Make the most of a career change

[THEME MUSIC] Are you happy? I am so happy. And that's why I love my job. Career switches can feel really daunting. That said, it's ideal to try to find something that balances both those financial aspects and the heart aspects. Fish for you. Is this like a good time to take another look under the hood? No better time like the present. Be bold. Be bold, Jessica. [THEME MUSIC] Switching careers, it can be thrilling and maybe a little daunting. Whether you're looking at a complete professional pivot or just exploring new opportunities, there is a lot to consider. Hi, I'm Ally Donnelly. Welcome to Money Unscripted from Fidelity Investments. Today, we're digging into what to weigh before making a job switch. What will your paycheck look like? How about benefits? And what are some options for that old 401(k)? But first, I want to tell you about Jessica. Her mental and physical health were suffering, and she wanted her career to be more mission driven. So at 45, she made a massive switch from corporate to nonprofit. She wrestled with what she stood to lose, what she stood to gain. Could she really afford it? And now, she's sharing lessons learned, including the one thing she'd do differently. [PENGUINS CHIRPING] Whoo-hoo. Ha-ha. Hi-hi-hi Ha-ha. It's cold. It's not every day that I get to jump into frigid water to feed hungry penguins. Now it's a penguin-feeding frenzy. Woo. He's looking at me with love in his eyes. But I'm tagging along with Jessica Tantin at the New England Aquarium in Boston. Like, this moment right here, this is just amazing. And that's why I love my job. [MUSIC PLAYING] The new job she loves is being head of diversity, equity, and inclusion at the aquarium. I don't imagine that you'd be petting a shark or having a 500-pound turtle glide by one of your meetings at your old job. So talk to me about the magic of this place. When I started at the aquarium, I would walk through the building. And then seeing those majestic animals around you, that is magic to me. Jessica had lost that magic at her old job in operations for a hospitality management firm. She wanted a career where she could focus on diversity and inclusion full time and found it at the aquarium. But she quickly learned that fulfilling work was only part of the equation. There were also the financial factors to weigh. She was leaving the safety and security of a higher paying corporate job for a more modest nonprofit paycheck. Could she make it work? I thought about what I was willing to give up to be happier. And if the trade off obviously was worth it, maybe I could run something smaller or in a different neighborhood. Maybe I can go to the nail salon less often. But also, did I have enough in my savings to say, well, I can go out there and take a chance? And what about your longer term financial goals? How did that weigh into it? I did not consider the longer term enough, in my opinion. And if I was to go back, this is something that I would do differently. I would definitely talk or reach out to a financial planner to understand the long-term consequences. I felt like I kind of winged it and hoped for the best. It has worked out for the best, but she's had to dip into the savings she had worked so hard to build, and didn't consider what that could mean for retirement. My retirement plan is to work. We've got you. [INDISTINCT SPEECH] Knowing all that you know now, what advice would you give other people, thinking about a career change where they're going to have to take a pay cut? Just make sure that you consider the financial aspect of it. I would say, however, that if you are truly unhappy where you are, the money is not everything. And to really consider doing something that will fill your cup every day because my mental health and my quality of life improved so drastically that I wish I had made the move even sooner. And it's worth everything. I mean, health is wealth. At the end of the day, health is wealth. [INDISTINCT SPEECH] Health is wealth, I love it. OK, to help us get down to brass tacks and cover all of the bases, I want to welcome in Meredith Stoddard. She's a vice president here at Fidelity, helping people get through major life events. Meredith, welcome. I'm so glad to be here. Thanks. So you heard it with Jessica. There is so much to consider when you're making a job change. But not all of it is financial. So give us a lay of the land. What are some things people should weigh as they think about a change? Yeah, job changes can feel really daunting at times. Sometimes, it's the fear of the unknown, not really sure if I'm making the right move and having that confidence. There's a few primary reasons why people might make a job change. So one is career satisfaction. Am I doing work that feels meaningful to me? Is it the right amount of challenging? Is my skill set valued? Am I doing work that I feel good about every day? There's also those quality of life issues. So your daily commute, maybe your commute is miserable, and maybe you could do better. Maybe it's around being able to make your kids' baseball games and balancing these other aspects of life. And so those can be really big deal. And of course, the financial is vitally important for most people. That said, it's ideal to try to find something that balances both those financial aspects and the heart aspects and the things that really motivate you. Yeah, which Jessica is trying to balance there. But there's the benefit of meaningful work, of course. And then there are the actual benefits a company can offer. So how could people start thinking about how to leverage benefits to balance out perhaps a different or smaller paycheck? This is a big one. It can be really easy to just look at the base pay and see what's going to come in your check each week. But the reality is that those other benefits can add up to huge, huge differences. So for example, retirement savings-- is a retirement plan offered? Does my company match? Do they do profit sharing? What's the bonus and pay structure? And how does that work? What are the other