Perks and pitfalls: Four things to consider when changing jobs
The days of staying at one job for your entire adult life are largely gone. According to the Bureau of Labor Statistics, the average worker stays at each of his or her jobs for about 4 1/2 years, with young employees staying in their jobs about half that amount of time.
Not all job changes are bad, but even if you have just landed your dream job, negotiating what you want and keeping track of all of the changes can be complex. Here are four considerations that can help you evaluate that new job offer or make the most of a recent change.
Consideration 1: Evaluate the major insurance benefits —
— Health, dental and vision: These three types of insurance can vary a lot in what is covered and in what they cost you. Some employers even offer more than one option. If you have a unique medical need or providers you like, you should find out in advance what your potential coverage will be.
— Disability income insurance: Does your new employer offer short- or long-term group disability income insurance? Most employer-sponsored plans will replace up to 60 percent of your pretax income if you are ill or injured. If you want to supplement this, you can get individual disability income insurance.
— Life insurance: Many employers offer a group life insurance program with a few coverage options to choose from. If you decide you need more protection than what’s offered by your employer’s life insurance option–either a different amount of insurance or a different type of insurance–you will want to evaluate purchasing your own life insurance policy.
Consideration 2: Understand your new employer-sponsored retirement plan.
If your new employer offers a 401(k), Roth 401(k) or 403(b), take advantage of the opportunity to save for retirement. Many companies will match a fixed percentage of your contributions up to a certain maximum amount. Don’t know how much to contribute? Putting in enough to max out the company match is a good place to start.
What if an employer-sponsored plan is not available? You might be able to set aside retirement savings in an individual retirement account, such as a Roth IRA, a traditional IRA or an annuity. Note, however, that contributions to Roth IRAs and traditional IRAs might be subject to certain income limitations. Talk with a financial professional to create your own retirement savings account.
Consideration 3: Factor in additional perks.
Workplaces have increasingly become creative with the benefits they offer, from on-site sports to travel discounts. These benefits may seem small individually, but they can add up quickly. Here are some common employer perks that may help out your bottom line:
— Paid time off or vacation days;
— Telecommuting or working from home;
— Paid maternity and paternity leave;
— Wellness programs, such as an on-site gym and smoking cessation programs;
— Education reimbursement and professional development options;
— Technology — company phone, laptop or other tools;
— Transportation allowances for mileage, parking or even fleet vehicles.
Consideration 4: Decide what to do with your previous company’s retirement plans and company stock.
You may have cleaned out your old desk, but until you take care of these issues, you still have ties to your former job. When it comes to the assets you have invested in a past job’s retirement plan, you have four options:
— Do nothing: You may be able to leave your assets in the existing account, but there will probably be a minimum balance you must maintain, and you won’t be able to contribute that plan.
— Roll over into your new job’s plan: Your retirement funds will be combined with any contributions you make to your new employer’s plan, but there may be a waiting period before all of the funds are rolled over.
— Cash out: You may need to pay taxes and potential penalties and include the amount you received on your tax returns.
— Roll it over into an individual IRA: This option keeps your money in a tax-qualified status. This choice may offer you a wider range of investments than is available to you under an employer-sponsored plan.
Beyond your old retirement account, you may also have a pension and company stock. The options with both of these assets will vary based on your former company. Talk to your benefits department and a financial advisor or tax accountant to be sure you understand the choices available to you.