For those of you who are considering retiring or quitting your job, here is a modest checklist. 1. Take all of your personal possessions home.Start now taking one item home with you each day. It will help you to prepare mentally for quitting. That will leave less to do at the end. You won't have time your last day of work to clean out because you'll be busy with company forms and property. Don't leave more than you can grab with one hand as you walk out the last day.If you have any personal files on the company computer, make copies and/or delete them.2. Get five years of living expenses ready. If you don't want to do that before you quit, have at least 6 months of living expenses available. Do not expect your pension, if you have one coming, to start promptly!!3. Max out your 403(b)/401(k).Consider carefully what this will require. Even if you are not quitting this year, you should take as much as possible at the beginning of the year to maximize your flexibility. Make sure to leave enough untaken so that if you end up working the rest of the year, you can capture the maximum company match. You will need to account for any raises, bonuses or awards that you may get later in the year.For example, let's suppose your company offers to match you 50% on the dollar for the first 6% you contribute. Let's also suppose that your allowed contribution this year is $13,000, and that you make $60,000/year. Since January is nearly gone, we'll assume you took $500 in January. Assume a $4000 bonus in December, just to show how it works. You should take enough as soon as possible so that you reach a point where you can contribute exactly, or a little more than, 6% for the rest of the year. Here's a way you could do that, although there are infinite variations, depending upon your requirements:Month Your Contribution Company MatchJanuary 500 (10%) 150February 2000 (40%) 150March 2000 (40%) 150April 2000 (40%) 150May 2000 (40%) 150June 2000 (40%) 150July 750 (15%) 150August 300 (6%) 150September 300 (6%) 150October 300 (6%) 150November 300 (6%) 150December 310 (7%) 150December bonus 240 (6%) 120Note that by the end of June, you've taken all but $2500 of your $13000 contribution limit. If you decide to quit in July, you should take 50% of your pay as a 401(k) deduction in July. If you had been taking only 6%, or $300/month for the first 6 months, by the end of June you'd only have taken $1800 of your allowed deduction, leaving $11,200 left, and if you quit in July, you cannot max out your 401(k). It pays to get the bulk of it up front so that the option to quit is always available. A word to the wise should be sufficient. Obviously, the rules vary for each company. This fictional example was meant only as an illustration of the point that you should load up early in the year so that if you quit later, you won't be left short. This table is not appropriate if your salary/raise/bonus are different from the assumptions. You'll have to create your own table. Never allow your contribution to sink below the level matched by the company.4. Take any leave now that you would forfeit if you quit.Some companies give different kinds of leave. If you have leave such as vacation for which you will be paid if you quit with it not yet used, you don't have to take that, but other leave such as comp time or personal holidays that may be lost should be taken now.5. Find out what your company will allow you to do with your 403(b)/401(k).Can you leave it, will you be forced to take cash, can you roll it over? If you can roll it over and want to do that, choose a custodian(s): -- What are the custodian's fees? -- What investments are possible? -- If you want a brokerage account, what are the trading costs? -- Can you have individual stocks and mutual funds in the same account? If not and you want them both, then figure out how to split the IRA into multiple accounts.If you want to leave your 403(b)/401(k) with the company, what happens if you take a new job? What happens if you want to roll it over later? Will your company do a SEPP if you need one? 6. Check on your company pension or retirement program. Are you due a cash balance lump sum or an annuity? How much will it be? What are the choices you will have to make? If you have an alternative, such as part annuity and part lump sum, get the details of the alternatives, then determine which you want to take. If you are getting a lump sum, you should consider whether you want to roll it over to an IRA. If not, you may have to pay taxes or penalties.If you have to roll over a retirement asset, make sure you understand the rules. If you don't want to pay taxes or penalties, you should arrange for a direct rollover. The check will be sent to you, but it must be made payable to your new custodian. If have have the check made out to you, the company will be required to withhold 20%. You can still deposit it in an IRA, but if you are not eligible to take a penalty-free distribution, you will have to come up with cash equivalent to the 20% the IRS is holding and deposit it along with the check into your new IRA to avoid the penalty on the 20% the company sent to the IRS. The IRS will give it back later, but a direct rollover is preferable.If you are married, do you want to opt for survivor benefits by taking a reduced pension? Consider getting term life insurance instead. Better yet, if the rest of your assets would allow your spouse to survive in comfort, take the single-life pension without survivor