Shakespeare Blog: View from the Lake

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Financial Checklist After Starting a New Job

Written By: Ryan Rink, CFP®, EA, ChFC®, CLTC®

New Job Handshake

Congratulations on landing that new job or embarking on a fresh career path! As you navigate the excitement and challenges of this new chapter in your professional career, it’s crucial to ensure that your financial house is in order. We’ll run through some of the planning items to be aware of when starting a new job.

Understand Your Compensation Package

It’s likely your pay won’t exclusively be a base salary. Oftentimes, there are other forms of compensation such as bonuses, stock options, commissions, etc. Be sure to understand how each of these types of compensation work and if there are any required goals that need to be met in order to obtain them.

Be sure to take into account the value of your new employer’s group benefits. You may not see these benefits directly hit your bank account, but they can be extremely valuable. These include, but are not limited to, health/life/disability insurance, employer retirement plan match, stock options, etc.

Cash Flow

It’s likely your income has changed after accepting the new job – hopefully it has gone up! You’ll want to review your current budget based on your new income. What expenses will change with your new position? Adjust your budget as necessary for additional or less commuting, as well as any new/lost employer perks such as a cell phone, gym membership, etc.

Review the amounts you are saving towards retirement, as well as any short-term goals (cars, vacations, etc.) and long-term goals (buying a home, getting married, starting a family, etc.). With an increased income, you may be able to allocate more towards each of these goals. You’ll also want to make sure to have at least 3-6 months of cash set aside in an emergency fund.

Retirement Planning

Be sure to review when you are eligible to enroll in your new employer’s retirement plan (401(k)/403(b), SIMPLE IRA, etc.). You’ll want to enroll as soon as possible. Review the employer match within the retirement plan. For example, if the employer offers a 100% match up to 5%, you’ll want to make sure you’re contributing at least 5% to the account to maximize this benefit.

If you had a 401(k)/403(b) at your previous employer, you should consider rolling over the account either to your new 401(k)/403(b) or a traditional IRA. This helps consolidate your accounts and makes it easier to manage going forward.

Your employer may offer more retirement plan options than just a 401(k)/403(b). Be sure to review each of the plan options available with your new employer. Some alternatives include a non-qualified deferred compensation (NQDC) plan or an employee stock purchase plan (ESPP). These are just two examples, but it could make sense to start contributing to these additional accounts on top of your 401(k)/403(b).

Tax Planning

With your salary changing, it’s possible you will now be in a higher or lower tax bracket going forward.  You’ll want to update your tax withholding elections to ensure you’re not overpaying/underpaying taxes.

Depending on your income change, it may make sense to change whether you’re deferring pre-tax or Roth to your retirement accounts. For example, if you’re in a higher marginal tax bracket with your new job compared to your old one, you may want to consider deferring pre-tax to your 401(k) versus Roth.  This works the other way as well – if you’re now in a lower bracket, you may want to defer more into Roth than pre-tax.

If your tax situation has now changed and become more complicated, it may be time to consider hiring a CPA/Accountant.

The checklist below is a great starting point to review and complete as you go. If you recently changed jobs, please reach out to your Shakespeare Financial Advisor at (262) 814-1600 with any questions you may have.