A New Job

In today’s marketplace, people change jobs and careers more frequently than they used to. Changing jobs can help you to advance a career, explore a new field or acquire new job skills.

On the other hand, corporate downsizing and office relocations can lead to sudden unemployment. Upper-level executives may sometimes find their options within an organization have become limited, and move on to a new company.

No matter which scenario you face, you would want your finances to make the transition smoothly.

If This Is Your First Job

A first job is a step into an exciting world of possibilities. Saving for retirement may be the last thing on your mind – but it should be at the forefront.

Begin by becoming familiar the company’s benefits, including health insurance, life insurance and retirement plans, profit sharing, vesting and stock options. Think of retirement contributions as paying yourself first; there may be a Human Resources administrator who can guide you, or you may need to do some research on your own to determine which plan will work best for you.

Take Full Advantage Of Employer Benefits

A popular type of employee-sponsored retirement savings plan is a traditional 401(k), which allows for pretax contributions so you have the opportunity to save for retirement while reducing your current taxable income. You pay no income tax on a traditional 401(k) until money is withdrawn, generally at retirement when you may be in a lower tax bracket.

401(k) withdrawals are subject to normal income tax treatment and if taken prior to age 59^1/2, may be subject to additional penalties.

You may also qualify to a make a Roth contribution to a 401(k) plan. The Roth contribution is taxed now, but remains federal income-tax-free when you withdraw after retirement.

Some employers match all or part of your 401(k) contributions. Over an established period of time you become "vested" – meaning you assume ownership of what they have contributed. The vesting period will vary depending on your employer’s plan, but you always own what you yourself contributed, and any earnings it may bear.

Along with a 401(k), you may contribute up to $4,000 annually to a traditional or Roth IRA. They both give you investment choices but are significantly different. Contributions to a Roth IRA depend on your modified adjusted gross income (MAGI) and income tax filing status during the given year. The allowable contribution may be less than the maximum possible, or even nothing. Contributions to a Roth IRA are not tax deductible, but post-retirement withdrawals are income tax free.

Stock options are another benefit many companies now offer to employees. You may have the right to purchase a specific number of the company’s shares as options, at a fixed price, within a certain period of time. Employees can profit later by selling their options at a higher price than when they were granted.

Job Offers

• The basis on which you will you be evaluated and promoted, with accompanying pay increases
• Bonuses or other incentives
• Profit-sharing plans
• A good employee benefits package

Changing Jobs And Health Insurance

In the past, changing jobs – whether by choice or not – often meant losing participation in your employee-sponsored health plan. Now, the COBRA and HIPAA acts ensure that you can retain your old coverage until your new coverage begins.

• COBRA: The Consolidated Omnibus Budget Reconciliation Act of 1986 protects employees and their dependents from losing health insurance coverage as a result of job changes, termination, reduced hours, or divorce. If you and your dependents are covered by an employer’s sponsored health insurance plan, COBRA entitles you to continue coverage – usually for up to 18 additional months, or 36 months if you qualify. Any employer with 20 or more employees is required to offer COBRA coverage.
• HIPAA: The Health Insurance Portability and Accountability Act of 1996 expanded certain COBRA provisions to benefit companies with 2 to 50 employees, the self-employed, and mothers and newborn infants. HIPAA allows workers to move from one employer to another without losing group health insurance.

Changing Jobs And Retirement Funds

When moving to a new job, you will face decisions about your 401(k) and other investments that reside with your former company. These investments can add up to a significant sum, so think carefully about your next steps. You can:

• Take a Lump Sum Payment of your 401(k). This may give you instant cash, but you will pay a penalty – 20% mandatory withholding, income tax on part or all of the distribution, and a 10% income tax penalty (if you are under age 59) from the total of the 401K at payout.
• Leave your funds in your former company’s retirement plan, whose advantages are familiar, but which can also limit your options.
• Roll over your funds to your new company’s retirement plan or into your own individual IRA.

Take your time to make these decisions – your fund can reside with your former company until you familiarize yourself with your new employer’s plans and options. A seasoned financial professional can analyze the advantages and drawbacks of each plan, and help determine which one makes sense for you.

Unemployment Benefits

You are eligible for unemployment benefits if you:

• Are unemployed or working less than full time
• Meet certain income requirements
• Are willing and able to work
• Didn’t leave your job voluntarily

You are not eligible if you:

• Quit because the job lost its appeal
• Were fired for committing a crime
• Have never had a job

How much can you expect to receive? Each state has its own formula for determining a percentage of your average weekly wage. In most states, benefits cover up to 26 weeks. During periods of high unemployment benefits are sometimes extended for longer periods. All unemployment benefits are taxable.

Disability Income Insurance

If you become disabled during your working life, who will support you or your family? In a two-income household, can one income allow you to live an acceptable lifestyle in your current home? Will you be able to provide for your children’s education as you planned?

Disability income insurance might make the difference between a life that’s challenged yet financially stable, and one in which the family finances are dramatically impacted.

Your employer may offer either or both short- and long-term disability insurance. If not, you should think carefully about purchasing a policy yourself.

Life Insurance

Life insurance can be an important component of a well-considered financial strategy. While you might be tempted to rely on your company’s plan, it’s wise to buy an individual policy to help ensure you have enough coverage and that your protection is not dependent upon an employer you may not be working for in the future. Also, remember that non-working spouses also should have life insurance to cover such expenses as childcare, housekeeping or nursing care.

There are many types of life insurance. Some policies have a cash value, which can be borrowed against. Others allow personal control over various investment options. Life insurance can be more than protection in the event of death – it’s a versatile financial tool that can help you secure the future for yourself and your family.

One guide to calculating your life insurance needs is "income replacement" – approximately 5 to 10 times your annual salary. However, individual needs and preferences vary. A financial professional can help you assess your needs and help you choose an insurance policy that suits you.

Early Retirement

An offer of early retirement places you at a crossroads – once you’ve made a decision, there is usually no turning back. Caution is critical at this juncture, and a financial professional can help you evaluate whether you can afford to accept the offer – and, if a seemingly attractive offer is as good as it appears.

Start by identifying sources of retirement income and the yearly amount you can expect from each. Then estimate your annual retirement expenses, adjusting for taxes and inflation. Some specific considerations include:

• Severance Package – is it enough?
• Payout options – a lump sum that you can spend or invest? Or deferred payments over several years to spread out your income tax bill?
• Pension – how much will your pension be reduced by retiring before age 65?
• Healthcare Benefits – does the offer include medical coverage? Is it adequate or affordable? Is it for life, or at least until you are eligible for Medicare?

Refusing early retirement can be risky – it may pay off, but there’s a distinct possibility you could lose. In the winning scenario, you might continue to rise within the company – even modest raises in salary would increase your pension. Or your company might extend another offer that is more lucrative than the first. However, in the opposite (and likely) scenario, you are bypassed as the company moves forward, and are downsized, demoted, or your position is eliminated.

The wisest course of action is to seek professional advice – and to make your decision in a timely fashion, as many offers expire within in a set amount of time.

Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent advisor. AXA Equitable Life Insurance Company (NY, NY) does not issue health insurance and disability income insurance policies. Securities are offered through AXA Advisors, LLC.  AXA Advisors, LLC (member SIPC) and AXA Equitable are affiliated companies and do not provide legal or tax advice.