Thursday, May 14th, 2020
The global pandemic has caused a huge shift in the job market. Jobs have been eliminated, either because they are ‘nonessential’ or due to other layoffs. According to the Bureau of Labor Statistics, unemployment has jumped from about 3.8% to over 14.7% in the last three months.
The effects on the economy leave a lot of room for opportunity and personal growth. Therefore, whether you’re considering or transitioning to a new job or career path, here are a few things to consider.
Switching from one job to another can literally pay off
Data from ADP’s Workforce Vitality Report states that job switchers see a larger pay bump than people who stay in their current roles year after year. In the first quarter of this year, the average job hopper realized a 5.2% pay boost, even when taking into consideration the huge number of layoffs that Americans experienced in the first quarter. This is in comparison to people who held their jobs, who only saw a 4.7% increase.
A recent Gallup study found that millennials are making job switching something of a habit: on average, millennials will change jobs four times from age 22-32. The study stressed that millennials are just as likely as other generations to be loyal to a workplace, but their decision to stay or job hop is contingent on their workplace engagement as well as financial factors. This compares to an average of two job moves in the first decade out of college for Generation X.
While switching jobs may be financially beneficial, you will also need to account for other employment factors such as health care and retirement savings options.
How quickly can you arrange health coverage?
If you already pay for your health insurance, this will not be an issue. If you had coverage at your old job and now need to find your own, fall is the prime time to start shopping for it. The open enrollment season at the Health Insurance Marketplace runs from November 1 to January 31. If you enroll in a plan by December 16, 2020, your coverage will begin on January 1, 2021.
If you were enrolled in an employer-sponsored health plan, you need to find out when the coverage from your previous job ends – and, if applicable, when coverage under your new employer’s health plan begins. If the interval between jobs is prolonged, and COBRA will not cover you for the entirety of it, you may want to check whether you can obtain coverage from your alumni association, your guild or union, or AARP. If you are leaving a career to start a business, confer with an insurance professional to search for a good group health plan.
What happens with your retirement savings?
You likely have four options regarding the money you have saved up in your workplace retirement plan: you can leave the money in the plan, roll it over into an IRA, transfer the assets into the retirement plan at your new job (if the new employer allows), or cash out (the withdrawal will be taxed and you may be hit with an early withdrawal penalty as well). Be sure to consult with a financial advisor to decide what the most advantageous thing is for you to do with your 401(k) as you switch jobs.
You will want to see how quickly you can start saving and investing through your new employer’s retirement program, as well as whether you can transfer assets from the old plan into the new one or not. If the company offers a match, when will it apply?
Can you manage your cash flow effectively between one job & the next?
You do not want to tap your emergency fund or your retirement accounts for cash during the transition, so take plenty of action to guard against using your cash reserves. It’s wise to postpone big purchases, avoid running up large credit card debts you will regret later, eat in rather than out, and buy what you really need rather than what you merely want. See if you can put off most of your holiday spending until late November. A cash flow worksheet can help you track your essential and discretionary household spending.
Each year, about 20 million Americans move on to a new job.
If you will soon join their ranks, make sure that you keep household money and insurance matters top of mind. You should be sure not to let emotions affect your money decisions, and strive to keep saving for your future at your new workplace.