benefits.7. If you will not be getting retirement medical benefits, check on transitional medical benefits, also known as COBRA. HR should be able to tell you the cost. It goes up every year. Figure out what you will arrange for medical insurance if you do not select COBRA or when COBRA runs out. You can usually have COBRA benefits for 18 months. The cost should be what it costs your company to provide the insurance plus a 2% administration fee. You may still be able to find something cheaper on the market.8. Check the company internal websites for any information you may need later that you won't have access to once you are gone. Print it out or copy it into a document. Be sure to follow company policy.9. Compile a list of email addresses and phone numbers of friends you might want to keep in touch with. Draft a "goodbye to my friends" letter. Don't keep this on company property. Keep it at home.10. Get phone numbers and URLs for HR for pension, stock options and ownership plans, medical benefits, 403(b)/401(k), etc. Get copies of all of your URLs that you need to take with you. If you have userids and passwords for benefit websites, make sure you know them or have them at home.11. If you have stock options, find out the rules on whether you can or must exercise those before leaving, and make a plan.12. If your income next year will be substantially less than this year, move deductions into this year and income into next year.If you give to charity, you may want to consider setting up a charitable gift fund this year when the deduction will be better. In your retirement years, you will be able to direct money from this trust fund to your church or charities, but you won't get a deduction again. Get your deduction now when it pays the most. Here are two funds to consider:http://www.charitablegift.org/index.shtmlhttp://www.vanguardcharitable.org/If you have stocks, bonds, funds, rental real estate, etc. to sell that will generate capital gains, consider whether you might do that next year if your income will be substantially reduced next year. Don't let taxes be the main consideration, but if you are a few weeks away from the new year, a little waiting on liquidating a LTBH investment may be wise.13. Make any non-cash contributions you can this year.Again, a deduction this year is worth more than it will be later, so clean out those closets and take it to the Goodwill. 14. Make any financial moves you need to make now while you have a job, such as refinancing your home.If you don't have a job, you won't be approved for a loan, so if you need to refinance or get a line of credit, do it now while you have a job. If you want to downsize your home and you cannot pay cash outright, you should also do that now, or at least speak to a mortgage broker about what will be required for a mortgage if you don't have a job. Will your pension income be enough to qualify? You can get a no doc loan, but the interest rate will be higher.15. Download this marvelous freeware program to help you organize all of the information you will need:http://www.treepad.com/This is without question the best piece of freeware I've ever used. It will take you about an hour to learn to use it completely. Once you do, you will wonder how you ever got along without it. You can keep it and the resulting data file on a diskette for transporting between work and home.Here is another alternative:http://www.onlythebestfreeware.com/program.asp?program_id=63I found it less intuitive to use but perhaps richer in function. I prefer treepad, although keynote will let you encrypt the data file. If I needed to encrypt, I would use axcrypt on the treepad data file.16. Start living like you no longer have access to things at work. Don't do any websurfing at work. Sign up for an online service at home. If you use the bank, daycare center, or fitness center at work, start using something you'll have access to outside of work. If you use software at work, find a suitable replacement you can use at home.17. Consider living on FIRE budget for a year.This would give you an opportunity to see what it would actually be like. Admittedly, the living requirements are often different while you are working, so this may not be possible, but you may want to restrict any spending you can now that you are planning to restrict in FIRE.18. Consider downsizing now before you quit to see if you are happy with a smaller house. If you will be moving to another part of the country, sell the house you have now and rent an apartment.19. Draft a resignation letter to your boss.Even if you are just issuing an oral resignation, you should think about what you are going to say. If your boss asks why you are leaving, what will you tell him? Don't use this as an opportunity to get revenge, even if your boss is a jerk and you have no intention of ever returning. You may think the revenge will feel good, but in the long run, you'll feel better about yourself if you take the high road. Be gracious and dignified. Best wishes on your freedom, and I hope this checklist helps you think about the things you might need to do before quitting.- tmeri
Month Your Contribution Company MatchJanuary 500 (10%) 150February 2000 (40%) 150March 2000 (40%) 150April 2000 (40%) 150May 2000 (40%) 150June 2000 (40%) 150July 750 (15%) 150August 300 (6%) 150September 300 (6%) 150October 300 (6%) 150November 300 (6%) 150December 310 (7%) 150December bonus 240 (6%) 120
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