Job Hunting: Financial Considerations

You know you’re a finance nerd when the first thing you wonder about when you’re considering leaving your job is what about contributing the full amount to your 401(k) for the year?!

As some of you may have noticed, my job satisfaction hasn’t been the greatest over the last while. Well, I’ve finally decided that it’s time to look for a new job externally. I’m working on preparing my shortlist of companies to whom I will send my resume (my goal is three) and then I will work on studying for interviews.

I’m not really remotely concerned about finances. In fact, I’m trying to convince my boyfriend that he should scrounge up the vacation days to go traveling for two weeks while I’m between jobs. Maybe that Europe trip we were planning for next fall could happen this fall/summer!

A) 401(k)

As of today, I have contributed ~$8,000 to my 401(k). I decided to leave June’s contribution as is because I’m reasonably confident that I will have a full July paycheck. I can then max out my 401(k) with my July paycheck, leaving me with a paycheck of about $650.

The other question is what I will do with my 401(k) plan after leaving. My current plan charges a fee if you leave your money in the plan, so I will have to evaluate between a) leaving the money there and paying the fee, b) moving the money to a Rollover IRA at Vanguard and having to undo my Roth IRA conversion for 2014 and not be able to do the Backdoor Roth IRA in any future years, and c) moving the money to my new employer’s plan. My hope is that option c) would work out, but option a) might be better than option b).

B) Cash flow

The $650 July paycheck would be concerning if I didn’t have enough vacation days banked to probably get a gross payout of those at around $3,000. Those two amounts together should be enough to cover August spending as normal. I hope to take at least a couple weeks off between jobs, which means that I will probably draw down from savings a bit, but that’s okay because I have about 6 months of expenses squirreled away in a savings account ($20,000) and especially with no 401(k) contributions at the new job for the rest of 2014, I should be able to replace any savings fairly easily. I’m not really concerned about money with this change, but I want to plan out how things are going to happen. I’m also going to stop making extra payments on the mortgage for a few months as the job situation shifts, stockpiling a bit of cash instead.

C) Health insurance

If I leave after the 1st of the month, my health insurance coverage will cover me through the rest of that month (I’m going to double check on this). If my boyfriend and I lived together, he could add me to his policy during the break, but since we don’t yet officially, I would probably pay for COBRA for any otherwise uncovered time necessary. I also have about $1,400 left in my Health Savings Account from the last plan year, which I will probably transfer elsewhere after I leave. Perhaps just to my credit union, where I could get 1% on it since my balance is so low.

My insurance has been so cheap with my current company that I don’t know what to expect with another one! It is the tech industry though, so I could end up paying even less. We’ll see how that falls out!

D) Social Security tax

If I stay with my current company, I will finish paying it in October. I’ll have to adjust my withholdings on my W-4 with the new company so that I don’t end up with a huge refund in April.

E) Future compensation

I don’t expect to replicate last year’s $200,000 gross income anywhere. I do, however, expect that any reasonably sized company would match my current total compensation range of $150,000 to $170,000. With a smaller company, I’m aiming for anything at or around $120,000 with a sane expectation of work hours (40-45 per week), 3 weeks of vacation the first year, and more holidays than I currently get. Obviously this will reduce my savings rate a bit, but that’s totally okay. I should still be able to make the full 401(k) and Roth IRA contributions, cover my normal expenses and have about $30,000/year leftover after tax to save outside of retirement accounts for a total overall savings rate of around 70%, which is not too shabby.

I also plan to ask questions around: base salary, bonuses (cash/stock? vesting schedule?), employee stock purchase plan (do they have one? what does it look like?), 401(k) (matching, plan details, vesting schedule, if they allow after-tax contributions, vesting schedule), health/dental/vision insurance info, fringe benefits, and days off.

F) Overall

All in all, I am really excited about looking for a new job. It has been years since I interviewed and I’m now interviewing as an industry hire rather than a new grad hire. I’ve located several companies that I’m really excited about the prospect of working for and I’m updating my resume.

Readers, what do you consider in terms of financial concerns when you’re contemplating a new job? Have I missed anything?


27 thoughts on “Job Hunting: Financial Considerations

  1. I’ve always been surprised at the lack of transparency potential employers give to interviewees about things like 401(k), medical plans, etc. When I got my last job (with a top 50 worldwide company) it was like pulling teeth trying to get information on matching, benefits, etc.

    And if you do end up switching, I highly recommend taking as much time off as possible. Most people don’t save enough to be able to take time off inbetween jobs but I’m sure you could take a month off or so, travel/relax, etc and then go back to work. Although I’ll admit it does make it tougher to go back.

