7 Money Moves To Make When Starting a New Job
Starting a new job can be a stressful -- albeit exciting -- life milestone. In addition to figuring out how to navigate your new role and new working relationships, there are also some financial decisions and changes you will need to make.
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From selecting a retirement plan to reconfiguring your budget if your salary has changed, here are the money moves you should make when starting a new job.
Review Your Tax Withholdings
Your tax situation may change based on your new role and salary.
"I suggest that after you receive your first paycheck, you review your federal tax withheld to make certain you are not withholding too little or too much federal income taxes," said Marla R. Chambers, senior financial planner at Buckingham Advisors.
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Figure Out What To Do With Your Old 401(k)
If you had a 401(k) plan through your former employer, now is the time to consider what you should do with it.
"Many people choose not to make a decision about what to do with their 401(k) funds. Instead, they simply leave the funds behind," said Kyle Ryan, CFP, executive vice president of advisory services at Personal Capital. "It's not always the best option. People often fail to monitor accounts held at former employers as closely as they should -- the money becomes 'out of sight, out of mind.' Also, the main benefit of a 401(k) plan is an employer match if the company offers one. Once you leave a job, you no longer receive the match. And there are better investment vehicles out there -- 401(k) plans tend to have high fees, limited investment options and strict withdrawal rules. So if you're no longer receiving the match, it's usually best not to leave your assets languishing in an old 401(k)."
Ryan recommends rolling over your 401(k) into an IRA, or into your new 401(k) if your new employer offers a plan with low costs and a wide variety of investment options.
Set Up Contributions To Your New 401(k) Plan
If you do have access to an employer-sponsored retirement plan, such as a 401(k), set up your contributions as soon as you are eligible.
"Contribute at least enough to your retirement plan to maximize your employer's contribution match," Chambers said. "Failing to maximize your employer's match is like refusing a pay increase. If you receive a pay increase with your new job, consider increasing the percentage of your earnings contributed to your retirement plan."
Consider Opening a Health Savings Account
Carefully review the healthcare plans offered through your new employer. If you are given a choice, a plan that includes a health savings account may be your best financial bet.
"If your new employer offers a high-deductible health insurance plan, contribute to your Health Savings Account directly through a payroll deduction," Chambers said. "Contributing to your HSA through your payroll reduces your federal, state and local taxes, as well as Social Security and Medicare taxes."
Review Your New Life Insurance Policy
"While your company's group life insurance policy is a nice perk, you need to calculate coverage to determine if it's enough for your family," said Andrea Woroch, a consumer and money-saving expert. "Generally speaking, you should have enough life insurance to cover between five and 10 times your annual salary. However, employer-sponsored group life insurance plans may only offer one to two times your annual salary in coverage, so it is likely not enough coverage to replace income due to death."
If this is the case, consider purchasing your own personal term life insurance policy in addition to the group plan, or opt out of the group plan altogether, Woroch said.
Adjust Your Budget
If your income will be changing with your new job, make sure you readjust your budget to ensure that you are living within your means. Set up automatic savings transfers and figure out how much you can devote each month to paying down debt (mortgage, student loans, credit cards, etc.). If you're making a higher salary, consider contributing the difference to paying down your debt. You can also set up contributions toward longer-term money goals, such as a vacation, car or home.
It may take some time to figure out a budget that works for you, so revisit your plan often.
"Reevaluate your budget on a monthly basis," said Richard Lavina, co-founder and CEO at Taxfyle.
Talk To a Financial Professional
Whenever your financial circumstances change, it's a good idea to get some professional insights on how to navigate your new situation. You may be able to get guidance directly through your new employer-sponsored retirement plan.
"If your employer offers an on-site retirement consultant, they can help answer your questions, as well as review tax withholdings, consolidate retirement accounts and other issues," said Aaron Moore, senior vice president and head of client engagement at Lincoln Financial Group. "If you don't have access to a retirement consultant at work, consider meeting with an independent financial professional who can provide advice tailored to your specific situation."
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This article originally appeared on GOBankingRates.com: 7 Money Moves To Make When Starting a New Job
