Before you leave a sales job, run this checklist: build 12-18 months of fixed expenses as runway, know exactly which equity shares are vested and when the rest vest, understand the tax picture in your transition year, reduce any fixed costs you can before income drops, have a health insurance plan ready, and decide what to do with your 401k. In that order.
I left tech sales to become a financial planner. I planned it out, built a runway, and still found three things I wish I had handled differently before I walked out the door.
The reps I talk to who are thinking about leaving sales are usually focused on one question: can I afford to do this? The honest answer is usually yes -- if they start planning far enough in advance. The financial preparation is not complicated. But there is a specific order of operations, and missing any one of them creates a problem that is easier to avoid than to fix after the fact.
This is the checklist. Work through it in order.
1. Build Your Runway First
Runway is the amount of savings you need to cover your fixed expenses during the transition period -- from your last commission check to the point where your new income is covering your costs.
The rule of thumb for leaving a high-income sales job: 12-18 months of fixed expenses. Fixed expenses are rent or mortgage, car payments, insurance, minimum debt payments, utilities, and groceries. Not total monthly spending. Not what you currently spend. What you cannot stop spending.
For a rep with $6,000 in fixed expenses, that is $72,000 to $108,000 in savings before the transition. If you have a signed offer at a known salary and a two-week start date, you need less. If you are moving to a role with a 3-month ramp, starting a business, or going back to school, you need more.
Most reps who leave too early leave because they earned well in sales but never built a reserve. The commissions were real. The spending kept pace. There was always a strong quarter coming. Then the decision to leave arrives and the runway is not there.
The single most important financial action before leaving a sales job is accumulating the runway before you need it. That means a period of intentional underspending during your last one to two years in the role -- keeping lifestyle flat while income is high and letting the surplus build.
If you are reading this with a two-week notice period already in your head, you are working with what you have. If you are planning 12-24 months out, the runway is the most important lever you have.
2. Know Your Equity Position Down to the Share
If you have ISOs or RSUs, you need to know three numbers before you leave:
- How many shares are currently vested
- How many are unvested and on what vesting schedule
- The exercise window for ISOs after your departure date
Unvested shares are forfeited when you leave unless your company has made a different arrangement. If you have a meaningful number of unvested shares with near-term vesting dates, waiting another quarter or two to leave can be worth tens of thousands of dollars. The math is straightforward -- add up the unvested shares, multiply by current value, and compare to the cost of staying.
Vested ISOs have a standard post-termination exercise window of 90 days. After that window closes, the options expire worthless regardless of their value. Before you leave, confirm this window with your company's equity plan documents. Some companies offer longer windows -- check before you assume.
If you have vested ISOs and the current spread is meaningful, you need to decide whether to exercise before leaving, within the 90-day window, or let them expire. The decision depends on the current 409A valuation, your tax situation in the transition year, your conviction in the company's future value, and whether you have the cash to exercise. This is not a decision to make without running the numbers. The IRS guidance on stock options covers the qualifying disposition rules that determine whether gains are taxed at capital gains rates or ordinary income rates.
Have equity in your package?
Exercise timing, the 90-day window, and the tax implications of leaving with unvested shares -- these are exactly the decisions I work through with every rep who has equity in their plan. Book a call before you give notice.
Book a free 30-minute call3. Understand the Tax Timing in Your Transition Year
The year you leave a high-income sales job is usually a high-income year. Commission checks you earned in the last few months arrive after your departure date and are taxable in the year received. The tax withholding on those checks may have been at your old bracket. If you're moving to a lower-income next year, you may have a significant difference between your high-income departure year and your first year in the new role.
Two things to plan around:
Estimated tax payments. If you leave mid-year and stop receiving withholding through a payroll, you may owe quarterly estimated taxes on any remaining income. The IRS estimated tax rules require payments if you expect to owe $1,000 or more at year end and your withholding is below the safe harbor threshold.
Roth conversion opportunity. If your new role has a significantly lower income than your old one, the transition year or the year after may be a good time to convert pre-tax retirement funds to a Roth IRA. You are filling a lower tax bracket at a rate you may not see again for a long time. This only applies if you have a traditional IRA or a rollover IRA from a 401k. Run this past a planner or tax advisor who can model the numbers for your specific situation.
4. Reduce Fixed Costs Before Income Drops
The time to reduce fixed costs is before income falls, not after. Once you are in the transition period, you are working with whatever commitments you have made.
