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 pro-rated monthly contribution to your HSA ($4,300 divided by 12, or $358, 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!

Cyn·Oct 08

The information about Medicaid isn't applicable in all states. Here in Georgia, it isn't possible for an adult to qualify for Medicaid unless they've been approved for disability by the Social Security Administration (a process that usually takes a minimum of several years) AND they have almost no income at all. That's mostly because Georgia's Republican government refused to opt in to the Medicaid expansion.

LauraNoren·Oct 08

Thank you so much for the nuance. Super important for someone in Georgia or any of the other states that opposed Medicaid expansion.

smichalczuk·Oct 08

That is correct, thank you for adding that @Cyn! The original poster didn't specify where she lives, but if she is in New York, California, or one of the other states that expanded Medicaid, it's a particularly good option.

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).

Mayola48·Oct 07

Ok, that makes a lot of sense. Thank you for clarifying. In my case, I can likely afford the COBRA coverage for 18 months, but I'm sure there are others who cannot. I only have to cover myself, no dependents.

smichalczuk·Oct 08

Can you elaborate on why only covering yourself would be relevant? You are still talking about choosing to pay $10,000-15,000 per year for COBRA vs. saving that amount by going on Medicaid.Just because you can technically afford it does not mean it is a wise choice financially.

lstlz·Oct 08

Be careful about the HSA advice. I think it gets prorated for max contribution if you don't have the high deductible plan all year. I am still paying extra taxes for a mistake I made with my HSA years ago. Our open enrollment was in February and I signed up for HSA/high deductible and maxed out my contribution. The next year they moved up open enrollment so it aligned with the calendar year and I switched off a high deductible and stopped contributing. Turbo tax told me I over contributed and I didn't pay close enough attention and instead of withdrawing the extra 300$ or whatever it was I ended up just saying I would pay the tax penalty, except now I keep having to pay the penalty each year because it is not an easy withdrawal since so much time has past. So be careful with HSA contributions if you are not going to keep the High deductible plan for 12 months.

smichalczuk·Nov 22

Yes, thank you for pointing that out! You are correct that it is pro-rated. There is one exception called the "last month" rule where if you are enrolled in an HSA-eligible health plan as of December 1 of a given year, you can contribute the maximum amount you're eligible for as long as you stay enrolled in an HSA-eligible health plan for a one-year "testing period" running from December 1 of the year you contribute to December 31 of the next year.Here is an explanation: https://www.fidelity.com/learning-center/smart-money/hsa-contribution-limits#:~:text=If%20you%20are%20enrolled%20in,you%20file%20your%20tax%20returnThat said, this is less relevant for the poster's situation of removing the golden handcuffs. It would be more relevant if she was not yet on a high-deductible plan but was thinking about joining one mid-year.

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 🥰

Ruthie89·Oct 07

Read your contract or anything you have in writing. Pay particular attention to language on bonuses or vesting. Do not leave until that is secure. Offer to reimburse the company or return anything of value that you received. They may not say it is necessary. But you want to leave under the best possible circumstances. If you have a non-compete you probably are bound by it in your field. If you completely change careers, you could ask for it to be dissolved..

Calandra116·Oct 07

If you are going the route of building a venture-backed company - or even a "lifestyle" company that is going to employ 100+ people - there's a lot of good content on Y Combinator's YouTube channel. They've put together a collection of 20 videos that they call Startup School. https://www.youtube.com/playlist?list=PLQ-uHSnFig5M9fW16o2l35jrfdsxGknNBYou had mentioned "proof points in the new venture". That's why I mentioned Y Combinator.

Tamiko164·Oct 09

Hi OP - given the current market, I would advise to have 2 years worth of savings, which sounds doable since this person has a high paying tech job and isn't supporting others, especially since it sounds like this person does not have a fallback person or family that they can turn to if the funds run out. Lots of aspects have been well thought out, like optimizing on leaving after the bonus, and getting those medical checks in. Of course, the thing with health-related issues is that you never know when something might happen. But looking through other comments, it sounds like through either COBRA or Medicaid, you could be covered. Also, I would recommend doing a deeper dive into the future entrepreneurial career, as the paths forward can be very different, as noted, and having a decision on which path before quitting that high paying job. And whichever path it is, yes, definitely start something concrete on it before quitting. Often an idea is very exciting, but when you do a deep dive into the financials and realize it doesn't work, you have to explore alternatives. Less stressful and discouraging to hit this point when you don't have to worry about finances or about the clock ticking. Best of luck to this person! ;D

cgomez100100·Oct 25

Hi OP, I was in a similar situation at the end of July and left my role having more or less 8 months in the bank cash on hand. I am the breadwinner and although there are very sophisticated resources linked below, I went with a simple spreadsheet with the MUST haves (health insurance I'm paying for Cobra, housing, etc.) and then a higher range with the nice to haves. So that way there's some degree of wiggle room. In terms of the the starting on one's own, I'm not looking to build to the same salary because I don't want to work the same # of hours/intensity. RE overlap, someone asked me a good question that was a prompter to leave - what is the COST of staying longer? I used to think of it in terms of what I'd be missing out on if I left before the next vesting cycle but then I realized it was alaso costing me physically, entally, emotionally, etc. Feel free to reach out with other questions.

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