We’ve not seen anything like today’s job market. Companies in many sectors are desperate for people to fill vital positions.
Are you thinking about changing jobs or accepting a new position? When an employer extends an offer to prospective candidates, salary is only one component of the benefit package. Health insurance, retirement plan and contributions, and other benefits may be part of the compensation that you’ll have to mull over. As a result, there are plenty of good reasons to speak with an independent financial professional before you make any decisions. Let’s briefly review these components of compensation.
This consists of salary, commission, bonuses, and other types of compensation (e.g., stock options). A basic comparison of how much you are earning in your present position against what is being offered is simple enough, but how do potential commissions and bonuses factor into how your disposable income may change, or how it affects your financial goals (including paying down debt or saving for children’s education)?
If you haven’t been paid with quarterly or annual bonuses in the past, how do these affect how you currently save and spend? Bonuses may also be paid through company stock options, which offer the ability to purchase shares at a discount to market prices. However, you may be required to work with that employer for a preset period before you can take advantage of them. And selling the shares after purchase can have significant tax implications. On the other hand, unexercised stock options often have expiration dates. Will they expire when you leave the company? If you plan to stay in the new job for a relatively short period, you may need help considering your stock option choices.
Workplace Retirement Plans
Your current employer may have an active worksite plan, such as a 401(k), 403(b), or IRA (or maybe even a conventional pension plan). If you change jobs, you will be faced with choices regarding the money you have accrued in this plan, including closing it out and taking your cash, transferring your accrued savings to your new employer’s plan, rolling the money into a new IRA account, or even leaving your old plan alone.
There are also questions for your new employer’s retirement plan, such as the type, whether the company offers a matching contribution, and the existence of a waiting period (i.e., vesting period) before you can participate.
An independent financial professional, like Isakov Planning Group, can help you wade through the options, and decide how these choices align with your personal savings and retirement goals.
Although many jobs today are done remotely, some may require a move to a different region. Part of the employment package may include relocation expenses, including lodging during the transition, as well as help in finding a new home. In some cases, the new company may offer a one-time payment meant to cover all relocation costs. There may be tax implications for these payments as well.
Today, health insurance costs more than ever. It is essential to understand (to the extent possible) the new employer’s health insurance plan and its implications for your contributions towards premiums, deductibles, and other out-of-pocket costs. Annual premiums can easily surpass $10,000 per person for certain age groups, so careful consideration of how this may affect your savings or spending can be crucial.
In summary, don’t focus solely on salary when changing jobs. Think about how the entire offer, including benefits, will affect you, your savings, and your goals. New employment inducements can become pretty complex these days, with signing bonuses, daycare subsidies, and long-term care or disability insurance. At Isakov Planning Group, we can help analyze your present situation and how the new offer compares. A change in employment is also a good opportunity to re-evaluate your overall financial plan. Contact us today to get started on your future today.