Who would have believed, during the depth of the Covid crisis in 2020, when millions of Americans were let go from their jobs, that just over one year later, millions of Americans voluntarily are leaving their jobs?
But it’s true.
In 2021, a record number of people quit their jobs, prompting the media to dub this post-pandemic trend the Great Resignation. And one of the particularly surprising aspects is who is doing the resigning.
Who is leaving the workforce during the Great Resignation?
You might think the exodus is overwhelmingly young employees, the generation generally expected to be more flexible and fluid with their jobs over the course of their careers. But it turns out that of the 5 million Americans who have left the workplace, 3.4 million are over the age of 55.
Perhaps you have friends or family who have joined the Great Resignation and you are thinking about how great it would feel to walk into your boss’s office – or log onto a Zoom call – and tell them “I quit.” But before you do, it’s important to understand that not all resignations are created equal, and should you choose to tender one yourself, how you do so can greatly affect your financial future.
“Before you leave, there are things you want to do to prepare,” said Isabel Barrow, director of financial planning at Edelman Financial Engines, in a recent interview for CNN Business.
“And then after you leave, you are going to want to look at the short-term, intermediate and long-term implications.”
Why are employees resigning?
One of the things you want to do before you leave is ask yourself why you want to leave?
If you’ve been unhappy at your job for some time, are looking for a career change or want to start a business of your own, then quitting might be the right choice for you. But what if you just want more of a challenge? Or more money? Or even to go back to school?
Due to the tight labor markets caused by the Great Resignation, employers are having a hard time finding qualified candidates to fill open positions, which means current employees have more leverage and employers are more willing to negotiate.
So before you decide to quit, first ask your employer if they would be open to your requests, like modifying your job, or even changing it, to give you more responsibility – along with an appropriate raise.
Or if they would be willing to modify your hours so that you could attend school? In some cases, if you’re going back to pursue skills to help you in your career, your employer might even be open to helping underwrite the costs.
Timing your resignation
But even if you decide that you want to quit, you need to make sure that now is the right time to do so.
If you signed an employment agreement when you were hired, there are likely rules you agreed to regarding a signing bonus, equity compensation and other incentives, which you may have to give back or forfeit should you resign within a certain time period after accepting the job.
There also might be specific language about how sick or vacation days are handled should you quit.
In addition, if part of your compensation includes annual or quarterly bonuses or commissions, when you quit may affect whether they get paid out, and if so, how much.
So though you might be ready to quit right now, make sure that waiting a few months, or even a few weeks, wouldn’t be better from a financial standpoint.
And speaking of finances, probably the most important thing you have to consider before walking away from a paycheck is what could go wrong and how well prepared you are should your post-resignation journey get bumpy?
“You have to look at the worst-case scenario,” said Barrow. “In six to nine months down the road, after you’ve taken some time off, you don’t know what the job market is going to look like.”
Because of this, Barrow recommends having a strong cash reserve in place before you quit your job, at least enough to pay for 12 to 24 months of expenses.
Retiring vs. resigning
However, if you are quitting your job and it’s the last one you’ll have, meaning you’re using the Great Resignation as an opportunity to retire early, you need to have a financial plan for much longer than that.
That plan will need to include how you’re going to generate an income during retirement, one that can pay your bills, cover your health care costs – which will likely rise as they will no longer be subsidized by an employer – and can support the lifestyle you want.
This can be particularly challenging for early retirees.
“Once an employee retires, many of the guardrails disappear,” writes Kelly O’Donnell, executive vice president and head of workplace at Edelman Financial Engines.
“The system that helps lead employees to retirement goes away the moment they begin relying on savings for income.”
But whether you’re thinking about quitting the workforce temporarily or for good, one of the best things you can do before you make that final leap is to meet with a financial advisor.
An experienced Edelman Financial Engines advisor can help guide you through the decision-making process to determine if resigning is the best move for you or if there are other alternatives to help achieve the outcome you’re looking for.