From reading through job postings to filling out paperwork at new employee orientation, starting your career brings with it several financial considerations that you may not have thought about before.
To help you navigate financial decisions at the start of your career, we interviewed Brad Decker from PSECU Financial Services® (PFS), available through CUSO Financial Services, L.P.* to get answers to common questions.
What financial aspects should I consider when searching for my first job?
When people think about the financial part of finding a job, they most often think about income. While this is an important aspect to consider, Decker notes several other things to consider when you’re beginning your first job search:
- Opportunities for advancement – “Opportunities for advancement can have a direct impact on your finances,” says Decker. The ability to grow with a company can lead to increased wages over time and impact your ability to pay down old debts and manage new debts or financial commitments you take on as you progress through different stages of life.
- Retirement account access – Saving for retirement is important at any stage of your career. While you may not have much extra income early on, putting even a small amount of money aside for retirement at the onset of your career can make a big difference in how much you have saved to retire, due to the power of compound interest.
As you read job descriptions and navigate any job offers, make sure to research what retirement account options are available so you know how the company will support your desire to save for the future.
- Length of time until you vest – Once you know what retirement options are available, you’ll want to know more details, such as how long it will take for you to vest in these accounts. Vesting means that you gain complete ownership of the funds in your retirement account and your employer cannot take back their contributions.
The longer it takes for you to vest in the retirement plan, the longer you’ll need to stay with the company in order to take full ownership of the funds. This is okay if other factors align and you see yourself staying with the company for the length of time required to vest – typically three to five years, according to Decker.
- Other perks – Some additional benefits, such as tuition or student loan repayment assistance, can make a big difference in your finances. You’ll want to factor in the value of these perks if you’re weighing multiple job offers, as the value of the perks could outweigh the higher income that one position offers.
What options do employers offer for retirement savings?
The type of company you work for often determines the type of retirement account available to you. The most common types are 401(k), 403(b), and 457(b).
- 401(k) – For-profit entities
- 403(b) – Non-profit entities (i.e. schools, hospitals)
- 457(b) – Government entities
As a recent graduate, I’m also managing student loans. What’s more important – using extra money to pay off loans or saving for retirement?
Decker recommends taking the time to determine what’s most advantageous – the money you’ll save in interest paid on student loans or the amount of money you could earn by making extra retirement contributions.
“It’s best to do a little bit of both,” says Decker. Even if you don’t have much to contribute to a retirement account, the power of compound interest can turn small amounts into bigger assets over time.
There is one caveat, Decker says – the status of your emergency fund. “Saving for retirement is great, but if you have to tap into it every time [something unexpected occurs], it’s not going to help.” So, if you find yourself with some extra cash after you’ve made your minimum payments and are maxing out your employer match on any retirement funds, the best choice may be to start or beef up your emergency fund. This can help you be prepared if anything unexpected should occur.
What is the recommended percentage of my salary I should put toward retirement savings?
“At least enough to max out employer match,” says Decker.
Ideally, he says, you should contribute 10-15% of your salary to your retirement fund, but most people don’t start off at that. To get there, Decker recommends making gradual increases each year as your earnings likely increase.
Is it worth it to put a small amount in a retirement fund if I don’t make a lot?
“Yes,” says Decker. “It’s always important to contribute, even if it’s not a lot. At least to the employer match, because it’s free money and will still allow you to benefit from contributing a small amount.”
Should I consider investing this early in my career?
According to Decker, investing this early is fine, but he recommends doing so in a retirement account that’s not tied to a specific employer before setting up a non-retirement investment account.
Where can I get help?
Navigating these financial considerations can be overwhelming, especially if you’re just starting out on your own and haven’t been faced with these decisions before. Consulting with a reliable financial advisor is a good step to make sure you’re on the right path.
PSECU members have access to financial planning services through PSECU Financial Services® (PFS), available through CUSO Financial Services, L.P.
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. PSECU has contracted with CFS to make non-deposit investment products and services available to credit union members.
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