You can spend a decade or a lifetime working, dedicating your time and energy to your career, and things can change in a matter of hours and days. I’ll never forget the call from my husband that his job had been eliminated in spring of 2021. No matter how much planning you execute it does not always prepare you fully for the experience. We were not alone and have not been alone. We have seen trends in the workplace change over time. In the last two years, since the beginning of the pandemic we have seen the great resignation, quiet quitting, and now we are beginning to see more layoffs as companies downsize. Today, we are going to cover some key items on how to address changes in your career whether they are initiated by you or the business that you work for. As always, we appreciate when you share the information with someone you think it might impact.
In 2021, we had the mass exodus of, mainly, female workers exit the workforce – otherwise known as the Great Resignation. Nearly 48 million people quit their jobs in 2021, a record setting year. According to a CNBC, most of the surveyed workers quit (56%) identifying pay as the top reason they were leaving. Often, in the news we feel as though the great resignation meant individuals were sitting on the sidelines. Reality is, most were leaving for higher wages or reinvesting themselves.
We are going to break down three transitions in the workforce trends we are seeing and how you should tackle each of them.
You are leaving your current employer for another employer.
What is your full compensation package?
No longer is salary the only piece that you should be considering. Health insurance, life and long term care benefits, bonus payouts, restricted stock or stock options, deferred compensation, vacation time, and other benefits – pet insurance, education reimbursement, as well as childcare reimbursement.
What stock options, restricted stock, or performance bonuses are you leaving behind?
Understand that when you leave, you don’t get to take these pieces of your compensation structure with you. Therefore, if you have not exercised options that are vested into the stock or cash – you lose them. Restricted stock that is not vested – you lose it. Performance bonuses that have not met the grant period – you lose it. When you are considering transitioning to another employer then you need to also consider these pieces and perhaps add them in as a negotiation tactic for a sign on bonus. Deferred compensation – depending on how you elected payment you may have a sum of money that is coming your way and you will absolutely want to tax plan on how this may impact you.
What are your out of pocket or insurance benefits that you need to consider?
Do you have a high deductible, PPO, or HMO plan? All of these are going to require different types of out of pocket costs to you. If you have a flex spending account, you will want to understand when you have to spend the money by – or you lose it. A health spending account is different from a flex spending account and you may need to transfer it to another custodian after you separate from your employer.
So, you want to reinvent yourself.
Let’s switch gears a bit, what if you are reinventing yourself and transitioning completely out of an industry that you have spent the majority of your career in. The NEW can be fun & exciting while also perhaps a bit daunting. You will want to understand financially what steps to take as well as think about who are the key people that you need around you during this transition.
Financially, here are the top three things you should do before you rip the bandaid off of your reinvention:
Understand your current cashflow – the income that comes in and the expenses that go out. What will you need to add as an expense that your employer may no longer be covering – insurance being a huge one!
How will you replace your income? Do you have a plan? – if you are starting a business then you’ll want to understand that revenue does not equal your income. You will have expenses that need to be covered for the launch and sustainability of the business. Many of the business clients we work with, we help them back into their pricing based on what they need to live off, save for, and pay for taxes.
What training, education, or certifications are required in order to live out your reinvention? – How will you cover these costs? How long will it take you to recoup your investment? Is there a new employer that would cover these costs to you as a part of their training program?
If you have read or hung around our team a while, you know this phrase – “Money touches all aspects of your life.” When you are reinventing yourself, you will want a community around you and likely not all of those professionals or people you will need if your corner will come for free. For instance, hiring a career or business coach to help you settle into a plan can be a cost. Your mental, emotional, and physical health play a big part in transitions – who will you need in your corner – therapist, chiropractor, personal trainer, acupuncturist, etc. Again, all of these will come at a cost – consider these before you find yourself racking up the bills.
What if this change was not your choice?
As we start to see more layoff from companies and the expectation for them to continue grows, we need to understand what to do if we become affected by a layoff. Here are some tips to consider.
Understand your separation package.
Some of you may be given a severance package as a part of your departure. Understand the payment structure and rules for the payout. Some companies will cease payment if you get another job within the company within a certain amount of time. Also, be aware that if a lump sum payout – what time of year it is paid out, if it is close to the end of the year it could affect your tax bracket meaning you may need to set aside even more for a potential tax liability.
Do not let pride get in the way of applying for unemployment.
If you are eligible, enroll in unemployment benefits. The amount will vary depending on your eligibility and the state you live in. Visit your state’s unemployment department to find out next steps.
Explore health insurance options.
COBRA is not the only option. Usually in these circumstances, you are allowed to join your partner’s insurance plan or look into the state plans offered through your state’s insurance exchange. Again, understand all of the out of pocket requirements comparing the change from one policy to the other.
Closer to retirement consider these pieces.
If you are nearing retirement in the next couple of years, you may be eligible to pull from retirement accounts in order to supplement your income. There is an option called a 72t distribution that may allow you to access prior to 59 ½ however, you will want to understand all of your options and look into it with your accountant and financial advisor before pursuing.
Remember through each of these scenarios, you are not alone, and just because what worked for one person does not always mean it will work for you. Take the time to review your options. Bring in your personal board of directors so within those options you confidently understand how different scenarios may impact you today and in the future. If you do not have a team and find yourself in any of the above situations – we would be honored to be your team to assist through this time.
We aren’t your traditional advisor team. It’s time for you to align with a team of modern financial planners that will truly put you at the center of your plan. Feel free to schedule an appointment to our complimentary 30 min Wealth Assessment session to learn more about how we incorporate these strategies and others to assist you through the financial planning process.
Securities offered through LPL Financial, a member of FINRA/SIPC. Advisory services offered through Forethought Planning, a SEC registered investment advisor. The views expressed here are those of the participants, and not those of Forethought Planning or LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. LPL Financial and Forethought Planning do not offer legal services. Socially Responsible Investing (SRI) / Environmental Social Governance (ESG) investing has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.