If you’re looking for a new job, you most likely have many concerns. This is an exciting and nerve-wrecking time. You face a multitude of options with companies that hopefully align with your values and your career goals. You may be concerned about making the switch, finding a fulfilling career, and how to tell your current employer you’re quitting.
To many job hunters, one of the primary concerns with looking for a new job is how much they will be earning, followed by health benefits, vacation time and other workplace perks. You should also be focusing on what retirement benefits they and if they fit you right. A strong retirement benefit should become a main focus before you consider taking on a new job.
We’ve compiled a list of retirement questions you should ask your new employer.
Will your health benefits be leveraged toward retirement?
You might not know that your health insurance options can be used to help you save for retirement. If you have a high deductible plan, you are eligible to contribute to a health savings account. This are contributions that you can exclude from your taxable income. Additionally, if used for qualified medical or health costs, the distributions of your contributions are also tax-free.
In an HSA – unlike a flex spending account – you don’t have to spend the money every year. It works kind of like a 40(k) or an IRA account in that it can increase the amount you are able to save yearly, tax-free. Your balance can grow free of taxes and can be used for medical expenses. After the age of 65, you can withdraw this money for any reason. The caveat: if the withdrawal is not used for a qualified medical expense, you will have to pay income tax on these funds. You will not; however, have to pay a penalty tax.
The contribution limits for these accounts is small and the investment options have a limit. So, this should not be your only retirement account. However, you can use it to increase your tax-deferred savings.
Will the company match my contributions?
Employer-matched 401(k) plans are incredibly valuable, as they boost your retirement savings. Companies should see this as a big draw toward the company’s retirement plan. Next you want to find out if they are matching your dollar amount or a certain percentage for each dollar.
An employer match is great because it’s essentially free money and can drastically increase your savings. occasionally, employers will put a certain amount of money into your retirement account annually – regardless of whether or not you add funds to it yourself. This is essentially an additional compensation, which means the funds will not be taken out of your income.
Your employer or HR person will go over your company’s retirement package with you in more detail.
Does the pension plan offer a 401(k)?
This should always be your first question. Knowing which options are available to you can help you begin your road-map to planning your retirement and investment options. If your employer offers an IRA, keep in mind the contributions options for this have a limit; however, you may be able to contribute to both and IRA and a 401(k) as part of the company’s plan.
Do matching contributions vest?
Vesting refers to the point at which you, the employee, acquire ownership of your retirement account. With a lot of companies, you will not be considered fully-vested until you’ve been employed with the company for a set period of time, which varies from company to company. Vesting timelines are important to consider because you will not be able to take employer-contributed funds with you if you choose to leave the company. You will only be able to take your own contributions.
It is important thing to keep in mind for vesting schedules is that the longer it takes for you to become fully vested, the less the employer contributions will be worth to you.
You have many retirement options
If you find your dream job but the employer-offered pension plan is not attractive, you can always start an independent retirement fund. Taking advantage of employer-sponsored plans can be great opportunities to grow your savings; however, it is not an obligation to take them. The option of how you save for retirement is up to you. You should align with your future goals and aspirations. Check out our blog or give us a call today to answer more of your questions!
