Congrats on the new gig! Now’s a good time to check in on your finances.
The past couple of years have inspired many of us to think about what we really want out of work and life. If you’ve recently taken a career leap for more flexibility, better opportunities, or any other reason, you’re in good company. According to a recent Bankrate survey,1 more than half of workers (55%) say they are likely to look for new employment in the next 12 months, in a wave known as “The Great Resignation.”
As you’re getting acclimated, you probably have plenty on your mind and to-do list: meeting your new team, finding the best lunch spots (if you’re going into the office), and getting your technology all set up. But while you’re in onboarding mode, don’t forget about the financial aspects of changing jobs. Here are five important money moves to consider.
A budget is the backbone of a solid financial strategy. At a high level, it helps you track your inflows and outflows so you can manage current obligations while also planning for the future. If you already have one in place, you’ll want to update it to reflect your new position—and if you don’t have one, now is the perfect time to start drafting.
Inputs should go beyond salary to include any bonuses, commissions, or equity awards you may be receiving. Line items will include retirement plan contributions, insurance premiums, and other work-related expenses, on top of your fixed costs (e.g., housing, food, utilities, debt payments) and discretionary expenses. Don’t forget to account for changes in spending on things like transportation, daily lunches and coffees, and even dry cleaning if you’ve made a switch between in-person and remote work.
One of the most exciting parts of starting a job is paging through the employee handbook or clicking through the intranet to explore all the new benefits at your disposal. Here are some things to think about as you evaluate your options:
- Retirement plan: Do you understand any eligibility and vesting rules for the plan? Does your employer offer a match, and are you contributing enough to get it?
- Insurance: Do you have access to a plan with a Health Savings Account (HSA), which allows you to save and invest for health expenses now and in retirement? (Keep in mind, HSAs usually accompany high-deductible health plans, which may not be preferable for everyone.)
- Modern money-savers: Are there opportunities for you to save on commuting expenses, family care, pet insurance, or fitness memberships? Are there discounts on financial services?
As you peruse, don’t forget to look for new benefits related to your mental health, such as subsidized counseling, meditation apps, and more. And speaking of well-being, be sure to take advantage of any offerings related to your financial wellness, like digital and live education resources, money coaching and/or consultations with a Financial Advisor, and potentially financial planning.
You generally have four potential options for your qualified retirement plans from former employers. You can:
- Leave your assets in your former employer’s plan, if permitted;
- Roll over your retirement savings into your new employer’s qualified plan, if one is available and if rollovers are permitted;
- Roll over the retirement savings into an individual retirement account (IRA);
- Cash out and take a lump sum distribution from the plan. This would be subject to mandatory 20 percent federal tax withholding as well as potential income taxes and a 10 percent penalty tax.
If you’re not sure which avenue might make the most sense for your situation, it can be a good idea to consult with a Financial Advisor and your legal and tax advisor.
While no one wants to think about worst-case scenarios, it’s smart to be prepared. As you sign up for certain benefits, you’ll be asked to name beneficiaries who will receive your assets if you pass away. If you’ve recently gotten married or divorced, had a child, or experienced another change in family structure, you’ll want to make these designations accordingly.
And while beneficiaries are top-of-mind, you might want to review your designations for any policies or accounts you maintain outside of work as well.
Equity compensation can be a powerful tool for building wealth. It comes in many forms, such as restricted stock units (RSUs), stock options, or employee stock purchase plans (ESPPs), which allow you to buy shares of company stock at a discount.
If your new employer offers one or more of these benefits and you’re eligible to participate, give some thought to your options. A Financial Advisor can help you evaluate company equity in the context of your overall investment portfolio and financial goals, and a tax advisor can help you understand its potential tax implications.
Starting a new job is an exciting time brimming with possibility. It’s also a time when you’re particularly focused on money matters. As you settle in, don’t forget to do some financial onboarding: draft or update your budget, take advantage of new benefits, make a plan for addressing old retirement accounts, and consider any available equity compensation. If you have questions about navigating the financial aspects of a job change, you may wish to recruit the help of a financial professional.