One very important factor to consider when attempting a career reinvention is your benefits. You should take a look at the benefits you have with your current employer, the benefits you might have or not have during your transitional period, and the benefits your new employment will bring.
Let’s start with your health insurance. You must have health insurance. It’s essential, and you can’t chance not being covered. So, if your current employer provides medical insurance, calculate the costs of continuing that coverage with COBRA until you have landed your new role with benefits. Also, check with private insurers as sometimes they are less expensive than COBRA. Also, if you think your coverage might be less in the new field, consider moving up some of your elective visits and procedures while you are still employed.
Then, you should research other employee benefits. This is important because other employee benefits that can affect your total compensation and overall financial picture going forward. In particular, benefits such as employer-paid life and disability insurance, flexible spending accounts (which allow you to pay for medical and dependent care expenses with pre-tax dollars), and employee stock purchase plans can make a big difference in your total compensation. If your new employer offers any or all of these, you can plan for a brighter financial picture.
And, while not a benefit, income taxes should be factored into your new financial outlook because there could be some tax breaks that might now work for you. For instance, if you experience a temporary reduction or gap in income, you could find yourself in a lower tax bracket and be eligible for tax breaks previously not available to you, such as Roth IRA eligibility or deduction on tuition paid.
If you’re married when your income goes down, it might make sense for your spouse, if employed, to reduce income tax withholding. This way, you can have the use of those funds throughout the year, instead of waiting for your refund. The IRS website has a calculator to help you determine withholding levels, but taxes can be a little tricky. If you’re unsure at all, see a financial planner or CPA.