We all dream of a point in our lives where our time is our own. For most of us, that entails, in part, leaving our current employer behind. At a time where 1 in 3 workers in the US are considering leaving their current job, it is vital to understand the totality of what you would need to replace. Whether your current goal is a comfortable retirement, or you are simply looking to move on to a new position, the considerations below will help you understand the value you are walking away from, ensuring that you leave nothing behind.
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Sick Leave, Vacation Days, and Holidays
Time, for most individuals, is the most valuable asset you have. Employers return time to us through observed holidays, vacation days, sick leave, and personal time, often aggregated as paid time off.
One can spend this time pursuing other passions, learning new skills with family or friends, or simply as a personal break from the daily grind. On average, employers will recognize eight paid holidays freeing up sixty-four work hours a year.
Taking your vacation days is vital. They provide a mental reset, fight against burnout and stress, and renew our motivation and focus. It is beneficial to the employer as well, as your time out of the office can help identify the business processes which are too dependent upon your presence, skills, and knowledge. The company can then iterate upon these processes until they no longer have a single point of failure.
If you are looking to Retire:
It’s easy to overestimate the time retirement will free up. Objectively, you will not be freeing up two thousand and eighty+ hours (52 full working weeks + commute) a year. Subjectively, your mind will want to adapt to your new life, and you may quickly feel as busy as ever.
Ideally, your time in retirement will be a little more flexible than the work-life you leave behind. Holidays can provide fantastic opportunities to travel, exploring how they impact cultures around the world. These days will likely remain on your calendar, retirement may simply allow you the freedom to celebrate them in different ways.
If you are moving to a New Job:
The US does not require private employers to provide paid holidays off. Check your potential employer’s website, or discuss recognized holidays as you negotiate the final job offer.
Paid Sick Days
In the majority of workplaces, it is common to perform your job in the face of an illness despite having sick days available. The need to come into work when you are sick can be detrimental to not only the employee, it has negative ramifications for their coworkers, as well as the company.
The average worker in the US earns six paid sick days per year, yet it is common to find oneself working next to a sick coworker frequently throughout the year. Taking this time to recover allows us to attack our responsibilities more efficiently upon our return.
Retiring?
Being on your own time, you may feel more inclined to maintain the status quo despite feeling slightly under the weather. Listen to your body and take a day when needed. While it is easy to consider the time taken to rest and recover as wasted, the inverse is often true. The value of the work you do while under the weather often falls short of the value gained by taking those days off.
An employer is not required to compensate you for your accrued sick leave upon retirement. If you are under the weather and would benefit from a recovery day, take it.
Moving to a New Job?
In your current position, you may have accrued a substantial bank of sick leave. While leaving these hours behind will hopefully not impact you, it is a safety net to consider.
Vacation and Personal Time
An extended break from the office can do wonders to clear our minds, lower our stress, and reinvigorate our passion for the work that we do. Workers taking this time to travel can also be great for the economy.
It can be difficult to break away from the office.
The US Travel Association found that American workers left 768 million vacation days unused.
Paid Time Off Trends in the U.S.
At an average hourly salary of $20 this shifts over $122 billion dollars of employee compensation back to their companies.
Faced with a competitive job market, low corporate loyalty, a desire not to let co-workers down, and a fear of the workload that will pile up in our absence, forgoing your vacation becomes the “easy” decision. Fight against this mindset. Use the time to expand your horizons and clear your head in advance of the work ahead. A responsible employer will thank you.
Retiring?
Upon retirement, you will likely be paid a lump sum payment for your remaining paid time off. Alternatively, you might consider slowly depleting your accumulated balance as you move closer and closer to retirement. This latter approach may allow you to delay your retirement while experiencing some of the freedoms and benefits your full retirement will shortly bring. This partial delay may allow you one more checkup at your doctor or allow you to make one final contribution to your retirement account.
Moving to a New Employer?
It is not uncommon to be rewarded for years of service with additional paid time off. As an incoming employee, you may be expected to start at a lower amount of paid time off than you are used to. The hiring process is your opportunity to negotiate for additional time off, a benefit which many employers are more flexible with than additional salary.
Retirement Benefits
Whether Social Security, state retirement programs, or pensions, the US bureau of Labor Statics reports that sixty-seven percent of private workers have access to a retirement plan through work.
When offered, the Employee Retirement Income Security Act of 1974 holds these plans to a universal standard.
Interestingly, this act does not require employers to offer a retirement plan. Employee demand has driven retirement plans to become a vital if companies wish to remain competitive.
Retiring?
Your plan may have service time based milestones, consider where you stand. An additional few months or a year may provide substantial value in your retirement, now is the time to decide if that is important and impactful for you. If you are near a vesting milestone, it may be well worth your time to reach it.
Moving to a New Employer?
If you are under the age of 55, do not cash out your plan. At this age you are likely to face early withdrawal penalties in addition to your normal tax. Instead consider the following options:
- If you are happy with the options and performance of your current plan you may leave it as is
- You may be able to transfer the funds into your 401k at your new employer
- Confirm that you are eligible to fund your 401k immediately as there may be a waiting period for new employees
- If you have, or wish to open, a brokerage account, roll the funds over to an IRA
- Transfer the account directly to avoid timing and tax concerns
- The early withdrawal penalties now apply up to 59 1/2 instead of 55
I have personally always rolled the money over to an IRA at my broker, which offers far more investment options at lower fees than any employer plan I have been part of.
Insurance
From mandatory health insurance to optional dental and eye, employer-sponsored insurance plans may not be perfect, but they often provide better value than their independent counterparts. Both the money your employer pays towards the plan, and your contributions, are done pre-tax, providing a discount relative to your current tax rate.
Retiring?
If you are over the age of 65, medicare will hopefully provide a strong foundation for your needs. Review your benefits carefully and decide if additional supplemental insurance might be a worthwhile investment to fill in any gaps.
Replacing health insurance for an individual can average over $450 a month, running to over $1100 for those with a family. Annual deductibles and out of pocket limits should be considered as well. Ehealthinsurnce found that:
Deductibles averages over $4000 for individuals and can hit almost $8500 for families. Out of pocket limits average over 8k for individuals and over 16k for families.
Moving to a New Job?
The quality and cost of employer-sponsored plans can vary widely. Information should be available on your potential employer’s website. If the company has that information secured behind an intranet, request such information during the middle stages of the interview process.
Additional factors to consider are the ability to opt-out in case you find better coverage elsewhere (such as through your spouse’s employer) or if there is a waiting period before your coverage takes effect.
Retirement or moving to a new position can be stressful and exciting milestone in our lives. It can be difficult to objectively weight a new opportunity. It’s in the face of the excitement of what could be that we tend to underestimate what we are leaving behind. You have worked your entire life to reach this opportunity, now you can move into it with no surprises.