Leaving your job

Preparation is the key to moving on

So you got that job you wanted. Now you have to figure out how to tactfully leave the job you had. It shouldn't be awkward, so make sure you properly resign without burning bridges or alienating everyone in the company. You will also want to make sure that you tie up all the loose ends, such as dealing with your 401(k) and making sure that you have appropriate health care coverage.

Once you're ready to resign, do so gracefully. "Executive Etiquette in the New Workplace," by Marjabelle Young Stewart and Marian Faux, recommends speaking to your supervisor in person if at all possible. Give them ample notice of your final day of employment. Two to three weeks' notice is standard; it is important to give appropriate notice to stay in good standing with the company. Accompany that conversation with a letter that states your last day of employment.

Be prepared for a counter-offer from your present employer. Companies generally don't like to see talented people leave, so they make an offer to keep them on board. Many experts advise you should be wary of accepting a counter-offer, equating signing one to career suicide.

The Federal Citizen Information Center, www.pueblo.gsa.gov, offers the booklet "Life Advice About Changing Your Job," which outlines how to deal with your 401(k) at your former job and how to make sure you have continuous health insurance.

Make sure you have all the information about your new position's benefits. Once you have that information, you can decide how to tackle the transition between jobs.

You have several options of what to do with your 401(k) when you leave your job. You can take a lump sum payout, which will be taxable and will incur penalties if you are under the age of 59. You can roll it over into an IRA (Individual Retirement Account) or into another qualified retirement account. In some cases, you may be able to leave it in the original account with your former employer. Here is a brief overview of your options and the tax implications of each choice from "401k ABCs," from mpowercafe.com.

Leave the money: If your vested account balance is $5,000 or more and you are under the plan's normal retirement age, which is commonly 65, you can leave your money where it is - and taxes won't be due until you withdraw money from the account. However, if your balance is less than $5,000 and more than $1,000, your employer may decide to automatically roll it into an IRA account on your behalf. If this occurs, there are no tax consequences because the money is moving from one tax-deferred account to another.

Roll the money into a new plan or IRA: You can roll over your 401(k) into a rollover IRA account or into your new employer's 401(k) plan. If you do a direct rollover - have the money transferred directly into the new account - you won't owe taxes until you withdraw money from the account.

Cash out: If you elect to take your money out of the 401(k) and not roll it over into a rollover IRA or another employer-sponsored retirement plan, you will owe all applicable taxes. You will also owe a 10 percent early withdrawal penalty unless you are 59 1/2 or older when you leave your company.

If you are quitting to take a new job, find out when you can expect your new health benefits, if any, to start. You may want to take advantage of the federal law COBRA (Consolidated Omnibus Budget Reconciliation Act.) This act requires your former employer to extend your health and dental insurance for up to 18 months. That does not mean it is free. You may have to pay the full premiums, not just what you paid as an employee but also what your employer paid on your behalf. In most cases, according to "Life Advice About Changing Your Job," you have 60 days from the last day of work at your old job to elect COBRA and an additional 45 days before you must pay a health insurance premium.

Sources: "Life Advice About Changing Your Job," from the Federal Citizen Information Center; "401k ABCs," from mpowercafe.com; "Executive Etiquette in the New Workplace," by Marjabelle Young Stewart and Marian Faux.


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