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The idea of an employee working for one company for an entire career is an outdated notion. According to the Bureau of Labor Statistics, the average American will “change jobs 10 to 15 times (with an average of 12 job changes) during his or her career.” In fact, statistics show “many workers spend five years or fewer in every job.” 

Now more than ever, we need to assess our fiscal readiness as we transition from one job to another. Here are three tips to take into account as you consider making job or career transitions.

Be prepared for the unexpected.

If you are downsized without severance or leave a job voluntarily before securing another position, you should have a savings account balance to cover six to eight months of expenses. Of course, the larger the cushion, the longer you can maintain your current lifestyle as you search for another position. When you switch employers, there may be a lag between the last check at the old job and the first check at the new job. With extra savings, you won’t have to worry about your inability to pay monthly expenses.

However, if you are unemployed due to layoff, you may be eligible for unemployment compensation. In the state of Indiana, you must have earned $4,200 in the first four of the last five calendar quarters before you file for unemployment. Of the $4,200 total wages, $2,500 must be earned in the last six months of this same time period. In addition to having a qualified reason for separation and meeting the income requirement, you must also be able, available and actively seeking full-time employment to continue to receive or avoid a reduction in unemployment benefits.

Pay attention to your medical benefits.

If you change jobs, what happens to your medical benefits? You should plan medical and dental visits before transitioning from your current employer. In addition, the Consolidated Omnibus Budget Reconciliation Act (COBRA) provides an opportunity for continued medical coverage during the transition period if you were already enrolled in your employer’s medical plan. COBRA requires that your previous employer offer the option of continuing coverage under your current health plan. The coverage is an option for most employees who have been terminated for any reason, except gross misconduct. The employee can extend coverage under COBRA for up to 36 months depending on the event that led to employment termination. The employee usually has 60 days after termination to elect to continue medical coverage. 

The downside of continuing medical coverage with COBRA is that the premiums will be higher than those paid as an employee, because you are now responsible for both the employee and employer portion of the premium. You may also consider a plan through the Health Insurance Marketplace. Refer to healthcare.gov for the latest information.   

Review your 401(k) options.

What about contributions made to your 401(k) plan? Once you separate from your previous employer, you could decide to leave your money where it is. Although your money stays in the old plan, you are no longer allowed to make additional contributions. The second option is to rollover the balance into your new employer’s retirement plan. When deciding between these options, consider the fees charged by both plans, as well as the different investment vehicles offered by both plans. 

A third option is to rollover the contributions to an Individual Retirement Account (IRA). Similar to a 401(k), the contributions to an IRA are tax deferred, meaning the contribution is nontaxable but taxable upon withdrawal. The final option is the costliest, and that is withdrawing the balance upon separation from your employer. This option requires your former employer to withhold a mandatory 20 percent federal income tax and a 10 percent withdrawal penalty if you are younger than 59-and-a-half years old.

If you’re considering a transition to a new job, be mindful of these three tips. As you start to make a checklist of what you want from an employer, make sure you’re ready to make the financial transition as well.

Angela Andrews is a clinical assistant professor of accounting at the Indiana University Kelley School of Business on the IUPUI campus.