benefits, like insurance-- so disability insurance, health insurance, auto? When it comes to the health insurance, how much am I going to be paying out of pocket? How much is it subsidized? Can I use my network? And then some of the intangibles, so care coordination. Some of those other aspects of day-to-day life can really save you a lot of time and energy. If I've decided to make the leap either for a new career or I'm just switching jobs, new role at a new company, what are some of the things I should consider as I prepare to leave that job? I know you mentioned retirement. Yeah. So in the retirement category, your 401(k), for example, there's what's called a vesting schedule. So a lot of people get a little confused by vesting. But essentially if you've put, say, $3,000 into your 401(k) and your employer has matched $1,000, the vesting schedule applies to that employer match. And most employer matches vest over two to six-year period. And so if you're right on the cusp, it could be worth it to stay a little bit longer. Another workplace retirement plan consideration could be 401(k) loans. So if you have an outstanding loan, some companies do require that you pay that back pretty quickly or immediately after you leave. So if that's the case, you'll definitely want to research that. And then as always, a job change can be an opportunity to reconsider some of those goals. Like, how much am I putting into retirement versus college versus a home-buying goal or whatever else? And so it could be a great opportunity to step back and reassess your goals. So what happens to that old retirement account when I leave the job? At a really high level, there's four options. One is to leave it where it is, if that's an option. Two is to take it with you. And you can do that in two ways, either rolling it into a new employer's plan if they allow that, or into an IRA, or an individual retirement account. And then the fourth option is cashing it out. So let's walk-- no, let's swim through, dive through. See what I'm doing, the aquarium-- those four options. So let's dive in. Number one, leave it where it is. So leaving it where it is if you keep it in the same place as your employer. There is something called de minimis. If you have less than $7,000, your employer can force you to take it out with you. And some employers just don't let you keep it there anyway. But some people liked the fun lineups, and for them, it works for them. The other option is rolling it over. So sometimes, your new employer will allow you to move that retirement money into the account of your new employer. So then you can consolidate it into one place. The benefit of that is that you can sometimes benefit from institutional pricing, for example. But the drawback might be that you have a limited investment lineup. With an individual retirement account, then you pick which company it goes to, and you have generally a broad array of investment options and oftentimes help with investing that. And that can be a way to gain more control over your accounts. OK, cashing it out? Yep, so cashing it out is a big one. That one can be really tempting because you might want to get a lump sum and take that out. You do have to remember that you are-- if you're under age 59 and 1/2, you're not only subject to full income taxes on that, but also penalties that can add up to about half of your account or more in some cases. Oh, wow. So that's one you want to be really careful of. So as an example, if you have a $10,000 balance in your retirement plan and you cash that out, it could eat up about half of it. So you'd walk with $5,000. In fees? Yes, in fees and taxes. So you would walk with $5,000. If you kept that in a retirement plan, so moved it to an IRA or a workplace retirement plan, then that can grow over time. So with a 5% return, that 5% over 30 years can grow to north of $40,000. At a 7% return, it can be north of $80,000. And so that's a really huge trade off to make to get a little bit of cash up front. Now, there are times when people are in dire situations and you need to make some really difficult trade offs, in which case cash out is an option. It's just one that you should give serious thought to before doing it. The average American switches jobs about 12 times over the course of their career or their lifetime, with many of them choosing to leave the retirement account with the old employer. So that's more than $1 trillion sitting in old workplace plans. Any watch outs for folks there? Yeah, there's a couple of key areas to consider. So let's say you do-- are in line with the averages and have 12. Then that's 12 different accounts that you're trying to keep track of. So every time you move, change your address, if you get married or divorced and change your name, you're doing it in 12 different locations, which is a little complicated. Two is when it comes to managing those investments. If you have little pieces of money in different places, it's really hard to get a sense of your overall financial picture, and it makes it a lot easier to keep on track of if you consolidate those. And then lastly, in a worst case scenario, if something happens to you, your family has to figure out, where are all these accounts and how do I get access to this money at a time when I'm dealing with much bigger tragedies? That's a great point. I wouldn't have thought of that. Staying with financial considerations, what about employees who were awarded company stock? Stock options is another area where you want to consider the vesting schedule. Sometimes, another few months could make a really big financial difference. So keep that in mind. The other is around the timing in which you exercise those. So make sure that you understand how your stock options work before you make any big moves. There is one other thing that's a little more complicated with stock options. It's called net unrealized appreciation. We're not going to have time to get into it today. But if you have big gains after you've bought those stock options, you definitely want to have a conversation