The fire service is changing. For many Fire Departments, the days of the 30-year employee are long gone. Many departments have evolved their retirement benefits away from pensions towards portable retirement accounts, such as a 401(a) or 457(b).
As a result, going from one department to another or leaving for another job is no longer uncommon. More pay, better benefits, and no mandatory OT…but we have nice shiny ambulances! Why would you leave? (crickets chirping)
Whether you are hanging up the helmet for good or trading it in for a new shield, you need to proactively address these 5 financial concerns.
Unused Leave Balances
If you are leaving with unused vacation time or PTO, your employer may be required to compensate you for your remaining time. Contact your HR department to clarify and calculate how much you will be owed. At my department, you get paid for your vacation leave, but not accrued sick leave.
Burning unused sick leave can be controversial (if you aren't actually ill). Still, I wouldn't feel bad for taking a couple of mental health days—especially if you never call out. If you know you are leaving well in advance, consider scheduling any necessary medical procedures and utilizing scheduled sick leave or FMLA sick leave.
Use It or Lose It Accounts
If you participate in a Flexible Spending Account, you need to spend this amount down before you leave. This account does not transfer and will be forfeited upon your exit. Any money left over will be returned to your employer.
Health, Life, and Disability Insurance
Your new employer or department may have a waiting period before you are eligible for benefits. If so, you'll need to inquire about COBRA (Consolidated Omnibus Reconciliation Act). You'll have 60 days to enroll, and COBRA coverage will last for 18 months (maybe more). Your cost will be significantly higher than what you were used to. Be sure to factor this into your household budget.
There are some alternatives to COBRA coverage to consider. If your spouse has an employer-provided plan, you can join that plan. Even if they are not currently covered, your job change is a qualifying life event. Or, you could choose a plan through the healthcare.gov marketplace.
Life and Disability Insurance
Find out if your new employer will be offering these benefits. If not, you need to make arrangements to purchase policies. If they do offer them, does it make sense to buy a private policy anyways? Employer-provided insurance policies are attractive because they can be cheap, but often they do not provide enough coverage. They also, typically, go away when you leave the job.
Discussing life insurance can feel morbid, but it's not about you. It is about taking care of your family in the event something terrible were to happen. I suggest shopping the market and finding a non-employer provided life insurance policy to supplement whatever they do provide (if not adequate).
I recommend a level term policy approximately 10x your salary (rule of thumb). I pay $32.00 a month for a 20-year level term half-million dollar policy in addition to the 3x my salary that my department provides.
Make a Plan for Your Investments
If you contribute to a 401(k), 401(a), 457(b), etc., you need to check on a few things.
First, check your vesting schedule. If you've only been with your department for a few years, all of the money may not be yours. Your contributions are always yours. Depending upon the vesting schedule, your employer's contributions might return to them. If your vesting period is right around the corner, consider pushing back your departure.
Second, you need to figure out what you are going to do with your current accounts. You have a few options:
Roll the amounts over to an IRA: This would involve opening a new account through companies like TD or Schwab. You accomplish this via a direct rollover. You will have a vast array of investments, which for many, can be overwhelming. If you would like to talk to me about it, schedule a free planning call here.
Roll the amounts over to your new employer's retirement plan: If your new plan allows, you can roll your money over into that plan and utilize the investments they offer.
Keep your investments where they are: This is typically not advisable unless you will be losing the advantages of an account such as the 457(b).
For most, it makes sense to roll your money over into your new retirement plan. This will simplify your financial life. If you are currently investing in a 457(b) and your new employer does not provide this account, you should probably keep the money in the 457(b). The 457(b) is one of the most advantageous accounts there is, and if you roll your dough over into a 401(k) or IRA, you lose those benefits.
Bridge The Gap
If you are taking time between jobs, be sure to save some extra greenbacks so that you don't feel the need to use credit cards to make ends meet. Create a monthly household budget so that you are aware of how much you spend. If you don't have the awareness, then you can't adequately plan. Once you understand your household expenses, save the amount necessary to bridge the gap between jobs.
Good luck and bon voyage…and don't let the door hit ya in the ass on the way out. But, for real though, best of luck to you!
Changing jobs can be exciting but can also cause a lot of stress. Plan accordingly and begin thinking about these things months in advance. If you know your current job isn't cutting the mustard, go ahead and look into your vesting schedule and your employer-provided insurance policies. Go ahead and gain that knowledge. Then, when the time comes, you won't be scrambling to figure it all out.
For whatever reason, the fire service views anyone who leaves before retirement age as a quitter. I think that stigma needs to be broken. So what you didn't want to spend 30 years doing the job. You did it for a few, you served your community, and now you are moving on. Maybe you are going to a new department, or perhaps you aren't. Either way, thank you for your service!
And, if you'd like a fiduciary financial partner, guide, and educator to help you navigate your career change; I am here to serve.
Your Friendly Firefightin' Financial Planner
Forward Focus Financial Planning wants to help you communicate and clarify your financial goals so that you can create a plan and take action. Take the first step and schedule a free planning call today. You only get one chance at living a great life. Define your goals, create a plan, take action, and be confident.
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