?

If you have stock options that you haven’t yet exercised, you’ll want to determine if they’ll expire when you leave. Carefully examine your vesting schedule so you don’t miss out. If your stock options will vest soon or you’re about to receive a cash or stock bonus, you may want to time your exit to best take advantage of those opportunities.

Note that even if your stock options have vested, that doesn’t necessarily mean you should exercise those options. This is especially true if your shares are underwater, meaning the price per share is greater than the actual market value.

Before your last day, make sure to download and save all your stock plan documents securely. It’s also a good idea to ask for a point of contact if you’re leaving a private company, as there may be a liquidity event in the future. 

4. Do the insurance and other benefits of my new job align with my need?

Think about how your benefits will change as you transition to a new job. A new position might have a higher salary on paper, but if the employer offers fewer benefits, it could outweigh any gains.

Make sure you’re noting any benefits you may be losing or gaining as you reorganize your finances for a new job, such as work-from-home flexibility, reimbursement for commuting expenses, paid time off, health insurance, short- and long-term disability, other insurance coverage or subsidized daycare. Any benefits that you may have to cover yourself should factor into your budgeting.

5. How will changing jobs affect my pension?

If you have a pension with your current employer, you’ll need to decide what to do with the funds you’ve amassed. Your options will typically include either leaving your pension with your current employer and collecting the benefit when you retire, or taking the money as a lump sum now and potentially investing it elsewhere. In some cases, you may be able to choose a combination.

Make sure to clarify with your current benefits administrator which type of vesting applies to you, as it may help determine when to change jobs.

If your current company engages in cliff vesting, you’re entitled to your full pension benefits on a specific date but lose those benefits if you leave the job early. If your company practices graded vesting, you increasingly gain ownership of employer contributions made over time, so even if you leave after a few years, you may retain some of the benefit.

6. Will I need to relocate?

Transitioning jobs sometimes comes with new expenses. These may be small, such as a change in your daily commute, or large, such as relocation.

If relocation is required, be sure to carefully evaluate any relocation offer. Some companies may be willing to pay for some or all your moving and relocation expenses. This can be done via a lump sum payment to you or by directly paying movers. Be sure to look at the tax and income considerations of any relocation package you review. 

If you do relocate, remember to account for changes in cost of living, including potential changes in your state or local tax code, which could affect your take-home pay.

7. Is there room to negotiate pay at my current job?

If you like your current role and company but the salary or benefits aren’t cutting it, consider negotiating before choosing to part ways. If your current employer can meet your requests and you feel content staying put, you will continue to get closer to becoming fully vested in any pension, stock options or workplace savings plan you may have.

If your salary isn’t a pain point or negotiable, you may consider requesting other benefits like additional paid time off, transportation reimbursement or a better 401(k) match. 

Get advice from a professional

Employment changes are often a good time to revisit your financial plan, as compensation adjustments can affect the timeframe you’ve established in working toward your goals.

Additionally, having the ability to consolidate assets outside of your former employer’s retirement plan might enable you to qualify for a wider range of investment choices. A financial professional can help you think through these considerations.

There are plenty of other things to think about when changing jobs. As you transition to your new job, consider these eight steps in choosing a health insurance plan.