If you’ve recently changed jobs, you probably have a lot going on as you try to acclimate to your new job, your new coworkers and your new company. However there are a few financial steps that you’ll want to make sure you keep in mind. Delaying or forgetting about some of these steps can cost you thousands of dollars (or even more). Make sure you take care of them in the first 60-90 days in any new job.
Enroll in an HSA or FSA
A Health Savings Account (HSA) and a Flexible Savings Account (FSA) are two different employer-sponsored accounts used to pay medical expenses. While an HSA and an FSA share a few similarities, there are some important differences that you’ll want to be aware of. The two most important differences between an FSA and an HSA are:
- To contribute to an HSA, you need to have a high-deductible health insurance plan. FSAs are available to employees with any type of health plan
- You must use any money in an FSA by the end of the year. You’ll lose the money if you don’t use it or if you leave the company. In contrast, money in an HSA belongs to you even if you leave your current employer.
If you have a high-deductible health insurance plan, an HSA plan is the right choice for you. It’s triple tax-advantaged; your contributions are deductible, your earnings grow tax-free, and your withdrawals are tax-free, as long as you use them for qualified medical expenses. You can even invest the money in your HSA to maximize its growth.
Make sure that you make a healthy contribution to an HSA or FSA when you are enrolling in benefits.
Set up your 401(k) or 403(b)
A 401(k) plan is another important thing to set up in your first couple of months on the job. A 401(k) plan is an employer-sponsored retirement savings plan. You can contribute to your 401(k) directly through your paycheck and your contributions are not subject to federal income tax. This can make it a great way to save for retirement. To sweeten the pot, many employers will match and/or contribute to your 401(k) plan as well. If your employer matches your 401(k) contributions, you’ll want to make sure to contribute at least that much.
If you work for a tax-exempt, charitable nonprofit, scientific, religious, research, or university employer, you may have a 403(b) plan instead of a 401(k) plan. The two types of plans work in a very similar fashion, so whichever type of employer-sponsored plan you have, you’ll want to make sure to open an account and start contributing to get the most out of your 401(k) or 403(b) plan.
Rollover the 401(k) from your previous employer
You’ll need to take control of any money that was left in a 401(k) account from your previous employer when you change jobs. You can’t contribute to a 401(k) from a previous employer, and you may have limited control over how your money is invested.
What you should do is rollover the money from your previous 401(k) into your own Individual Retirement Account (IRA). It could be a Roth IRA or what is called a “Traditional” IRA. Both types of accounts can be right for you depending on your situation. Investing your money into an IRA gives you more control over your finances.
The Bottom Line
Starting a new job can be a stressful time. But it’s important to take these simple financial steps as part of your transition. If you don’t, you could end up costing yourself thousands of dollars down the road.
Make sure to sign up for an HSA or FSA, and your employer’s 401(k) or 403(b) plan as part of your benefits enrollment. And if you have a 401(k) account from a previous employer, make sure to take that with you. Taking these simple steps will put you well on the way to a solid financial future.
Dan Miller is a freelance writer and founder of PointsWithACrew.com, a site that helps families to travel for free / cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 kids.