Look at every fixed commitment you have and identify the ones that have a natural exit point in the next 12-24 months: lease renewals, loan payoffs, subscription expirations. At each exit point, make a deliberate decision about whether to renew at the same level or reduce.
Common places to look:
- Apartment lease renewal -- can you move to something smaller or less expensive before income drops?
- Car payment -- if you are in the last year of a loan, pay it off before the transition
- Subscriptions and recurring services -- audit everything, cut what you can
- Any new fixed commitments -- do not sign a lease for a more expensive apartment in the six months before leaving
The income floor test applies here: every fixed commitment should be affordable on your new income, not your old one. Run every spending category against your anticipated new income and identify the gaps before they become pressure points.
5. Have a Health Insurance Plan Before Day One Out
Health insurance is one of the most expensive surprises for reps leaving a W-2 sales job for the first time. Employer-sponsored coverage ends on your last day (or end of the month, depending on the plan). COBRA is available but expensive -- typically the full premium cost the employer was covering, plus a 2% administrative fee.
Your options after leaving:
- New employer plan: If you are moving directly to a new role with benefits, this is the simplest path. Confirm the start date for coverage.
- COBRA: Expensive, but provides continuity of your existing coverage. Available for up to 18 months.
- ACA marketplace plan: Losing job-based coverage is a qualifying life event that opens a special enrollment period. Plans at healthcare.gov may be significantly cheaper than COBRA depending on your income level in the transition year.
- Spouse or partner's plan: If you have this option, use it.
Do not go uninsured. Do not assume coverage continues after your last day. Know the exact date it ends and have a replacement in place before then.
6. Decide What to Do With Your 401k
When you leave a job, you have three main options for your 401k balance:
Leave it in the former employer's plan. This is an option if the plan allows it (most do if your balance is above $5,000). The funds stay invested in the plan's offerings. This is low-effort but leaves the account wherever it is, with whatever investment options the plan provides.
Roll it to a traditional IRA. A rollover moves the funds to an IRA without triggering taxes or penalties, as long as you do a direct rollover (the check goes directly to the IRA custodian, not to you). An IRA gives you more investment flexibility and consolidates your retirement accounts in one place.
Roll it to a new employer's plan. If your new employer's 401k has good investment options, you can roll the old balance into the new plan. This simplifies account management if you prefer one account over two.
Do not cash out the 401k. If you withdraw the balance, you owe income tax on the full amount plus a 10% early withdrawal penalty if you are under 59 1/2. On a $100,000 balance, that could be $40,000 or more in taxes and penalties. The runway should be funded separately -- the retirement account should stay invested.
The IRS 401k distribution rules cover the specifics of rollovers and exceptions to the early withdrawal penalty if your situation is unusual.
Frequently Asked Questions
How much savings do I need before leaving a sales job?
The rule of thumb is 12-18 months of your fixed expenses saved before leaving a high-income sales job. Fixed expenses are rent or mortgage, car payments, insurance, minimum debt payments, utilities, and groceries -- not total monthly spending. For a rep with $6,000 in fixed expenses, that is $72,000 to $108,000. The range depends on how certain your next income is: a signed offer at a known salary needs less runway than a transition into entrepreneurship or a ramp period in a new industry.
What happens to my unvested stock options or RSUs when I leave?
Unvested ISOs and RSUs are forfeited when you leave unless the company has a specific arrangement to allow continued vesting or accelerated vesting. Vested ISOs typically need to be exercised within 90 days of your departure date or they expire. RSUs that have already vested are yours. Before you leave, know exactly how many shares are vested versus unvested, the vesting schedule for unvested shares, and the 90-day exercise window for any ISOs.
What is the best time of year to leave a sales job financially?
From a tax perspective, leaving early in the year is often better than leaving late -- you have a lower-income year ahead, which creates opportunities like Roth conversions that benefit from a lower marginal rate. If you leave after a strong Q4, you have funded your runway but owe tax on the high income year. Neither is universally better -- the right timing depends on your equity vesting schedule, your next role's start date, and your specific tax picture. If the timing is flexible, run it by a planner before you decide.
What do I do with my 401k when I leave my sales job?
Roll it to a traditional IRA or to your new employer's plan. Do not cash it out -- taxes and penalties make that the most expensive option in almost every case. A direct rollover moves the funds without triggering any tax event. If your new employer has a strong 401k, rolling into the new plan simplifies account management. If you prefer more investment flexibility, an IRA is usually the better choice.
