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The period directly before retiring, or before changing work status can be both stressful and uncertain. What does someone need to do before quitting work permanently versus changing jobs?
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Let’s find out what’s needed in both situations!
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Although many things on the checklist are necessary for either situation, the checklists will be divided into Quitting Work Permanently or Changing Jobs.
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Checklist for Job Change
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- Review job options– will you be quitting your current work to start a different job with the same company, or with an entirely new company? Will you remain at the same job but take a period off (sabbatical leave)? Are you leaving your current employment to start a business? Will you be starting a new career? Each of these different scenarios will require that different steps be taken before moving forward. If staying with the same company, then there is no great concern about health insurance changes, retirement plan changes, or company benefit changes. If leaving to start work at a new company, or starting a new business, then there are concerns about health insurance, retirement plans, and company benefits.
- Review of finances– if future work prospects are uncertain, the first thing to review is the amount of emergency funding available, and how long will these funds sustain someone in an unemployed state (See: PREPARING FOR THE UNEXPECTED: THE IMPORTANCE OF AN EMERGENCY FUND.) If you are unsure of how much you are spending, then formulating a spending pattern for past expenses and creating a budget for future expenses will be necessary (See: THE MONEY CHRONICLES: REFLECTING ON A YEAR OF SPENDING.) if future income is uncertain, you may want to pay off credit card balances and large credit balances (such as auto loans.) Also, if considering moving to a new job which would require the purchase of a home in a new location, this home should be purchased before quitting your current job, as financing may be more problematic if you are presently unemployed or don’t have a long work history with your current employer.
- Health insurance– one of the most important considerations is how future healthcare will be funded and provided. If moving to a different position in the same company, will current healthcare insurance remain? If moving to a different company, will the new employer provide healthcare? If you are becoming self-employed, how will you provide and fund your healthcare?
- Employee benefits/ PTO/ Flex Spending Plans– if possible, employee benefits plans, personal time off, and flex spending plans should be reviewed. Since these benefits will be discontinued after you quit working for your present company, then reviewing and planning how to best use these benefits before leaving your current employer are important. You may want to use some of your time off and flex account funds for medical exams, dental exams, and treatment towards the purchase of new eyeglasses, or funding other medical expenses.
- Retirement plan benefits– before leaving your present employer it will be important that a plan be put in place to transfer or roll over existing retirement plan funds into a new plan, or a rollover IRA. Vesting schedules should be reviewed, stock option trigger dates identified, and other important retirement plan dates identified and reviewed to outline strategies for maximization of retirement plan vesting, stock options, and any other retirement funding. In addition, it may be possible to delay or modify the final work period to front-load or maximize 401(k) contributions and employer 401(k) matches at your current employment.
- Office amenities and product discounts– if your current place of employment offers product discounts, or provides office amenities there may be discounted products you want to purchase or amenities you want to access before leaving work.
- Contact HR or supervisor– it may be necessary to schedule an appointment with your HR contact or supervisor to determine the necessary protocol for giving notice. In some cases, this may include a formal letter of notice or resignation. There may also be a certain period that must elapse between notification and the actual cessation of work.
- Finalize current work projects– once the decision to terminate has been made, a plan should be formulated to complete or transfer current work projects. Every effort should be made to complete projects in progress before leaving your current job.
- Copy files and email addresses– chances are good that once you leave work with your current employer, you will no longer have access to work files and email addresses. Before leaving work, all important files and email addresses that can be legally copied should be transferred to a personal computer.
- Schedule an exit interview– an exit interview may be part of the resignation process. Even if it’s not required, an exit interview will provide a chance to offer positive feedback. Always remember that negative feedback is generally not beneficial to either employer or employee. During the exit interview is also an excellent time to request a written recommendation.
- Thank co-workers, bosses, and supervisors– the time between the notice of resignation, and the final work date is an excellent time to meet with coworkers, bosses, and supervisors to thank them for their help and support during your time at the company.
