Whether it’s your first full-time job out of school or you’ve made a recent career switch, the first few weeks of a new job are always jam-packed. From new co-workers to a unique company culture, there’s a lot to take in. What’s more, you’ll likely find yourself in and out of orientation meetings, hearing terms like Roth 401k and Health Savings Account (HSA). But before you tick any boxes or sign any forms, take the time to understand how these decisions can, and will, impact your financial well-being in the long-run.
Start Saving: Sign up for your employer retirement plan.
When you’re young, it’s easy to overlook retirement. It may be decades away, but saving for the future is one of the most important things someone can do from the get-go. With this in mind, pay close attention to what employer-sponsored plan is available to you — a 401k, 403b (typically offered by nonprofits, schools, or hospitals, etc.), SEP, or SIMPLE IRA (if you work for yourself or for some small businesses).
Once you have a strong grasp on your employer’s plan, make sure you’re aware of whether or not there’s a match program available, or a Roth option. While it’s a personal preference, a Roth 401k may be worth considering. Unlike a traditional 401k, you make after-tax contributions upfront, so that all of the money, including earnings, is tax-free upon withdrawal in retirement.
Importantly, if you’re starting a new job, but it’s not your first job, you’ll also need to decide what to do with your previous retirement plan. There are three main options to consider — leaving the money where it is, transferring it into your new employer’s plan, or rolling it into a separate IRA. Depending on your situation, there will be benefits and drawbacks to each option, but using your HR team as a resource is the best way to guarantee that you’re not leaving any money on the table.
Be Prepared: Understand what insurance is available to you.
When it comes to health insurance, you may only have one plan to choose from. But it’s possible that there are a few options, such as an HMO or PPO. If that’s the case, make sure you understand each plan, and compare them, especially if you have health issues or speciality needs.
Plus, even if you’re in great health now, it’s important to ask yourself: if something were to happen, will the plan I select today put me in a good position for any increased medical costs down the line? Read up on the monthly premiums, copays, deductibles, and out-of-pocket maximums associated with each one. If you select a high-deductible health care plan, you may also want to consider contributing to a Health Savings Account (HSA) pre-tax as a way to offset some of those medical bills.
Perhaps less talked about than health insurance, but just as important, are disability and life insurance. These can seem like dark topics, but, much like saving for retirement, it’s never too early to sign up. Disability insurance is important as it typically kicks in to replace a certain percentage of your income when your sick pay runs out. Plus, it’s usually quite cheap. Similarly, life insurance tends to be cheaper to buy while you’re still young and healthy, and is especially important to consider if you have dependents or a spouse at home.
Dig for Extra Perks: Ask about all the benefits you can take advantage of.
Beyond retirement and insurance, your employer may offer several other perks that you’re not aware of. From company discounts to gym benefits to commuter subsidies to low-cost parking, don’t be afraid to ask about what’s available. In the short-term, these benefits may seem like small ways to save money. But, if you take advantage of them right away, you’ll see how they can add up to some major savings over time.
Speak Up: Talk to HR and find a mentor early on.
As you start to navigate the piles of “new hire” paperwork, pay attention to those around you. Perhaps, there’s someone in your office who’s gone out of their way to help you out. Or, you happen to click with one of your co-workers early on. Your HR department is an amazing resource, but having a work mentor is a smart way to guarantee you’re never afraid to ask questions. From when your first paycheck arrives to when it comes time to take your first vacation, there’s no reason you should be feeling in the dark about anything.
Amidst the excitement of a new job, make sure these major decisions don’t get swept to the side. While you may have opportunities down the line to update your plans, it’s essential to stay on top of deadlines before any windows close. Ask questions during your meetings with HR, and set aside time one weekend to review everything in detail. More than anything, think about both your short and long-term goals, and how your selections today will impact your financial health years from now.