What to Do When You Change Jobs
A four-step checklist to move your financial plan forward as you start a new job
“When you leave a job or take on a new one, there are multiple factors to consider that could significantly influence your future,” explains Stuart Ritter, CFP®, a senior financial planner with T. Rowe Price. As you make the transition into your new position, consider each of the following items:
1 Your new workplace retirement plan
Contribute to your new workplace retirement plan as soon as you are eligible—and make an effort to contribute more than you did to your former plan. Ritter suggests deferring at least 15% of your salary, if possible, including the amount of your company’s matching contribution. “Many variables change when you switch jobs,” Ritter explains. “Your salary may be higher or your commute might cost less, enabling you to contribute at a higher rate than you were before, without significantly affecting your finances.”Select a diversified mix of stock and bond funds appropriate to your time horizon. Your new employer’s plan may include target-date funds, which provide an easy way to achieve an age-appropriate allocation. For a complete picture, remember to look at the assets in your old 401(k) plan and any other retirement accounts you may own when weighing the investment choices in your new plan. Of course, diversification cannot assure a profit or protect against loss in a declining market. All mutual funds are subject to market risk, including possible loss of principal.
A new job means a new set of benefit choices. While your family likely still has the same needs for life insurance, disability coverage, and other coverage, use this transition to find the most efficient way to meet them. “Your new employer may offer a benefit that you previously had to buy on your own, such as life or disability insurance. Or it may not offer a benefit that you rely on,” Ritter says. “Evaluate your needs and compare the available benefits offered by your new employer and your spouse’s employer.”
3. Flexible spending account
Even if you change jobs midyear, sign up for a flexible spending account (FSA) at your new job, which allows you to pay for qualified medical expenses and child-care costs with pretax dollars. Also take full advantage of your FSA at your previous job by submitting all qualified expenses you’ve incurred so far this year. Everything from orthodontics to programs for quitting smoking are considered qualified expenses. If you have a question about what’s covered, contact your plan administrator.
4. Beneficiary designations
You’ll need to name beneficiaries when you sign up for your new workplace retirement plan. Take this opportunity to check the designations on all of your financial documents and update them if necessary. You may have had another child, or you may have divorced and married again. “You may still have your parents designated as beneficiaries from before you were married,” Ritter says. “If you don’t update the paperwork, your assets may not be distributed as you wish when you pass away.”You probably will change jobs many times throughout your career. Making the right decisions during the transition is critical to keeping your financial goals on track. “Think about the ways your new job offers opportunities to optimize your financial situation,” Ritter says. “Employers offer a variety of benefits that can significantly influence your financial position now and in the future.”