This is an anonymous post from an Elpha member.

How to Remove the Golden Handcuffs?

What financial advice would you give someone who is preparing to quit a high-paying tech job with cushy perks? How can we remove the golden handcuffs safely?

Assume the would-be quitter must remain financially solvent (e.g. mortgage must be paid) and does not have a spouse or parent who can offer financial support, health insurance, temporary free place to live, free meals, any of that. Assume also, that the would-be quitter does not need a work visa to remain in country.

Specific question - tips and tricks:

The standard emergency fund advice to save up 6 months of monthly costs can be a little hard if things the employer is covering (health insurance, 401k, maybe meals, life insurance) now need to be covered in addition to one's typical monthly housing, utilities, food, insurances, car stuff, etc. Aside from meticulously backing out all those costs, is there another cost estimation trick? Or a set of tricks to time the quit advantageously relative to the perk cycle (e.g. pre-pay the 401k early in the year and aim to be re-hired by the next year; move health appointments up to the front of the year or find a "safe" year to skip them; by all means, wait until the day after bonuses are paid out, etc.)?

Another specific question - overlapping the timing:

What if the goal is NOT to get hired into corp America again but to start out on one's own? Then the "have 6-9 months saved" seems particularly anemic. It likely takes a lot longer to build back up to the same salary + benefits level. The mitigating factor could be that the quitter could start warming up the freelance or startup next big career move before quitting, which will require a delicate overlap dance. Any advice on how to stage an overlap is appreciated. This one is probably less about finances and more about selecting proof points in the new venture, whatever it may be.

Iynna·Oct 01

This post is amazing - so well thought out! I love all the assumptions to go with, which is very helpful to give the most informed feedback/thoughts. First off - we have MANY MANY MANY Elphas who have done this so it's more common than one realises! Does the quitter have some clients lined up to start freelancing? I feel like psychologically this was the biggest hurdle when I went back school, I knew it was going to be hard not seeing an influx of cash coming in at a regular cadence. So having something somewhat lined up to get cash might alleviate that (mental hurdle)Yes the typical advice of having 6 months is tricky, I'd actually say double it - have a rainy account for a year if possible (it might be possible given the quitter is in a high paying role now?)

Mayola48·Oct 01

It might be nice if the quitter could get advice about:1. doing a freelance thing, since most Elphas seem to like this route. This feels easier to 'start small and grow steadily'.However, I have a close friend who has done freelance successfully for over a decade. Sh had set out to achieve work/life balance by keeping her bills paid, her body healthy (lots of working out, yoga), and her soul full (lots of time with her partner, traveling, having lazy Sunday mornings, etc). Living the life! This recently became precarious when one big client decided to go out of business, disappearing 33-40% of her revenue. Since the friend is sliding towards retirement age, the idea of having to go out and drum up that much more new business is causing all sorts of questions: "do I really want to do this? Could I give up on my imagined retirement for a much quieter version? Am I as good as I thought I was if I'm this at-risk over losing a single client? Could I have handled more business during the height of my engagement with that big client? Would I have wanted to handle more business and longer hours given that I was trying to avoid that attribute of corporate life? Will I run out of money in retirement; was I optimizing for the good life too soon?" So that's *a* version of the freelance life.Another option...2. Starting a company that's aiming to eventually have 10s of thousands of customers and employ hundreds. This feels is a different, much bigger challenge. It requires having money to pay the bills -- probably for more like 18 -24 months - but also money to invest in the new company. Instead of looking for freelance customers, the quitter should be looking for a cofounder or two, angel investors, a lawyer, designers, etc. It is difficult to convince any one of those people to care until one is solely dedicated to the new company, which only increases the risk profile.Advice from those who have walked both paths is helpful!

smichalczuk·Oct 03

Hello! My company Predictabill.com helps consumers navigate these types of career changes with respect to their health insurance. For the situation you are describing, here's an example of how someone might optimize their benefits:1. During Open Enrollment, enroll in a High-Deductible Health Plan for the January 1st, 2025 plan year.2. During the remainder of 2024, freeze your eggs (it might be too late in the year for this if you are still on birth control), use up your remote work stipend or any other stipends available to you, spend down your transit card, etc.3. On January 1st, max out your contributions to your HSA ($4,300 less whatever your employer puts in). Make sure to invest this money right away rather than leaving it sitting in cash.4. On January 15th, quit your job.5. Immediately apply for Medicaid in your state before you start earning any other income. You should qualify for 12 months of coverage where everything you do is free and prescriptions are only $1.6. In 2026, if you get a new job, you will no longer need the Medicaid. If you remain independent, you will switch onto a Marketplace (Obamacare) plan, and you will receive subsidies from the government if your income is still ramping up.Happy to answer any follow-up questions you might have!

Mayola48·Oct 04

My company doesn’t give bonuses for the prior year until mid-March. It’s worth 20% or more of annual salary so it’s worth it to stick around for that. If I applied for health insurance in March, after getting income from regular Q1 paychecks and the bonus (minus pre tax HSA and 401k contribs) how would that impact Medicaid eligibility?

smichalczuk·Oct 04

You can qualify for Medicaid at any time of year, so waiting until March should not matter. The rules vary a bit from state to state, but as long as you can honestly report a go-forward income that is small, you should still qualify. The number is pegged to the Federal Poverty Level, but is typically between $15K and $20k in annual income. Again, this only applies on a go-forward basis, so it would not include your bonus or Q1 wages. It will not work if you have a lot of other income (for example, investments).The reason I suggested January as optimal is because you could minimize the amount of time you would need to be on a High-Deductible Health Plan while still maxing out your Health Savings Account contributions (and all of the tax advantages that go along with that).

KQ·Oct 03

this is a great article on going out on your own, to set expectations of the transition. https://open.substack.com/pub/erahsociety/p/the-7-year-business?r=1ktaj2&utm_campaign=post&utm_medium=webI was relieved of my position amidst my ideal "transition out" plan, so I had to move forward cold turkey. you'd be surprised on how little you need to survive. I would encourage you to release the "standard plans" + really sit with what's reasonable, considering your circumstances. starting my business was one of the hardest things I've ever done + takes tenacity. I'm over 5 years in now + happy to share more of my experience / offer advice, if you want to chat. https://kqunplugged.as.me/givefirst

rey17·Oct 05

Thank you for the article!!! Sooo much insightful information 🥰