New Job? Don’t Forget Your Finances


man at work

Man at work | Source: iStock

Getting a new job can be an exciting time. However, it’s also important to make sure your finances are in order. The Cheat Sheet spoke to Kate Ryan, a wealth management advisor at TIAA, to learn more about how to prepare your finances after getting a new job.

The Cheat Sheet: What are some financial benefits many new hires don’t take advantage of?

Kate Ryan: The No. 1 financial benefit most often overlooked is the retirement plan match offered by employers. New hires should contribute as much as they can and take advantage of the full match their new employer offers. By failing to do so, they are leaving free money on the table. 401(k) or 403(b) contributions are taken directly out of their salary in pretax dollars to fund their retirement savings.

New hires should also check to see if their employer offers a Roth 401(k) option and see if they are eligible. This is a way to add tax diversity in the future as contributions are made on an after-tax basis and there are no taxes paid on distributions after the age of 59 1/2. The sooner you start saving for retirement, the sooner you’re able to start accruing compound interest.

CS: What should new hires do if they don’t understand how to fill out their retirement plan forms?

KR: Do your research! During the enrollment process, if you have multiple options for retirement plan providers, research your choices beforehand. Explore the provider’s website, read materials provided to you, review their additional services and offerings for participants, as well as the provider’s mission and values.

If helpful, see if the retirement plan provider has representatives you can either speak with over the phone, or meet in person, to discuss your options and answer any questions you may have. You may feel rushed during orientation but taking a few minutes to research and speak with a representative can help you put your money in the best plan for you.

CS: Tell us a little about the Roth IRA

KR: One option that everyone with a job and earned taxable income can consider is opening a Roth IRA. The beauty of a Roth IRA is that individuals likely won’t have to pay taxes when making withdrawals later in life. You can also make certain withdrawals when you are ready to purchase your first home. Also, check to see if any of the retirement plans available to you offer target date funds. This option will allow for you to achieve diversification within one fund, and automatically align the investment mix and risk with the time frame you’ve set around when you plan to retire.

CS: If their retirement plan doesn’t offer a match, should they still participate?

KR: Definitely! Young adults entering the workforce have one of the greatest gifts – the gift of time and compound interest. Compounding happens when earnings on your savings get reinvested to generate their own earnings, which also get reinvested to create more earnings, and so on. Over time, compounding can fuel the growth of your savings. Getting an early start on savings can pay off in a big way. The most common mistake young people make is that they think they don’t need to start saving when they are young. But this is completely wrong. In fact, saving while you are young is one of the best gifts you can give yourself.

In part two of our conversation, we’ll talk more about how new hires can take control of their personal finances.

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