When you’re evaluating a job offer, salary isn’t the only financial consideration. Changing jobs also can have a significant effect on your retirement savings plan. Take the time to assess how a new job will affect your financial future.
Understand Your New Retirement Plan
Identify any factors that may affect your retirement savings goals:
- What kind of plan does the new employer offer?
- Are new employees eligible to participate, or is there a waiting period?
- Does the employer match contributions, or has it suspended or reduced matching during hard financial times?
- If your new company does match, how much does it match for each dollar, and up to what percentage of pay?
The “Hidden Costs” of Switching Plans
- Waiting periods: Some companies require employees to wait a certain amount of time before they can start contributing to a plan, which can put a significant dent in retirement savings. Consider an alternate way to make contributions in the interim, such as by opening an IRA or a Roth IRA (if you qualify).
- Vesting schedules: Employers often use vesting schedules for their retirement plans. This means the longer an employee stays at the company, the higher percentage of the retirement plan benefit is available to them when they retire.
If you leave a company before you are fully vested, you will be able to take only a percentage of that plan benefit with you, such as 20 percent, 40 percent, 60 percent, etc. (Note that the vesting schedule only applies to matching funds provided by the company, so any money you put into the retirement account from your paycheck still is yours.)
Increase Your Contributions
If your new job comes with a bigger salary, consider increasing the amount you contribute to your retirement plan. As measured with this calculator, a small increase can make a huge difference over time, especially if your employer will match contributions.
Go to the next page for information on what to do with the savings you've already accrued.