A Guide to Switching Your Benefits When Changing Jobs
Changing jobs means not only changing benefits but changing your salary, your retirement options and possibly even moving. If you have worked hard to change your career, you do not want to let switching benefits detract from the positive aspects of your new job. After all, it may be helping you reach your ultimate career goal. It is a stressful time since you are focusing on making a good impression on your new boss and coworkers, but your financial decisions are still important and should be considered carefully. Remember that taking advantage of your benefits can reduce your taxable income. You may qualify for new benefits during open enrollment, so be sure to review them each year.
Generally, there is a waiting period at a new employer before you qualify for health insurance. You still need health insurance coverage during that time. You can choose between using COBRA insurance or a short-term health insurance policy. The short-term insurance policy will cost less but is catastrophic insurance, which means you will have a high deductible to meet before it starts covering your medical bills. The short-term policy usually does not meet the requirements for the Affordable Are Act.
When you sign up for new health insurance at your new employer’s, you may have different policies to choose from. Choose the most affordable plan that will give you the coverage you need. If you do not need a lot of coverage, you can opt for a cheaper plan. You may want to consider a high deductible insurance plan, particularly if your employer will contribute to the Health Savings Account on your behalf. Try to avoid a hybrid plan that has high deductibles but does not kick in with full coverage once you meet them.
A new job means a new retirement plan. Many people leave a trail of 401(k)s behind them. They forget to roll their 401(k) over or figure it is too complicated. You can roll your 401(k) into an IRA at an investment firm or at your bank. It allows you more control of which stocks you use, plus it consolidates your retirement contributions to one place. If you have a 401(k) loan, the amount will be due when you quit your old job. You will need to be prepared to pay it off completely immediately or pay taxes on it.
There may be a waiting period before you can begin contributing to a 401(k) at your new job. If this is the case, do not get out of the habit of contributing to retirement. Set up a monthly contribution to an IRA account until you qualify for your employer’s 401(k). Sign up for the benefits and any matching contributions you qualify for as soon as you are eligible.
When you start, you should be given the opportunity to sign up for a Flexible Spending Account as well as other types of insurance. A good starting point would be to consider what you had before you left your old job and see if the coverage is comparable to what your new job is offering. You may find that the dental plan is better at your new job and is worth signing up for. On the other hand, the vision plan may not be worth th money. It is important to realize that as your family changes, and as you age some benefits will become more important to have while others may not be worth it when you are young, single and healthy.
Take time now to work out a new budget with your new salary. This may mean you have found more money to put towards paying off your debt or increasing your retirement contributions. Before you increase your spending in any area, consider getting out of debt and increasing your savings a priority now. Making the change when your salary increases is easier than cutting back after you have formed new spending habits.
People often find it easier to change spending habits in a new environment. Try to limit the amount that you eat out and your recreational spending when you move to a new area or start working at a new office. If you bring your lunch from home and look for a nice park to eat at, you can still get out of the office but save a lot of money.
If you are moving for your new job, be sure to scout out your new area before signing a lease. You should also use a financial moving checklist to make sure you change all of the addresses you need to, close accounts, and keep yourself from late payments and other hassles that come with moving.
If your company is not paying for your moving expenses, be sure to save the receipts because the money is tax deductible if your new job is more than 50 miles away from your new location. It can save you quite a bit of money when it is tax time.