    • I actually had a fair level of detail upfront when I took this job, so maybe my industry isn’t so bad. I’ve even found some of the info I listed above around benefits on company websites. It’s quite common to cover premiums entirely and lots of other fringe benefits. I’ve also managed to find details of 401(k) plans online, just not the matching info…

      My goal is to take 1-2 months off. I want to line up a new job before quitting though. I haven’t taken more than 2 weeks off consecutively since I started this job in 2010.

  2. Whatever you do, don’t roll your 401k into your new employer’s plan. Employer plans are usually pretty limited in the investment choices they allow, and you could easily find yourself years from now with a sizable retirement nest egg that you have very little control over.

    • I don’t see myself staying at any company for more than 6 years at the most. If I was starting a new job at my current company with $100k in my 401(k), I would absolutely roll it in – we have a really sweet 401(k) plan with super cheap Vanguard index funds. I also don’t want to prevent myself from being able to use the Backdoor Roth IRA in the future by rolling my old 401(k) into a Traditional IRA.

      That said though, you should definitely evaluate what your new employer’s 401(k) plan looks like before rolling any money into it and if it’s not that great, it might be better to roll it into a Traditional IRA.

        • Lots of taxes are stopping me! My balance will be around $100k when I’m done contributing for this year, so converting to Roth would bump me up to the 33% tax bracket and paying the extra 3.8% medicare investment tax. It’d probably cost ~$30k to convert to Roth now. That’s a pretty decent chunk of change and defeats the purpose of deferring taxes!

  3. My friend whom is job hunting, is actually trying to figure out the financial side of leaving her current position… She is afraid of what to ask for, when it comes to salary and also the benefits is key for her to because of her son’s speech therapy and more. For myself, yes I am currently happy we I am as far as experience, but next year I will have to gradually get on your financial wagon (seriously). I did get a decent raise (for a teacher), so I can’t complain now!!!!

    • Congrats on your raise! It’s so hard to know what to ask for. I’m definitely super worried about that. I know what I’m worth at a large company, but not necessarily what I’m worth at a smaller company.

  4. It seems like you have covered all your bases really well with regards to financial concerns. I only have a few thoughts that indirectly relate to your financial considerations:
    (1) What will the commuting distance be at any new employer versus your current situation? This could be a major time suck and financial burden if you have to drive or take public transportation for far distances on a daily basis.
    (2) What are the professional development opportunities at your new employer? I suspect that the tech industry might be a bit more flat organizationally speaking, but I need to become a manager to make more money in my field. So, professional development opportunities are important for financial reasons at least in my situation.

    • (1) Great idea! I definitely have thought of this and am only planning on applying to companies that have a reasonable commute. All of the ones I have shortlisted are about a 20 minute bus ride (no transfers) or a 30-40 minute walk, which is comparable to what I have now (their offices are just in a different direction). I am actively avoiding even interviewing at any companies that would be a longer commute than that.
      (2) Tech is super interesting because you can actually become more senior without going into management and I love that! You can get more responsibility and influence without having direct reports. Not all companies have that though, so that’s definitely something to consider. I’ve had problems with managers in the past where a manager was pushing me into management because they didn’t understand the concept of a more senior engineer.

  5. You may want to double check this, but if I recall correctly you can make cobra retroactive up to 60 days after you no longer have coverage. Eg, you quit on the 2nd of July, company policy covers you thru end of July. Just some advice as I executed this same thing and the hr person told me to always wait a couple days because it can get jumbled and doesn’t always work out if you quit on the 1st. Also, if you plan to give notice for effective day at start of month you risk them marching you out that day. You may think it is low risk, but can happen. You then can go august and September without paying cobra premiums. If something happens sept 29th, you can get coverage by retroactively paying premiums for August and September. Nothing happens, move on with life.

    This is at least my understanding and I’ve never gone as long as 60 days nor needed insurance in the gap, so I can’t speak to how it is actually executed. Your own research is most definitely warranted.

    • It’s absolutely possible that they could just walk me out when I give my ‘notice’. I don’t plan on telling them until I’ve lined up a variety of things, including finishing contributing to my 401(k) and an accepted offer with another company. I have colleagues who have accepted offers and only told their previous employer the day before their start date at the new company, knowing that they were going to be walked out. My plan will probably be to give two weeks’ notice around the 3rd business day of the month, just in case I’m walked out. I don’t think I would personally be walked out, but you never know.

      I will investigate the COBRA 60 day policy – Harry pointed me at his post on that as well ;)

      Thanks! You always have insightful comments :)

  6. I would definitely make sure they have a 401k and that they match your 401k. Also health benefit is also something I look for. I would also look into company that provide tuition reimbursement if I wanted to further my skills and learn more. Hope your job hunting work out good for you.

