The first question most people ask when they get a job offer: How much will it pay? While salary is clearly important, there are other factors you might not immediately consider such as location, benefits and the potential financial consequences of leaving your present employer. Each could have a significant impact on your long-term financial security.
We caught up with Melissa Wyman Bradley, CFP, a financial advisor with Merrill Lynch Wealth Management, to get answers to the frequently-asked questions she receives and learn what to consider when switching jobs.
What are some questions people should ask themselves before making a final decision about a job offer?
The first thing to consider is whether you will be giving up an annual bonus, equity compensation or deferred comp at your old job. Suppose a portion of your current compensation is tied to a yearly bonus, equity compensation or deferred compensation plan, such as a retirement or stock option plan. In that case, you may have to forfeit those assets when taking a new job if they aren’t vested or exercised.
What about the importance of benefits?
You need to find out not just what benefits are available, but what you actually qualify for. A pay hike is important, but if you lose access to benefits, you may end up worse off. For example, losing a company-funded pension or switching to a company with a smaller matching amount for your retirement savings account might negatively impact your finances long-term. Other benefits to consider are health care coverage, disability income insurance and life insurance.
What else is crucial to consider before accepting an offer?
The last major question to ask yourself is whether there are any unanticipated costs that affect your income. If a job involves relocating, look closely at housing costs and regional tax rates, as these can have a significant impact on your net income. See if your new employer might be willing to pick up the relocation costs, and ask your financial advisor to help you calculate what your net income and cash flow might look like in a different area.
Retirement is a huge consideration for many professionals. How do you advise clients, friends and family members in that regard?
Depending on your financial circumstances, needs and goals, as well as prior retirement plan design, you may be allowed to leave the funds in its existing account, roll the balance into a traditional IRA or Roth IRA, roll over your 401(k) account under your prior employer’s plan to a 401(k) account under your new employer’s plan or even cash it out. The best course of action for your situation will depend on your account balance, the investment options and fees in your old and new accounts, your tax bracket and more.
Many people take new jobs because they want to earn more money. How should that factor into your investment strategy?
Overall, job transitions present a good opportunity to meet with your advisor to assess your progress toward specific financial planning goals and to consider potential adjustments.
Melissa Wyman Bradley, CFP, is the vice president and wealth management advisor at Merrill Lynch Wealth Management. She has more than 20 years of experience helping clients achieve their goals and aspirations.
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