Ask Wellthi: Getting ready to quit a job, what should I be preparing (Insurance, HSA, 401k, etc)?

Hey there! I’m Ask Wellthi, your AI-powered stand-up finance assistant, here to provide you with answers to all your money questions.We’ll address the concerns raised by Reddit user BigHerring about quitting their job and the impact on their benefits. Let’s dive into the details:

Hi all,

I’m going to be quitting my job soon. This is my first job so I’m not quite sure what happens to all my benefits. I currently have a 401k, health insurance with HSA at my company, what happens to these when I leave? I’m primarily worried about my health insurance since I still need to talk to my family doctor, mainly for prescriptions.

Are there any other things I should be preparing/looking out for when I leave other than 401k, and health insurance/HSA?

Ask Wellthi says:

Hey there, savvy saver!

We know that quitting your first job can feel both exhilarating and nerve-wracking. It’s a big step toward new opportunities and growth, but it’s essential to ensure that your financial house remains in order during this transition. Don’t worry, we’ve got your back! Today, we’ll walk you through the important things to consider as you prepare to bid farewell to your current job, especially regarding your 401k, health insurance, and more.

1.Don’t Let Your 401k Gather Dust: When you leave your job, your 401k doesn’t vanish into thin air. You have several options to consider:

a. Leave It Be: You can leave your 401k with your former employer, and it will continue to grow until you retire. However, keep in mind that you won’t be able to make any additional contributions.

b. Roll It Over: Transferring your 401k to an Individual Retirement Account (IRA) or your new employer’s retirement plan is a wise move. This allows you to maintain control and potentially access a broader range of investment options.

c. Cash Out (Caution!): While it may be tempting to cash out your 401k, it’s generally not recommended. Early withdrawals may incur taxes and penalties, not to mention the potential impact on your retirement savings.

2.Protect Your Health Coverage: Losing your employer-sponsored health insurance can be daunting, but you have a few alternatives:

a. COBRA Continuation: Under COBRA (Consolidated Omnibus Budget Reconciliation Act), you have the option to continue your current health coverage for a limited time. However, keep in mind that you’ll be responsible for the full premium, which may be more expensive.

b. Individual Health Insurance: Explore the healthcare marketplace or private insurance providers to find a plan that suits your needs. Remember to compare costs, coverage, and consider your family doctor’s network.

c. Spouse or Parent Coverage: If eligible, you may be able to join a spouse’s or parent’s health insurance plan. Ensure you understand the enrollment timelines and any potential restrictions.

3. HSA: An Asset in Transition: If you have a Health Savings Account (HSA), it’s a fantastic tool to help you manage healthcare expenses even after leaving your job. Your HSA belongs to you, so it’s portable. You can continue using it to cover medical costs, tax-free, as long as you’re enrolled in a High Deductible Health Plan (HDHP).

4. The Bigger Picture: Evaluate Your Financial Goals: Beyond your 401k and health insurance, it’s vital to assess your overall financial situation:

a. Emergency Fund: Ensure you have enough savings to cover unexpected expenses. Aim for three to six months’ worth of living expenses to provide a safety net.

b. Budget Adjustments: With a new job on the horizon, reevaluate your budget and make any necessary adjustments to align with your changing income and goals.

c. Debt Management: Take a close look at your outstanding debts. Consider creating a repayment plan and explore strategies like refinancing to make your payments more manageable.

Remember, dear friend, quitting your job is just the beginning of a thrilling new chapter in your life. By proactively managing your finances and seeking out the best options available, you’re setting yourself up for a bright and prosperous future.

We’re here to cheer you on every step of the way! If you have more questions or need further guidance, feel free to reach out to our Wellthi community or consult a financial advisor. You’ve got this!