    • I would definitely make sure that they have a 401(k). A match is good, but not the end of the world if it doesn’t exist. It’s still useful in the comparison though. Tuition reimbursement could be interesting, but I have no plans to pursue further education at this point.

  7. You hit most of them. I also consider hours worked and flex time offered financial concerns as they both have value, though in many jobs, hours of work is something you find out by word of mouth and not in the interview (as it looks bad to ask). In addition, compensation through base> compensation through bonus. Vacation days now (which you hit) and in the future. If you plan on having kids in the not too distant future, length of paid maternity probably matters, though again, this is also something better off finding out outside the interview.

    And while I am not in your field, so am not specifically informed on this, you probably shouldn’t set your pay expectations too low – switching jobs from like to like can generally produce a pay bump and often a significant one. Employers often use what you are currently being paid as a starting point and at times have employees doing the exact same work at very different pay. A headhunter may be able to help with this (e.g., you tell a head hunter you are currently making X and would like to make Y, they could tell you whether this is plausible and help direct you).

    • I will ask about flex time, but honestly, a tech job without flex time is pretty much not a tech job in my opinion.

      I’m hoping to increase my base pay a bit than what I have now, maybe 10% so to ~$125,000? I’d love to get over $10k/month gross – such a nice round number ;) My uncertainty around how much to ask for in total compensation is where the pay difference is between a large and a small company. Most of my compensation now is in total compensation. If I was saying looking at a company that hadn’t gone public yet, I would end up seeing some sort of equity % instead of regular bonuses? I suppose I will learn more about that in this process!

      I’m always curious about maternity leave even though I have no near future plans for kids because I honestly just don’t want to work for a company that only gives you 2 weeks paid maternity leave. That’s just…not enough and makes me wonder how they treat their employees. I would never ask about maternity leave in an interview though – then they might think I’m pregnant/planning on being soon.

  8. I thought you recently moved to a new project at your current company? Did that not work out as intended?

  9. Well in regards to your question then, if I was as financially comfortable as you seem to be, I would not evaluate a job based on “financial considerations”.

    It sounds like you could sell your condo tomorrow and profit from it just fine. You could move to all kinds of places and you could probably pay cash for a property or get a cheap mortgage, and spend your life doing whatever the heck you want…..

    Basically – if I was you I’d be more interested in job satisfaction and a healthy work-life balance than $$.

    But it sounds like you already considering that since you are pondering removing the golden handcuffs. :)

    • I’m not really going to evaluate a job based on financial considerations, but I do like to have all of my bases covered and make sure I’m not missing something like health insurance during a switch. I’m more interested in job satisfaction and healthy work-life balance than $$ – that’s why I’m more than happy to take a pay cut. I don’t really see them as golden handcuffs anyway since I only live off of 20-25% of my overall net pay ;)

      If I sold my condo today, I would have $19,200 at a 4% SWR off my overall net worth. That’s pretty good if I moved to somewhere where I spent less on housing :) Pretty cool progress!

  10. Looks like you have thought of most everything. I suggest taking more than a couple of weeks off, if you can, as finances aren’t a concern while you are in-between jobs. Once you start working again, your time off is limited to the amount of vacation you have and will always continue to be limited as long as you are employed full time.

    You do not need to worry about healthcare in between jobs. Either your insurance will cover you through end of the month or ends the day you leave. Either way you can enroll for COBRA and that will provide you with continuation in coverage until you are covered by your new employer’s plan. If COBRA is too expensive, you can always sign up for insurance using Affordable Care Act (ACA). You should be eligible for ACA as job loss is an eligibility event that allows one to sign up for ACA. COBRA may be the best option in your situation.

    Good luck with your job search. I hope your next job gives you more satisfaction than the current one.

    • Thanks Pam. My plan was to take 1-2 months off. I definitely wish it was easier to take more time off than it is is while employed full-time.

  11. I can’t say I’d recommend taking a lot of time off unless you have a guaranteed contract and/or are content with your long time off becoming longer than you would like….

  12. This is so exciting. When I switched jobs last year I maxed out my 401k mid-year at my old job. This worked out great b/c 1) my new company doesn’t match for the first 12 months and 2) my new job pays less- but is a lot better fit- and it was nice to adjust to my new lower salary without my 401k being taken out.

    The only other things that affects cash flow in a new job is that social security starts getting taken out again, even if you’re past the annual thresh hold. You get it back at tax time but it’s annoying none the less.

    Good luck! Can’t wait to hear the good news.

    • Last year, I had social security taken out all year, but I adjusted my withholdings so I had less income tax taken out to compensate and then it all evened out in April when I filed my taxes! Hopefully I’ll be able to do that again this year.

      Thanks! I’m getting pretty excited :) I haven’t looked around in a while and there are a lot more job opportunities than there were last time I looked!

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