Career Transitions

Protecting Your Financial Future During Professional Change

Welcome to the final installment in our 2025 Annuity Awareness series exploring how life events shape financial decisions. This week, we examine the financial challenges and opportunities that come with career transitions, and strategies to help protect your accumulated wealth during professional change.

Job changes, early retirement packages, and career transitions create both immediate challenges and long-term opportunities for your financial future. Whether planned or unexpected, these professional changes often require critical decisions about your accumulated retirement assets and overall financial security.

The Financial Impact of Career Transitions

Career transitions affect your financial life in multiple ways, often creating both immediate pressures and strategic planning opportunities. Understanding these impacts helps you make informed decisions that protect your financial future while navigating professional change.

Immediate Financial Pressures:

• Income uncertainty or reduction during transition periods
• Loss of employer benefits including health insurance and retirement contributions
• Time-sensitive decisions about retirement plan assets, often subject to IRS rollover deadlines (e.g., 60-day  rule)  Potential gaps in healthcare coverage requiring immediate attention

Strategic Planning Opportunities:

• Ability to consolidate and optimize retirement account management
• Opportunity to reassess and adjust your overall financial strategy
• Chance to reposition assets for your new career phase or retirement timeline
• Potential to simplify your financial life through account consolidation

Common Career Transition Scenarios

Job Loss or Involuntary Separation

Unexpected job loss can create immediate financial stress and may require important decisions about accumulated retirement assets. The emotional impact of involuntary separation can make financial decision-making more challenging, yet these decisions are often time sensitive which is why it’s important to evaluate available options carefully and consult with a qualified financial professional when possible.

Key considerations include understanding your severance package terms as applicable, evaluating COBRA health insurance options, assessing your emergency fund adequacy, and making strategic decisions about potential 401(k) rollover options. Rollover decisions should take into account fees, investment choices, and your long-term financial goals.

Early Retirement Packages

Attractive early retirement offers can provide financial security but require careful evaluation to ensure they support your long-term goals. These packages often include lump-sum pension payouts, enhanced severance, and extended health benefits, but they also mean fewer earning years to build retirement wealth. It’s essential to consider longevity risk, inflation, and future income needs.

The decision to accept an early retirement package involves analyzing the total financial value, understanding the impact on your retirement timeline, and planning for the income gap between early retirement and traditional retirement age.

Voluntary Career Changes

Changing careers, especially later in your working life, often involves financial trade-offs and opportunities. While you may have more control over the timing, career changes still require strategic thinking about asset management, time horizon, and risk tolerance.

Considerations include the potential for reduced income during transition, the potential need to rollover retirement assets from previous employers, and the opportunity to reassess your financial strategy for a new career phase.

Business Sale or Transition

Selling a business or transitioning from business ownership to employment represents a unique career transition with significant financial implications. The proceeds from a business sale often need to replace the income the business previously provided while also funding retirement and other long-term goals. It’s important to develop a plan that considers taxes, timing of distributions, and how those assets will be invested.

Key challenges include managing a potentially large lump sum, transitioning from business owner to employee or retiree, and creating sustainable income to replace business profits.

Strategic Approaches to Career Transition Planning

Asset Protection During Uncertainty

When your employment situation changes, protecting your accumulated retirement assets becomes particularly important. Market volatility can be especially damaging when you’re also dealing with income uncertainty or reduced earning capacity. Individual circumstances should guide any reallocation of assets, and working with a financial professional is recommended to ensure alignment with long-term goals.

Consider how much risk you can realistically take when your employment situation is in flux. Assets that provided appropriate growth when you had steady income may be too aggressive when facing career uncertainty and review whether your allocations still align with your financial strategy, timelines, and risk tolerance.

401(k) Rollover Strategy

One of the most important decisions during career transitions involves your former employer’s retirement plan. You typically have several options: leaving assets in the former employer’s plan, rolling over to a new employer’s plan, rolling over to an Individual Retirement Account (IRA), or taking a distribution.

Each option has distinct advantages and disadvantages related to investment choices, fees, loan provisions, and withdrawal flexibility. Maintaining the existing 401(k) may offer some benefits such as the ability to take a loan, and the rollover decision also presents an opportunity to consolidate retirement assets and potentially access better investment options or lower fees.

Bridge Income Planning

Career transitions often create gaps between your last paycheck and your next stable income source. This is particularly relevant for early retirement packages or when transitioning to retirement.

Planning for bridge income might involve creating systematic withdrawal strategies from accumulated assets, utilizing severance payments strategically, or positioning assets to provide temporary income during transition periods. Early withdrawals from qualified retirement accounts, however, may incur tax penalties and reduce long-term savings.

Tax-Efficient Transition Management

Career transitions often involve multiple taxable events that can be managed strategically. This might include timing the receipt of severance payments, managing the tax impact of retirement account rollovers, or positioning assets for tax-efficient growth during transition periods. It is important to seek professional tax advice involving potential tax implications.

Annuity Solutions for Career Transitions

Fixed Index Annuities (FIAs) and Multi-Year Guaranteed Annuities (MYGAs) can play valuable roles in career transition planning by providing stability and protection during uncertain times.

Safe Harbor for Retirement Assets: Both product types offer features such as principal protection. These features may appeal to individuals seeking stability during career transitions, however, your individual needs should be carefully considered including time horizon and risk tolerance. 

