You Started a New Job! Now What?
In a recent Gallup survey, 21% of millennials said they’d changed jobs within the past year – a number more than three times that of non-millennials. With any job change, there are likely financial decisions that need to be made, which could have a significant impact on your long-term financial plan. As you pop the champagne to celebrate, you may also want to consider the following.
Job changes often come with changes in cash flow. You may be making more or less. Either way, you’ll want to consider what affect your new salary will have on your budget. An increase in pay may offer the opportunity to save more towards your financial goals such as retirement or a down-payment. A decrease may mean making some cuts to your budget or reducing certain line items. If the change in pay is significant enough to bump you into a different tax bracket, you may also need to adjust your withholding. If you think this may be a possibility, be sure to contact your CPA or speak with your HR representative about what you should adjust your withholding to so that you don't owe a significant amount at tax time.
A new job will also likely mean a change in benefits. While you may feel overwhelmed with having to remember everyone’s name, make a good impression, organize your desk, and learn a new set of systems, you’ll also need to choose your benefits. Take the time to research your healthcare options as you’ll likely be stuck with the plan you choose until the next open enrollment period. If your employer offers retirement benefits, you’ll want to consider to what extent you should participate, especially if your employer offers any type of matching. I’ve said it before and I’ll say it again – if possible, contribute enough to get the full match. An employer match is free money on the table. Don’t miss out! You'll also want to evaluate your options under the new plan - Roth or Traditional, as well as the available funds.
As you transition from your old job, there are also a few things to keep in mind. If you have a retirement plan at your old employer, you’ll want to consider rolling it over. Traditional 401k funds should be rolled over into a traditional IRA and Roth 401k funds should be rolled over into a Roth IRA. This often makes sense if your former employer’s 401k plan will begin directly charging you administrative expenses to administer your plan now that you’re no longer employed with that firm. Your employer is likely not going to pay those fees on your behalf now that you’re no longer with them. Rollovers are pretty straightforward, but you should make sure you understand the rules before executing one. Taking too long or having the funds sent to an unqualified account in your name (or cashed out) could result in the IRS considering the rollover to be a distribution which would make the funds taxable to you.
Adkins, Amy. “Millennials: The Job-Hopping Generation.” Gallup.com. Gallup, December 16, 2019. https://www.gallup.com/workplace/231587/millennials-job-hopping-generation.aspx.
“NUMBER OF JOBS, LABOR MARKET EXPERIENCE, AND EARNINGS GROWTH: RESULTS FROM A NATIONAL LONGITUDINAL SURVEY.” U.S. Department of Labor. U.S. Bureau of Labor Statistics, August 22, 2019. https://www.bls.gov/news.release/pdf/nlsoy.pdf.