If you are looking to change jobs or are transitioning to a new job, keep these four rules in mind to avoid stay on track with your goals.
Rule #1: Understand the “Total Package”
Know the impact on pension benefits, salary, bonuses, equity, health, life and disability insurance this job change will cause. You should clearly understand what you are giving up versus what you are gaining, and calculate whether the changes are in line with your long-term plans.
Rule #2: What is your market value and prepare to negotiate for it
Do your homework and research what a person with your human capital, your talent, education and experience, is compensated for the position you are seeking. This directly affects your financial capital. When negotiating, preparation and knowledge are essential. Try to push the compensation envelope up!
Rule #3: Roll over your 401(k)
Don’t spend the proceeds in your 401(k) by withdrawing it and incurring costly penalty taxes. The better options are to roll over the proceeds to a self-directed IRA or transfer the proceeds to the new employer. Many employers have limited investment selections within the 401(k) plans but self-directed IRAs often have more choices than the typical 401(k) and may be a better fit for your goals.
Rule #4: Enroll in your new employer’s retirement plan if available
According to the Employee Benefit Research Institute, 72 percent of employed American workers report their employer offers them a retirement savings plan. Of those, 79 percent say they contribute to the plan. The dollars you fail to defer now will be more expensive in the long run due to lost compound interest.
Business executives would be wise to follow these four rules when making a job transition to keep the course with their personal goals and financial plan.