Continued Tax-Deferred Growth: Rolling retirement assets into annuities maintains the tax-advantaged growth that helps preserve and build retirement wealth, even during career transitions.

Bridge Income Capability: Many annuities offer withdrawal provisions that can provide temporary income during career transitions, while still maintaining long-term growth potential for remaining assets. Withdrawals, however, may be subject to taxation and could reduce overall retirement savings. 

Simplified Asset Management: Consolidating multiple retirement accounts into annuity products can potentially simplify your financial life during already complex career transitions.

Future Income Options: Many annuities offer the flexibility to convert to guaranteed income streams in the future, providing certainty for retirement income planning regardless of how your career transition unfolds.

Case Study: The Strategic Early Retirement

This hypothetical case study is for illustrative purposes only and individual financial needs and circumstances will vary. 

Consider the experience of Robert, a 56-year-old software engineer who was offered an attractive early retirement package from his employer. The package included a lump-sum pension payout and enhanced severance, but Robert needed to replace income for six years until he could access Social Security and other retirement benefits.

Robert had accumulated $350,000 in his 401(k) and needed to make a rollover decision while also planning for bridge income during his early retirement years. After careful consideration of Robert’s financial objectives with a financial professional, he implemented a strategy that included:

• Rolling a portion of his 401(k) into a Multi-Year Guaranteed Annuity for funds he would need in the first 2-3 years, providing certainty and principal protection
• Allocating the remainder to a Fixed Index Annuity to potentially benefit from interest credited based on a market index, with protection against market losses, subject to caps, spreads and participation rates.  
• Developing a withdrawal strategy based on the MYGA’s guaranteed interest and the FIA’s credited interest (if any), to create a bridge income stream during his early retirement years

This approach provided Robert with the confidence to accept the early retirement package, knowing that a portion of his assets were allocated to solutions that provided income predictability and principal protection, while allowing for potential future growth. 

Taking Action: Next Steps for Career Transitions

If you’re facing or anticipating a career transition, consider these steps:

1. Understand all your rollover options for employer-sponsored retirement plans, including timelines, tax implications, and penalties
2. Evaluate your risk tolerance based on your changed employment situation and income uncertainty
3. Assess your emergency fund adequacy for potentially extended transition periods
4. Consider principal protection strategies for accumulated retirement assets during uncertain times
5. Plan for bridge income needs if there will be gaps between employment or early retirement before accessing Social Security and other retirement benefits 
6. Consult with a financial professional about the right potential financial plan including how annuity solutions may fit into your career transition strategy 

Career transitions are inevitable parts of modern working life, but they don’t have to threaten your retirement security. With thoughtful planning and appropriate financial tools, you can navigate professional changes while preserving and growing your accumulated wealth.

As we conclude our Annuity Awareness Month series, remember that life events—whether market volatility, approaching retirement, financial windfalls, or career transitions—create both challenges and opportunities. The key to successful navigation is understanding how each transition affects your financial priorities and how exploring tools, such as annuities and other planning solutions, can help support a more confident and secure retirement. 

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Disclaimers

This blog is meant for educational purposes only and does not constitute specific financial advice. Please consult with a qualified financial professional about your individual circumstances before making any financial decisions. The Harbourview MYGA (Generic Policy Form ICC19 OLA SPDA) and Harbourview FIA (Generic Policy Form ICC19 OLA FIA) are single premium deferred annuities. May not be available in all states.  

HARBOURVIEW ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY THE FDIC OR NCUA/NCUSIF OR ANY OTHER FEDERAL GOVERNMENTAL AGENCY. MAY LOSE VALUE. NO BANK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT. GUARANTEES ARE SUBJECT TO THE CLAIM PAYING ABILITY OF THE ISSUING INSURANCE COMPANY.

Annuities issued by Oceanview Life and Annuity Company, 1819 Wazee Street, 2nd Floor, Denver, CO 80202. In California, doing business as Oceanview Life and Annuity Insurance Company www.oceanviewlife.com.

Annuities are generally designed as long-term retirement solutions and have certain limitations. They are generally not intended to replace emergency funds, serve as income for day-to-day expenses, or support short-term savings goals.  Please review the contract for full details.  

A.M. Best Rating as of December 11, 2024, is subject to change. A (Excellent) rating is third highest of fifteen possible rating classes for financial strength. The outlook assigned to these Credit Ratings is stable.

This material is a general description intended for general public, educational use. Oceanview Life and Annuity Company is not providing investment advice for any individual or in any individual situation, and therefore nothing in this correspondence should be read as such. 

Neither Oceanview Life and Annuity Company nor any of its representatives may provide tax or legal advice. 

Withdrawals in excess of any Free Partial Withdrawal amounts are subject to a Surrender Charge and Market Value Adjustment (MVA). The MVA may have the effect of increasing or decreasing the Surrender Value of the withdrawal depending on the market interest rate changes.

The IRS may impose a penalty for withdrawals prior to age 59 ½.

Contracts purchased in an IRA or other tax-qualified plan provide no additional tax-deferral benefit, since they are already afforded tax-deferred status. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan. For non-qualified annuities, tax deferral is not available to corporations and certain other entities.

Funds allocated to an index do not directly participate or invest in the stock market or any index. 

Rates, renewal caps, and declared interest rates, will always follow contract provisions relative to minimums and maximums stated.  Oceanview determines, at its discretion, the rates, renewal caps and, declared interest rates above the contractual minimums that are guaranteed.