You just landed your first job … What now?
Have you ever been surprised by the amount of paperwork you receive during your integration? Starting a new job isn’t just about setting up your direct deposit to receive your payment. The onboarding process is accompanied by essential documents that can affect the amount of money you bring home on each payday, the way you take care of your health, the impact of tax day on you and how you contribute to your retirement life. This paperwork can be intimidating. Sometimes it feels like you have to quickly figure out how to make the best option for yourself. However, you are not alone. ESSENCE asked three career coaches for their advice on making the best decisions about our 401k, healthcare and taxes.
Being prepared and understanding what you’re signing up for will help you start your new job with confidence and no surprises. Here are their tips for making an informed decision:
Even if your professional life is just beginning, thinking about retirement is essential. When you start a job, your business may have 401k or other retirement options. You will need to decide whether or not to participate in this benefit when you complete the onboarding documents. âIt’s never too early to start planning for retirement, so participating in your company’s 401k when you’re eligible is a great money move,â said Sarah Morgan, CEO of BuzzARooney LLC, a coaching and business company. of advice. His company works with organizations to help them create more equitable and inclusive cultures while coaching executives and HR professionals in the same fields. With each paycheck, you will be deducted a pre-tax amount that you choose to be placed in your 401k. Most companies will then match your contribution to this retirement fund.
âYou can borrow and withdraw from your 401k for purchases like cars, houses, education expenses – and pay yourself back with interest! These are all great ways to make your money work harder for you, âMorgan said. If your business doesn’t offer the 401k, Morgan suggests other retirement options to consider, such as an Individual Retirement Account (IRA) or Taxable Brokerage Account (TBA) through TD Ameritrade or Ally. âDo your research online to make sure you understand the associated fees and broker responsibilities, so you don’t profit from them. Also, keep in mind that IRAs and TBAs will almost always be contributed after tax, so you won’t get the same tax breaks as with your 401k plan, âshe explained.
When you start your career, rent and student loans can take up a large chunk of your salary and limit what you can contribute in your retirement. âThe calculation of your contribution should always be based on what you can afford. Depending on your personal expenses, this can represent 1 or 2% of your income. It’s totally ok! Something is better than nothing as a starting point. You can always increase your contribution later when your expenses allow it or when you get a raise at your job, âMorgan explained. If possible, Morgan suggests contributing to what your employer matches if you can afford it. If your business is up to 4% of your salary, Morgan says contribute at least 4%. âIf they offer 4% and you pay 2%, you left 2% on the table and you messed up that free money,â she explained. Consult with retirement advisors often to set goals and verify your investments. Once you leave a business, 401k contributions stop. âHowever, the money you contributed, the interest on it and some if not all of your employer’s consideration still belongs to you,â Morgan said. Contact your employer to see options to transfer your 401k to your new employer, cash in with a penalty, or do a solo 401k if you become an entrepreneur. “Your retirement isn’t a slow cooker chicken – don’t just put it on and forget it!”
Understanding Your Health Care Options
âYou never know when you’ll need healthcare because things happen quickly – let’s say in the event of an illness or an accident you’ll want to be ready anytime things may change,â explained Latesha Byrd, CEO & Founder of Byrd Career Consulting. She runs a talent development consulting agency serving organizations and top talent at the intersection of career empowerment, diversity, equity, inclusion and leadership development.
Some employers offer several health care options that you should consider when starting your job. These options come with different plans with different levels of coverage and pricing. âUnderstanding your health care options will also help you plan for the budget. Some plans cost more than others, and choosing the right plan requires good planning for the future while finding a plan that best suits your current financial situation, âByrd said.
Where you are in life can determine the type of plans you consider and how much you invest in your healthcare. If you are at a point in your life when you are considering expanding your family through birth or adoption, or bringing a parent or sibling into your household, consider what will provide the best coverage for your family. Even chronic illnesses you might have should be considered when finding a plan if medication is a big part of your budget and frequent doctor visits are a way of life. The cheapest health care option may not damage your paycheck, but the medical bills will hit your pockets right down the line. “It’s those out-of-pocket expenses that add up, and if we don’t ask the questions up front about what’s covered and not, we could end up paying more than we anticipated or accounted for,” he said. -she explains. Byrd suggests looking for a financial advisor to work with to help make better financial decisions. âI personally hired a financial coach to help me budget, improve credit, save money, pay off debt, and decide health care options. Now I feel like I’m ready for my future, âshe added.
Byrd says professionals often don’t ask enough questions before receiving a job offer. It catches us off guard when we learn that benefits have been left on the table because we haven’t educated enough. âMake sure you ask for full pay. Salary is only 70% of the package, and a lot of benefits can be negotiated, in addition to salary; she said,â healthcare lies behind the physical, including mental and emotional health and well-being, âshe said.
Understanding tax forms
One of the forms needed to start a new job well is your tax form. Kimberly B. Cummings, founder of Manifest Yourself, agrees. âTax forms have long-term consequences that many professionals forget when they rush to fill out a virtual stack of onboarding documents. The more money you earn, the greater the consequences at the end of the year. Manifest Yourself is a leadership development company that provides tailored solutions to hire, develop, engage and retain women and people of color. Cummings suggests asking a CPA for help filling them out, but recommends taking more taxes rather than less when you decide to claim 0 or 1. âOver tax this year? You will receive a nice refund check early next year. However, there is no worse feeling than when you expected a refund check, and you end up writing a check to the IRS at the end of the year because you didn’t pay enough money. ‘taxes,’ she said.
When the paperwork continues to be overwhelming, talk to an HR professional about your options and ask for an extension for when you submit the paperwork so you can spend time making an informed decision about your future.