Personal Finance

Before you join ‘The Great Resignation’ and quit your job, here’s what you need to know

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It may be tempting to say “I quit” as the nation emerges from the Covid pandemic.

You wouldn’t be alone. Four million Americans quit their jobs in April, a record high, according to the Labor Department. More than a quarter, or 27%, plan to leave their employer as the pandemic subsides, a survey from Eagle Hill Consulting found.

It’s been coined “The Great Resignation.”

“We have more time to think about: Do I enjoy what I’m doing? Is there a way I can do something I will get more joy from?” said certified financial planner Diahann Lassus, managing partner at Peapack Private Wealth Management, based in New Providence, New Jersey.

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“That makes perfect sense, given what we have been through,” she added. “Life is too short.”

People may be unhappy at their jobs or unwilling to return to the office after working from home for more than a year. They were able to ditch their commute, have more freedom and family time, and perhaps save some money.

Of the 38% of Americans who worked from home at some point during the pandemic, 57% said it had a positive impact on their personal finances, a survey from found. Millennials (ages 25-40) and Gen Zers (ages 18-24) were most likely to feel that positive effect.

People weren’t spending on their commute and may not have been buying lunch or dry-cleaning their clothes.

“You end up spending a lot on hidden things,” said Ted Rossman, senior industry analyst at Bankrate.

“There are a lot of ways people drop money during the day.”

Yet just because you saved money and curbed your spending doesn’t necessarily mean you can quit your job.

You need a plan — whether it is lining up a new job first, or making sure you are financially secure to withstand some down time between gigs.

Spending matters

The pandemic was sufficient enough time to have actually changed people’s spending habits, said CFP Sophia Bera, founder of Austin, Texas-based Gen Y Planning.

So try to make them stick.

However, don’t assume that because you were able to spend less last year that it will continue, even if you still work from home. Increased spending may sneak up on you.

“We weren’t doing anything last year,” noted Lassus, a member of the CNBC Financial Advisor Council.

She suggests looking back at your 2019 spending as a guide when you decide whether or not you can comfortably quit.

Have savings for an emergency

Don’t walk away from your job without another one lined up unless you have an emergency fund that can cover six months to 12 months of living expenses.

“If you need money, the last thing you want to do is pull it out of a retirement account and pay all those taxes and potentially penalties to do that,” Lassus said.

Health care can cost you

Don’t forget about your 401(k)

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People lose track of their 401(k) plans when they change jobs, Lassus said. While you don’t have to do anything with it immediately, figure out what your options are and understand them. If it is a small amount, your company may immediately cut you a check.

If you have some time before you plan to leave, try to max it out, if you can, suggests Bera, also a member of the CNBC Financial Advisor Council. The annual maximum contribution for 2021 is $19,500, plus a $6,500 catch-up contribution if you are age 50 or older.

This way your retirement savings doesn’t fall behind if you are out of work for a while. Putting more money into the plan can give you a sense of how well you can live with a smaller paycheck coming in.

Total up other employer perks

Look at the other perks your employer is providing, like life insurance, company stock and flexible spending accounts. Will you be giving up stock options that are unvested when you leave? Will you need to buy term life insurance?

“Really figure out how you are utilizing those benefits now and be strategic about your exit,” Bera said.

You can negotiate

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