Jean Chatzky on how to maximize your employment benefits when you take a new gig
You’ve probably heard that the average worker changes jobs about ten times over the course of their career. That’s more or less true, although in recent years we’ve been hanging on a little tighter to the jobs we’re lucky enough to have, thanks to the recession. The truth is, there’s nothing wrong with switching jobs, often to chase a bigger salary, a better fit, a more prestigious title. But doing so can put your retirement – and other benefits – at risk. If you’re changing companies every few years (and women are most likely to fall into this category) here are the benefits that may be affected, and what you can do to minimize the damage:
* 401(k). The standard advice is that you don’t want to leave your money with your old employer. But you also don’t have to rush into anything, and if you have at least $5,000 in your account, your employer can’t make you move it – instead, you become what’s called an inactive participant, explains Rebecca Mazin, author of “The Employee Benefits Answer Book.” You’ll probably want to move it eventually, but this way, you can take some time to decide whether you want to roll it into an IRA or into your new employer’s plan. Get to know the new plan – the fees and investments – and then make your decision. Keep in mind, too, that some employer plans have waiting periods before you can enroll.
* Vesting. This goes hand in hand with your retirement plan, and determines whether you’ll be able to take employer contributions with you when you leave. Different companies have different vesting schedules: Some are immediate, some are graduated (the most common; generally 20% will be vested each year until you hit 100% at five years) and some are set at three years, meaning if you leave before three years, you can’t take any employer contributions. This means it can pay to hang around until you’re fully vested, but you have to weigh other variables as well: salary, career path, and, of course, your happiness.
* Health insurance. Many companies have a mandatory waiting period before you can join their health insurance plan, and it can stretch as long as three months. If this happens to you, you have a couple options: You can continue your old insurance under the provisions of COBRA, but it will likely cost you a pretty penny. Or you can look for a short-term plan on a site like ehealthinsurance.com. I’d look at both and compare costs, then try to get your new employer to foot the bill. “Rather than getting benefits early, you can sometimes negotiate a subsidy or bonus to cover the cost of COBRA,” explains Mazin. It’s worth a shot, particularly if you were recruited or you’re in a higher-level position. Once you’ve got interim coverage lined up, make sure it doesn’t end before your new coverage kicks in.
* Other insurance policies. If your previous employer offered extras – like long-term care, disability, or life insurance – and your new one doesn’t, you can sometimes convert your existing coverage into an individual policy. Mazin says that many employers won’t bring this up, so it’s up to you to ask, and in most cases, you have to act fast. If you have questions, contact the insurance company directly.
* Vacation. In some states, unused vacation days are required to be paid out. In others, it depends on the company’s policies. Either way, it’s worth your time to find out – even if the company isn’t required to pay out, sometimes they’ll cough up the money owed as a goodwill gesture, particularly if you leave on good terms.