What new grads need to know before you start your new job

What new grads need to know before you start your new job

“You're off to Great Places! Today is your day! Your mountain is waiting, So... get on your way!”― Dr. Seuss, Oh, The Places You'll Go!

 

As you put those studying days behind you and start your first job, here are some tips to help you start to build a financial foundation.

Review group life insurance

Many companies offer group life insurance to their employees as part of their benefits package, often with a death benefit equal to one to two times an employee’s annual salary.

While this is a generous company benefit, the amount of the death benefit may not be enough to cover final expenses and any other remaining debt under your name.

Also, keep in mind that in many cases you don’t “own” your group life policy. If you resigned or were terminated from your job, the group life insurance policy may not go with you.

Think about your current debt, mortgage, family that you care for, and the legacy that you want to leave to see how much of it your group life insurance covers.

Is your group disability income insurance enough?

Similar to group life insurance, most company provided disability income insurance benefits only pay if you are still employed with that company.

Typically, long-term disability insurance through an employer pays 40-60% of your base salary (pretax) for a certain period.

If you were to get injured or come down with an illness and only received a portion of your salary, how long would you be able to pay your bills?

It’s never too early to start saving for retirement

While you may be trying to balance new expenses like rent, car loans and student loans, don’t be tempted to put off saving for retirement. When you are young, you have the power of compounding interest on your side and also the ability to ride out the ups and downs of the market.

As soon as you are eligible, be sure to take advantage of saving in a 401(k) at your new job.

  • It’s OK to start small and then challenge yourself to increase your contribution by 1-2% each year.
  • Contribute a percentage of your salary instead of a flat dollar amount to your plan. Saving by percentage automatically increases your contribution to the plan as your salary increases.
  • Your goal is to save at least 1 times your salary by age 301.

If your new job doesn’t offer a 401(k), you can set up your own IRA or Roth IRA to save for retirement. Check out this article about the biggest mistakes you can make with your 401(k).

Take advantage of company match

Many companies offer matching contributions. For example, you may need to contribute 3% and your company will match that. 

Review the company requirements and be sure you are contributing enough to earn the company match. It’s FREE money!

Don’t use your 401(k) as an emergency savings account

It may be tempting to draw on your 401(k) account if you need some emergency cash. However, if you are under age 59½, when you take a withdrawal from your 401(k) account, you’ll typically pay income tax on the amount withdrawn and a 10% federal tax penalty (unless an exception applies). You will also miss the opportunity to earn compounding growth on your account.

If it is really needed, there may be ways to take a loan or a hardship withdrawal. Check the plan document for your company’s 401(k) plan to see what provisions are available and the potential cost to you.

Next steps

Talk to a financial professional to see how you can get on the right track to creating a financial foundation. 

Source: How much do I need to save for retirement? (08/21/2018)

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Insurance products issued by The Ohio National Life Insurance Company and Ohio National Life Assurance Corporation. Guarantees are based upon the claims-paying ability of the issuer. Product, product features and rider availability vary by state. Issuers not licensed to conduct business in NY. 

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