If you’ve been keeping up with employment trends this year, you’ve probably heard about the “Great Resignation.” That’s the snappy name given to the millions of Americans who have decided to leave their jobs after reassessing their careers and life goals in the wake of COVID-19. About 4 million Americans quit their jobs in July alone, and then a record 4.3 million quit their jobs in August.
A Harvard Business Review analysis found that the greatest increase in resignation rates was among mid-career employees 30- to 45-years-old. Numerous reasons were cited, including the shift to remote work caused by COVID-19. With employers concerned that inexperienced workers might not perform well working remotely, mid-career workers found themselves in high demand – and many quit their jobs in search of greener pastures elsewhere.
If you’re considering joining the Great Resignation — whether to retire for good, take some time off or search for work elsewhere — it’s important that you look at your financial situation and plan accordingly.
Assess Your Cash Flow
Before you consider joining the Great Resignation, take stock of any income you have from sources outside of your current job. This could be anything from a side hustle to real estate investments or stock dividends. If you’re involved in a live-in relationship, you can count your partner’s income as well.
Figuring out how much money you’ll have coming in after you leave your regular paycheck behind can help you plan financially. For example, if you rake in enough money from investments to cover your monthly bills, then you can focus on how you’ll pay for health insurance or fund a retirement plan. But if you have no outside income, then you need to make sure you have enough cash saved up to pay your bills for the next few months before quitting your job.
Build Up an Adequate Emergency Fund
This is something everyone should be working on, anyway. An emergency fund is money you’ve set aside to pay unexpected expenses not in your everyday budget (such as a medical bill or car repair), or to help you stay afloat in the event of a sudden loss of income. Most financial experts say an emergency fund should cover three to six months’ worth of living expenses.
But leaving a job without having another one lined up might require more money. Certified Financial Planner Diahann Lassus, a managing principal at Peapack Private Wealth Management, told CNBC in August that it’s best to have six to 12 months of living expenses set aside.
Rethink Your Budget
Joining the Great Resignation means learning to live more frugally — especially if you’re retiring early, or want to take an extended period of time off from work. The key is to keep your fixed expenses as low as possible until you decide to either go back to work or are old enough to tap into your retirement savings or collect Social Security.
Make a list of all of your monthly expenses and find items that can be greatly reduced or eliminated altogether. For example, you can probably live without streaming subscriptions or gym memberships. Instead, just watch regular TV and take up jogging. And while it’s important to have a social life, you can trade those $150 date nights for cheaper visits to the corner pub.
Account for Healthcare Costs
Unless you are covered on someone else’s health plan, you’ll be leaving behind healthcare coverage when you quit your job. This is one of the biggest financial considerations you need to plan for — especially in the middle of a global pandemic.
In most circumstances, you’ll be offered COBRA continuation coverage by your former employer, according to the Healthcare.gov website. Under COBRA, your current health plan is extended for up to 18 months, but you’ll have to pay for it, which gets expensive.
If you can go on your partner’s plan, that’s the best option. Another option is to buy coverage through one of the government’s public exchanges.
Ensure Your Retirement Savings Are On Track
If you have a 401(k), pension or another retirement plan with your current employer, you’ll need to consider what to do with it before quitting your job. One option is to move it into an Individual Retirement Account, especially if you don’t have another job lined up that offers a retirement plan you could roll yours into. You might also be able to just leave it where it is. In this case, make a note of getting the administrator’s contact info before quitting your job.
Take a good look at how much you’ve saved for retirement and determine if it’s enough to cover your expenses when you do leave the workforce for good. One thing you don’t want to do is run out of money after you’ve retired.
Good To Know
The amount of money you should have saved up for retirement depends on a number of factors, including your location, lifestyle, debt load and family obligations. Before joining the Great Resignation, take time to use a retirement calculator like the one available on the AARP website. This will help determine if you’re on track for a comfortable retirement.
Make Sure Your Debt Is Not Out of Control
Quitting your job with a pile of debt to pay off is not a wise move, so you’ll need to make sure your debt is manageable before turning in your notice. If you are buried under a lot of credit card or other high-interest debt, you should strongly reconsider leaving your current job unless you have another one of equal pay lined up.
The last thing you want to do is dip into your retirement or emergency savings to pay down debt. Put a priority on getting your debt under control before joining the Great Resignation.