Armchair Millionaire Community Bulletin: Making a Smooth Transition to a New Job

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Job changing can be very stressful. Minimize the stress--and maximize your financial success--by being prepared before you leave your old job, and then making the most of your new one.

The Bureau of Labor Statistics tells us that the average American changes careers three times in a lifetime, and changes jobs about every 3 1/2 years. It has gotten to the point that successfully transitioning between jobs has become a job skill in itself, and one that most of us will need more often than we think.

We asked members of the Armchair Millionaire community for their advice on how to prepare for a job change effectively. Here is one of the comments we heard:

“Have a nest egg of at least one year's expenses in the bank. Assess your monthly expenses, identifying what is ‘necessary’ vs. ‘desirable’ vs. ‘can do without.’ Give yourself some leeway; too strict a budget is a recipe for failure. Put off any unnecessary large expenditures (e.g. repair current car, don't buy new one, etc). Clean up old debt, if any, if possible. Then just do it.” --A.N.

The days when Americans looked to their employers to take care of themselves and their families are quickly fading into the past. Traditional pensions are going the way of the dinosaur, replaced by the do-it-yourself 401(k)--when it they are replaced at all. Fewer employers are offering health insurance, and more are requiring their employees to pay ever-larger portions of the premiums.

This all means that it’s more important than ever to rely on yourself when it comes to managing the financial aspects of your employment. My checklist provides the key steps you should take to make the most of your new job. Manage your 401(k). You generally have three good choices for dealing with your old 401(k) plan:

1. Roll it over into a traditional IRA. This means simply moving your money from your 401(k) to an IRA. Any mutual fund company or brokerage will be able to supply you with information for setting up a rollover IRA and making the transfer.

2. Keep it with your old employer. As long as you have at least $5,000 in your account, you can leave it in your former employer's plan. You might opt to do this if you especially like the investment choices it offers or if you just need more time to decide what to do.

3. Roll it over to your new employer's 401(k) plan. Most plans allow you to do this. Your human resources department will be able to give you information on eligibility and the forms you need to arrange the rollover.

There is a fourth route which you should not take: cashing out your 401(k) altogether. Not only will you pay a 10 percent penalty, you’ll lose the benefit of deferring taxes on the growth of that money.

Take care of your health insurance. If your old employer provides you with health insurance, talk to your human resources department about continuing coverage under COBRA. You new employer may have a waiting period of anywhere from three to 12 months before you’ll be eligible for its coverage, and you’ll need COBRA to fill the gap. If you new employer does not offer coverage, talk to an insurance agent, or find out if you can get coverage through your spouse’s employer.

Scope out your new benefit package. Health insurance is the benefit most people look to first, but don’t fail to take advantage of any other benefits that your new employer may offer. For example, disability and group life insurance are often offered for free or at a low cost. A Section 125 cafeteria plan, which allows you to set aside money from your paycheck pre-tax to pay for items such as insurance deductibles and child care, can save you hundreds of dollars a year in taxes.

Job changing can be very stressful. Minimize the stress--and maximize your financial success--by being prepared before you leave your old job, and then making the most of your new one.

Lewis Schiff founded the Armchair Millionaire Web site in 1997. His first book, The Armchair Millionaire, was published in 2001. Schiff's newest report, "How to Know When You Are Rich," is now available at

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Lewis Schiff

Armchair Millionaire


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Lewis Schiff