Career Transition? Three Steps to Protect Your Financial Health
Whether you’ve been laid off or are moving on voluntarily, career transitions can be stressful, but there are ways to help tame the uncertainty.
They say change is the only constant in life, but that doesn’t make it any less challenging to navigate even under the best of circumstances. This is especially true when it comes to career transitions. Work is so often the bedrock of our financial stability — not to mention a key resource for our overall health, mental well-being and sense of identity — so even positive career transitions to pursue a passion or take a leap into something bigger can bring the stress of uncertainty.
Whatever your circumstances, there are steps you can take to harness a career transition, stay proactive and safeguard your financial health even when things feel out of control. Here are three tactics that can help you regroup and find your footing for the next phase of your professional journey.
Making a career change can be turbulent whether it was voluntary or unplanned. If you’re facing a job loss, remember that curveballs like this are sadly sometimes a part of life. Take the time to refocus your attention on your financial health and take it one step at a time.
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One way to chip away at uncertainty is to arm yourself with as much information as possible so you can form a personal plan of attack and control what you can. Ground yourself with the details of your employment contract, any severance package and how the dates of final payments will work out. Don’t forget to find out what’s happening with employer-sponsored benefits. Oftentimes, companies experiencing layoffs may extend coverage for a transition period for affected employees, giving you a buffer to access offerings such as health insurance, retirement savings accounts and company stock programs.
Having all these details in front of you can help you figure out more tangible next steps for yourself and organize a strategy to protect your overall financial trajectory. Even if your job is safe, it can be a good practice to build up the flexibility to make a pivot should the need arise.
2. Fill the gaps
Once you have a clearer picture of your workplace situation and choices, it’s time to connect the dots to your personal finances. Divide and conquer important areas of your financial health by identifying your needs and planning to cover any gaps between your prior job’s coverage and your next career step:
- Budget. Check your typical monthly expenses as well as any additional costs on the horizon, then take steps to preserve your assets and reevaluate your budget. If you’ve been laid off and meet certain work and wage requirements, you may qualify to receive unemployment benefits from the government (this will vary by state). This might be the time to fall back on your rainy-day fund, but you’ll want a solid idea of how long you can reasonably expect to rely on any emergency savings you have.
- Health insurance. Look into your coverage choices, such as paying to extend your former employer’s group plan through the Consolidated Omnibus Budget Reconciliation Act, or COBRA; purchasing a different policy through the federal Health Insurance Marketplace under the Affordable Care Act; or listing yourself as a dependent on a partner or parent’s plan if you’re under 26.
- Retirement. With your short-term financial transition at the top of the priority list, retirement may feel far away, but resist the urge to make any early withdrawals. Keep tabs on your prior workplace accounts. You generally have four options: leaving assets in your former employer’s plan; rolling over your savings to a new employer’s plan, if allowed by the employer; rolling over savings into an individual retirement account (IRA); or taking a cash distribution. If you’re not sure which route fits your needs, it can be a good idea to consult with a professional, such as a financial adviser or a tax adviser.
- Equity. And if you received equity awards from your former employer, the impact of the change in your employment status will depend on the type of plan you had and the specific details of your company’s plan. Find out how your former employer is managing the transition and any contact information you’ll need to tap into any resources they’re providing. Don’t leave any money on the table.
3. Dare to dream
You also don’t have to go it alone: There are professionals who can help you think through your decisions and plan for success, such as a personal counselor to help you manage the human side of your career transition, a financial adviser or coach to offer insights around the specifics of your finances, or an accountant or estate attorney to help you safeguard your assets and plan ahead.
Once you’re clear on what you want, it may be time to begin reconnecting with people in your network, brush up your résumé or work on learning something new. Remember that even though much of life happens outside our control, you are in the driver’s seat when it comes to the choices that lay ahead of you. And with these strategies and best practices, you can help maintain a sense of control over your financial health.
This material has been prepared for informational and educational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
When Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors (collectively, “Morgan Stanley”) provide “investment advice” regarding a retirement or welfare benefit plan account, an individual retirement account or a Coverdell education savings account (“Retirement Account”), Morgan Stanley is a “fiduciary” as those terms are defined under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and/or the Internal Revenue Code of 1986 (the “Code”), as applicable. When Morgan Stanley provides investment education, takes orders on an unsolicited basis or otherwise does not provide “investment advice”, Morgan Stanley will not be considered a “fiduciary” under ERISA and/or the Code. For more information regarding Morgan Stanley’s role with respect to a Retirement Account, please visit www.morganstanley.com/disclosures/dol. Tax laws are complex and subject to change. Morgan Stanley does not provide tax or legal advice. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a Retirement Account, and (b) regarding any potential tax, ERISA and related consequences of any investments or other transactions made with respect to a Retirement Account.
Morgan Stanley at Work, Morgan Stanley Smith Barney LLC, and its affiliates and employees do not provide legal or tax advice. You should always consult with and rely on your own legal and/or tax advisors.
Morgan Stanley at Work services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries of Morgan Stanley. CRC 5557649 4/2023
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Krystal Barker Buissereth, CFA®, is a Managing Director and the Head of Financial Wellness for Morgan Stanley at Work. In this role, she is responsible for working with corporate clients and organizations on creating, implementing and managing financial wellness programs that meet the needs of their employees.
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