Important Considerations When Starting a New Job
Transitioning to a new job brings about a multitude of decisions. Whether you’re embarking on a new role or returning to the workforce, it’s crucial to make the necessary adjustments to your financial plan. This ensures that you can continue saving and working towards your financial and lifestyle goals for retirement. If you’re among the millions of Americans who have changed jobs in recent years, here are some essential tips to consider:
Update Your Cash Flow Planning
Starting a new job necessitates a review of how the change in income will impact your ability to save and achieve your goals. Take the time to assess your pay stub and consider adjusting your net income for tax projection purposes. You will also want to account for any new or lost employer perks, commuting costs, and other out-of-pocket expenses when modifying your budget.
Evaluate Changes to Employer-Provided Benefits
Significant changes in insurance coverage or individual disability coverage will have an impact on your overall financial situation and budget. Ensure that you coordinate your insurance coverage to avoid any gaps and consult with your doctors and healthcare providers to verify if they remain in-network.
Consider the Tax Implications
If your new job provides a substantial increase in income, it’s worth noting that you may find yourself evaluating where to put some of these funds for future retirement needs. Explore the possibility of moving some of your money into both traditional and Roth options within your workplace retirement plan if available. A Roth option allows you to pay the tax now but have the funds tax free in the future if rules are followed. Changes to the SECURE Act introduced additional avenues for maximizing your retirement account contributions.
If you experience a reduction in income, it may be prudent to decrease the amount you contribute to your retirement plans. If you find yourself in a lower tax bracket, you might need that money now rather than in the future. Collaborating with a financial professional will help you determine the best course of action based on your unique circumstances.
Assess Your 401(k) Options
If you have a 401(k) with a previous employer, you have several choices regarding its management. One option is to roll those funds into an IRA, which provides increased flexibility. Another possibility is transitioning your existing 401(k) into a new one. If you are eligible to enroll in a new plan, consider what type of contribution would need to be made to receive the benefits of an employer match.
Keep in mind that HR departments typically do not offer the level of advice necessary to make informed decisions regarding your 401(k). Therefore, it is advisable to consult a financial professional before making any changes. They can conduct a comprehensive review of your accounts and offer recommendations aligned with your financial plan.
Work with a Trusted Financial Professional
We highly recommend partnering with a trusted financial professional who can thoroughly assess your compensation and benefits. At Financial Dynamics, our dedicated team will carefully evaluate your current financial situation to ensure you can take advantage of any catch-up contributions on retirement accounts. We will assist you in investing your money in line with your goals and create a legacy plan for your family. Furthermore, we will guide you in selecting the products and accounts that best suit your unique needs and objectives.
Advisory services offered through J.W. Cole Advisors, Inc. (“JWCA”). Financial Dynamics & Associates, Inc. and JWCA are unaffiliated entities.