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Checklist for Quitting Work Permanently
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- Job change checklist– instead of rewriting, the bullet points contained within the job change checklist, it would be easier to review the above bullet points as many of the subjects listed will also pertain to quitting work to retire.
- Formulate a Retirement Plan– a formal retirement plan should be initiated many years before retirement. This will be the master plan that you will follow during your working career (See: AVOIDING A FINANCIAL HURRICANE BY CREATING AND UNDERSTANDING A FINANCIAL PLAN.) This Retirement Plan should address all three legs of the ENOUGH stool: MONEY, PURPOSE, and FREEDOM.
- Talk to spouse– this sounds like a no-brainer, but one of the first pre-retirement conversations necessary is with one’s spouse. The decision to retire is complicated and involves both worker and spouse. This is an excellent time to encourage a spouse to help with retirement planning and implementation.
- Health insurance– when moving into retirement, health insurance is one of the largest issues to be addressed. Can your employer-based insurance be retained? When you retire will your age qualify you for Medicare? If you are less than 65 years old at retirement, how will you provide insurance until you reach Medicare age? Will you be eligible for COBRA, or some type of work-related bridge healthcare insurance?
- Retirement budget– most retirees can expect to spend between 70% and 90% of pre-retirement income during the early retirement period. It is important to establish an estimated retirement budget before retirement to facilitate proper retirement funding.
- Social Security– the Social Security website (SSA.gov) normally provides estimates of your Social Security PIA (primary insurance amount), which is the amount of Social Security a person will receive at full retirement age. The website also has a retirement calculator that can be used for a more precise calculation of Social Security benefits. (It is also important to realize that when a person leaves the workforce their contributions to the Social Security system stop. If a person leaves the workforce before full retirement age their social security benefits may be adversely affected by the lack of contributions before reaching full retirement age.)
- Quitting work quickly or slowly– there is also a decision to be made in terms of quitting work quickly, or gradually moving into retirement through part-time employment (See: THE GREAT DEPARTURE: CHOOSING BETWEEN SWIFT OR GRADUAL RETIREMENT.)
- Pension/ retirement plan details– before deciding to retire, is the time to meet with an HR representative to discuss and determine retirement benefits. This is the time to discuss how retirement will affect access to these benefits, and the period after retiring that funds will be available within the company retirement plan or will be available for transfer to a personal account.
- “Purpose” planning– the period before retirement is the time to formulate a retirement “purpose.” What hobbies are you interested in? How will you fill 24 hours on each retirement day? What are your interests and passions? What are things that you would like to try, or new hobbies you’d like to explore?
- A vacation or second home– the pre-retirement period is an excellent time to purchase a vacation home or second home. Once a person retires, their work-related income disappears. Many lenders are hesitant to finance homes when someone has no work-related income. Therefore, the period before retirement is the appropriate time to make these purchases.
- Retirement paycheck planning– pre-retirement is the time to formulate how retirement will be funded. Many pre-retirees use a retirement paycheck system before full retirement as a “test drive” for retirement. Many people that I’ve spoken with will implement their retirement paycheck several years before retirement to make sure that their system will work, and that they are comfortable with that level of retirement funding (See: BUILDING YOUR RETIREMENT INCOME: EXPLORING FUNDING SOURCES and FROM PROBLEM TO SOLUTION: CRAFTING YOUR RETIREMENT PAYCHECK.)
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Final Thoughts
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- The time to create and implement a retirement plan is before retirement.
- Many pre-retirement decisions may take months or years of planning before retirement.
- Quitting work permanently is inherently different from changing jobs. These two situations should not be treated as being identical and equal.
- Each of the bullet points addressed above outlines what needs to be completed or addressed before quitting work or changing jobs. Many of these bullet points link to more comprehensive articles and more complete information.
- A greater magnitude of preparations completed before retirement should equal a smoother transition into retirement.
- The period of transition from work to retirement may produce anxiety and anticipation. Proper planning beforehand will help to minimize retirement anxiety, and pave the way for a successful and happy retirement!
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