How to navigate finances/during a career change amid Covid-19

Covid-19 has presented many challenges for businesses. To adapt to this ever-changing environment, employers have adopted work-from-home policies, leveraged video conferencing and unfortunately, in many cases, reduced their workforce. It’s been more than a year since the pandemic began, and PA’s unemployment rate was 6.9% as of May 2021, while the overall unemployment rate for the U.S. was 5.8%. While this is better than stats from a year ago, many are still navigating unemployment. Although many state and federal packages were designed to assist with unemployment because of Covid-19, workers typically feel isolated and anxious while navigating unemployment, especially when it comes to finances.

A career change highlights the importance of an emergency fund, especially if a career change was unplanned. The first step is to do a deep five into your finances to start building that emergency fund. To do this, you’ll want to develop a budget and reduce as many monthly expenses as possible. 

In an article on, Megan Leonhardt reported that roughly 37% of Americans would have to resort to a loan from family, the bank or credit cards for unexpected emergencies. After landing a replacement job, it is important to start building an emergency savings account for unforeseen contingencies.

If you have an employer-sponsored retirement plan, such as a 401(k) or 403(b), it may be tempting to access these funds to cover monthly expenses while seeking new employment, but this should be considered only as a last resort. Accessing qualified retirement savings before age 59½  typically results in a 10% early withdrawal penalty. If you are not of retirement age, withdrawing funds early from retirement accounts reduces future growth and will likely impact future financial security in retirement.

During a career transition, neighbors, friends, and family are likely to offer unsolicited advice. Beware of free advice. Consult with a financial professional or complete detailed research. 

General rules of thumb are a great starting point, but they do not always account for unique circumstances. For example, the general rule of thumb is to consolidate 401(k) assets into an IRA so that you are not limited to investment options within the 401(k) offering. However, if your termination of employment is between age 55 and 59½, distributions from a 401(k) will avoid the 10% early withdrawal penalty that would otherwise be imposed on an IRA, so you would be able to access those funds early, if necessary. This is typically referred to as “the rule of 55.”

Navigating unemployment, especially in the aftermath of Covid-19, can be extremely nuanced. One decision can greatly impact another, potentially adversely impacting taxes or eliminating someone from qualifying for assistance. It is often extremely useful to outline your current financial situation and develop a financial plan. Not only does this act as your financial road map, outlining your goals and quantifying your next steps tends to reduce the stress and anxiety associated with the uncertainty of a career change.

It is important to update your financial plan when starting a new position. Take some time to understand your benefits package. If your new employer provides a qualified retirement plan, look into what level of participation allows you to receive the highest company contribution. If your company provides a health care plan, is there a way to save for medical expenses in a tax advantageous way? Frequently, employees do not take full advantage of their employer benefits, simply because they are unaware of the full offerings. Take the time to research your employer benefits package. 

In a stressful time, such as a career change, relying on a professional to help navigate uncertainty tends to reduce stress. If finding a new employer is challenging, do not hesitate to reach out to a recruiter. It is customary for the recruiter to collect compensation from the employer, not the job seeker. 7

Bryson J. Roof, CFP®, is a financial advisor at Fort Pitt Capital Group in Harrisburg, and has been quoted nationally in various finance publications including CNBC, U.S. News & World Report, and Barron’s.