with your tax advisor or financial advisor to understand, is that something you should take advantage of? You've had some great call outs on timing. So as people think about when to leave or when to tender their resignation, anything else timing wise they should consider? Yeah, reimbursements is a good category to consider here. So, for example, it could be tuition reimbursement, childcare reimbursement, fitness reimbursements, flexible spending accounts-- making sure you understand how that works when and if you leave the company. So a little bit of research can go a long way in terms of saving you money there. What about vacation time? Yes, good one, so depends on how the company structures it. So if you're mid-year, for example, and you haven't taken more than 50% of your vacation time, then it's possible you'd get a payout at some companies. Other companies, it's a wash and you don't get anything. And in other cases, you could owe money back. So definitely look into your company's policy there. So rude. Right? Going back to getting on the vein of benefits for health care, when it comes to health care benefits, specifically, what should folks consider? There's a few key things. So one is if you're going to have a gap in coverage, you may want to look into COBRA or the Health Care Marketplace in order to bridge that gap. The other thing to consider is before you leave your employer, it might be a great time to get that one more set of eyeglasses-- eye exam, the dental exam. Get your kids appointments in. Because it's a little more complicated to navigate it if you have different providers, different structures, different reimbursement policies. So getting ahead of that can make a big difference. And look into your HSA and flexible spending accounts. So again, flexible spending accounts or lose it accounts-- so good opportunity to do some medication refills, maybe eyeglasses, things like that. And then health savings account, look into how you might take that with you and use it for future use. Because the FSA is not coming with you. Yes. Yeah, OK. We talk about getting your ducks in a row, but what about your financial ducks? Is this a good time to take another look under the hood? It always is. So, I mean, there are some people who are on top of this weekly or monthly and really is paying attention to an ongoing. That is not most people. And so a job change can be a really perfect opportunity to step back and assess. So what am I spending? What am I bringing in? Are there areas I can cut back? Those sneaky subscriptions can really add up over time. Can I reassess that? What are your goals? So am I having the right amount going to retirement versus emergency savings or maybe a house fund? And so what are your priorities there? Debts, am I paying down debts in a fashion that works for me? And then what's the difference from a cash-flow standpoint? So use this as an opportunity. It can be overwhelming when you have a lot of things going on with the job change, but no better time like the present because it can be really easy for weeks, months, or years to pass before you take a look at these things. And that time value of compound interest over time can really add up. So it'll be worth it. We've been focusing on the financials a lot. Of course, it's important. But I want to circle back on that head and heart balance. I mean, careers are not always a linear, straight, predictable line. Or, in fact, they rarely are. At the end of the day, sometimes you have to take those opportunities when they come and make sure fear is not your driver. For example, I enrolled in a sustainability degree program at age 47, and I won't be walking across that stage till I'm 52 complete. But sometimes, I think of it as, what am I going to regret more 5 or 10 years from now? Am I going to regret not having made the change or am I going to wish I had? Sometimes, the $5,000 extra you might have made by staying might not be worth the trade offs that you get in terms of personal fulfillment and how you live your day-to-day life. Yeah, as Jessica saw. We will be cheering you on at graduation. Meredith Stoddard, thank you so much. This has been great. Thank you. And thanks to all of you for joining us. If you're looking for more career resources, from resume writing to options for your 401(k), check out our show notes or our website, fidelity.com/moneyunscripted. We'll see you next time on Money Unscripted. It's your life, get your money's worth. [THEME MUSIC] [Sources and disclosures] US Bureau of Labor Statistics Capitalize Study May 2023 This example assumes the following: A hypothetical 24% federal marginal income tax rate, a hypothetical 7% state income tax, and a standard 10% penalty for early withdrawal. The penalty is not withheld from the distribution, but rather paid when the employee files their income taxes. The assumed rate of return used in this example is not guaranteed. Investing involves risk, including the risk of loss. Be sure to consider all your available options and the applicable fees and features of each before moving your retirement assets. Information presented herein is for discussion and illustrative purposes only and is not a recommendation or an offer or solicitation to buy or sell any securities. The views and opinions expressed by the Fidelity speaker are his or her own as of the date of the recording and do not necessarily represent the views of Fidelity Investments or its affiliates. Any such views are subject to change at any time based on market or other conditions, and Fidelity disclaims any responsibility to update such views. These views should not be relied on as investment advice and, because investment decisions are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity product. Neither Fidelity nor the Fidelity speaker can be held responsible for any direct or incidental loss incurred by applying any of the information offered. Please consult your tax or financial advisor for additional information concerning your specific situation. 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