Job Change Guide

Tips on Building Long-Term Wealth During a Tech Job Change

As a professional in the tech sector, would you ever recommend that someone invest in a company that lacked a CFO? We sure hope you wouldn’t. But as a tech professional in the midst of a job change, you might be doing something very similar to yourself.

Think of your broader career in tech–and your recent job change–as a company that needs to be financially managed in order to thrive. If you don’t have a financial plan, you’re just like a company operating without a CFO.

When you start at your new firm, will you know:

How much to contribute to your 401K–or how to take advantage of a Roth 401K, if one is available?
What investments your retirement plan offers, and which options are right for you? What to do with retirement accounts from former employers?
Whether you should utilize any stock program your company might have, and how to do it in a way that's right for you?

Your job change presents you with the chance to make key decisions to build lifelong wealth. This digital guide can help you make the most of the exciting financial opportunities in front of you.

Laying the Groundwork

Once you’ve started working at your new company, you’ll need to check off a few tasks for a smooth and successful transition. Don’t forget to:

Adjust your budget to reflect changes in your cash flow.
Consider a life insurance policy review.
Pay down student loans or other debt aggressively if you can.
Double-check your paycheck tax withholdings.
Set up automatic savings deposits.

Once you've dealt with all of this, it’s time to take a closer look at your financial opportunities, perks, and benefits.

Changing Jobs in Tech: Unique Wealth-Building Opportunities

Many tech employers offer their top employees a range of compelling financial opportunities.

A financial planner can help you build long-term wealth by evaluating the value of any financial perks and benefits you have access to.

Some popular examples include:

Equity compensation: Many employers offer equity compensation plans that let employees establish a direct ownership stake in the company. Equity compensation involves non-cash incentives like performance shares or employee stock options. A financial planner can help you understand the various forms of equity compensation and the options that are available to you now and in the future.

Employee stock purchase plan (ESPP): ESPPs allow you to buy company stock at below-market prices through payroll deductions. This means your stock purchases will be withheld from your paycheck as they are with other benefits. ESPPs are distinct from employee stock options, which are a limited-time chance to buy company stock on public exchanges at lower rates. This can be an attractive savings vehicle but there are several matters to consider when investing in ESPPs.

Signing bonus and annual incentives: Many tech companies offer their sales professionals a generous signing bonus plus annual incentives. A financial planner can help you make the most of any extra capital you’ll have as well as advise you on how to address taxes with your CPA in that tax year.

Restricted stock options: Restricted stock refers to internal shares of a company that are under special trading constraints. With restricted stock options, it is important to understand how and when these shares can be redeemed.

Company-sponsored retirement account: Most tech companies offer a sponsored retirement account like a 401K and many firms offer a company match. Some companies also offer access to a Roth 401K. A Roth 401K is attractive because your account grows tax-free, and withdrawals are tax-free when you reach the qualified retirement age. Understanding how much to contribute to company-sponsored retirement accounts can have a major impact on long-term wealth.

Apart from these considerations, a financial planner can also help you pursue your vision for retirement, and make sure your family is optimally provided for.

Setting Yourself Up to Retire

As you plan for your job change, saving and investing for your retirement should be top-of-mind.

If you had a 401(k) with your previous employer, you’ll need to decide whether to:

Keep your 401(k) where it is: If you meet certain balance requirements, you may be able to keep your 401(k) with your old employer. There are other stipulations to consider, and this option might not be available to everyone.

Transfer your funds: Moving your funds to an account at your new job is another potential option. If you have the chance to do this, look very closely at your previous employers’ retirement perks compared to those at your new job. What are their respective fees, matching policies, and range of available investments?

Transfer to an IRA: Individual retirement accounts (IRAs) are a fantastic way to save for retirement. You might want to opt for one if your new employer doesn’t offer a 401(k). Even if they do, an IRA might be the superior choice because of its investment flexibility and typically reduced fee structure compared to company-sponsored plans.

Take the cash: While it can be tempting to have cash in hand, remember that early retirement disbursals usually carry stiff fees, taxes, and penalties. You’re also robbing your funds of the chance to compound over time.

If you’re married or if you have children, you’ll have an additional set of issues to grapple with. Do you know how to:

Address taxes in a year of job transition?
Protect your family’s future with life insurance?
Effectively save for college?
Gauge your liquidity to avoid harmful financial choices?

Changing jobs in tech is exciting and full of opportunities. But you need to know how to navigate the financial landscape to help take advantage of those opportunities–and, ideally, a partner who can help you along the way.

Take Charge Like a CFO: Make a Plan

Hiring a financial planner represents an important step in someone’s financial life. It’s an investment in creating your desired future–safeguarding and planning for those things you’ve worked so hard to attain.

At Tailored Cents, we help our clients take charge of their financial lives with a three-step process:

Create a custom financial plan: We’ll work with you to figure out your unique situation and goals–where are you in your financial life, and where would you like to go? We use a financial planning software to help you make the best financial decisions now and in the future. All your financial information is securely stored in one place, and always up to date.
Execute key recommendations: Recommendations are made using a combination of our team’s years of expertise along with key models and projections from our software. You’ll be able to plan your financial future just like a CFO, with in-depth reporting and forecasting on your asset allocation, tax and social security strategies, budgeting, and much more.
Monitor progress and revise: You can monitor every financial step you take in real time with our financial planning software. We’ll continue working with you closely to ensure that you’re on track with your financial plan. We’ll also help you factor in any new goals you might have, or handle any unexpected financial events that might occur. All of our meetings are virtual and scheduled on demand to fit your calendar.

Building long-term wealth is all about creating a customized plan that’s right for you, and then sticking to it while also being flexible when necessary.

Make a Tailored Strategy for Your Job Change, and Beyond

Your job change represents not just a new chapter in your career, but also a new chapter in your finances. A financial planner can help you take charge of your money, invest with clarity and confidence, and build the life you’ve envisioned for yourself.

If you’re ready to take charge of your financial life and create a tailored plan, schedule a free no obligation introductory call today.

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This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice.