Starting a new job is an exciting time, but it can also feel a bit overwhelming. There are so many things to learn and get familiar with, like new co-workers, job responsibilities, benefits, and hopefully, a higher salary. The good news is that avoiding a few common mistakes people make when starting a new job can help someone seamlessly transition into their new role and eliminate unnecessary stress. From missing out on valuable benefits to making a decision on transferring 401(k)s, here are six mistakes people make when changing jobs and how to avoid them:
- Changing spending habits One of the biggest mistakes people make when they start a new job is changing their spending habits. A new, higher salary could tempt people to spend more money, a phenomenon known as “lifestyle inflation.” As spending grows with salary increases, net savings remain constant; sometimes, if spending grows too large, net monthly savings can even decrease. Hence, it’s important to stick to a preset budget. Following a disciplined budget with a higher salary means more savings.
- Missing valuable benefits Many companies offer unique benefits that can help save time and money. For example, some companies provide childcare benefits or tuition reimbursement. Many companies offer a 401(k) match, giving employees free money toward retirement. Taking advantage of any benefits offered by a new company can lead to significant financial benefits. During orientation, new hires should discuss benefits with human resources to ensure they aren’t missing out on useful benefits.
- Putting off retirement planningOne of the biggest mistakes people make when changing jobs is forgetting to factor in their retirement plans. Tasks to do include:
Finding out what different retirement options new employers offer Determining whether IRA contributions make sense with the new income Setting up recurring contributions to the new 401(k)
These tasks can take some time but it’s well worth it to prevent new employees from falling behind on retirement planning while preparing for the future.
- Forgetting about an old 401(k) Over 20% of 401(k)s are forgotten or left behind due to job changes. Unfortunately, account holders could face almost $700,000 in foregone retirement dollars from a single forgotten 401(k). One way job changers can avoid this is by rolling an old 401(k) into an IRA or their new employer’s 401(k). Rolling an old 401(k) into an IRA can have many benefits, including lower fees, greater control, and more investment options.
- Skipping networking New jobs provide an excellent networking opportunity. Getting to know new colleagues and building relationships can benefit new hires down the road. Of course, with the rise of remote work, networking can seem difficult. Useful networking strategies for new hires can include setting up virtual water coolers or making a point to connect with colleagues on sites like LinkedIn. Also, starting a new job should not mean losing touch with former colleagues. Staying in touch with former co-workers and clients can lead to even more opportunities in the future.
- Forgetting to plan for taxes Forgetting to factor taxes into a new salary can lead to unpleasant surprises come tax season. As part of onboarding with a new job, employees will want to calculate the most appropriate federal withholding status on form W-4 so they don’t have too much or too little tax withheld from their paychecks. Anyone moving to another state for their new job might be subjected to new state tax laws, too. It’s important to plan for taxes while factoring in pre-tax deductions, like 401(k) contributions. Understanding taxable income for the new job minus those deductions may help avoid future tax-related headaches. Bottom line A lot is going on when starting a new job, but avoiding these common mistakes can prevent financial and emotional distress down the road. Taking time to complete simple steps like exploring the new company’s retirement plans and deciding what to do with an old 401(k) can help create a secure financial future. The good news for people deciding to move their old 401(k) accounts is Capitalize can handle the legwork and makes moving the old account simple. All someone needs to do is provide Capitalize with their old employer’s name and choose an IRA provider on Capitalize’s website. Capitalize will handle the process to roll over the old 401(k) for free, saving time and hassle. Source: Capitalize