The average American born in the later years of the baby boom (1957-1964) held nearly ten jobs from ages 18 to 36, according to the Bureau of Labor Statistics of the U.S. Department of Labor in August, 2002. This number is likely higher for younger Americans. Gone are the days of staying with one job for 30 years. Mobility, technology, and education have created a competitive and ever-changing employment landscape. Whether it's your first job or your post-retirement career, decisions you make as you move from one job to another will have a strong financial impact on your current and future lifestyle.
Take time to read through your benefit options at your present job. Before leaving a company, make it a priority to discuss retirement plans and medical coverage options that are available to you as a terminating employee. Understanding all your options is the greatest financial advice you can give yourself.
Company Benefits
Take the time to fully evaluate your medical options and other company benefits. Make realistic choices and take into consideration worst-case scenarios. Do you have enough savings to cover deductibles and other out-of-pocket expenses? If you can't work, do you have disability insurance? If you have family members to consider, make sure your
life insurance coverage is affordable and fits your needs.
Budget
Your best bet is to pay yourself first (put money into savings and your retirement plan) and then use the leftover for nonessentials. If your company has direct deposit, consider having a portion of your paycheck go directly into savings. Get in the habit of saving first and spending later. The following hypothetical illustration shows the potential benefits of saving for retirement early.
Example:
Compare two 25-year-olds who both contribute $200 a month to a tax-deferred investment and receive an 8 percent annual effective interest rate of return, compounded monthly. Mary starts contributing immediately and stops after 10 years. Walter waits 10 years before getting started, then contributes every year until retiring at age 65.
| |
Annual Savings |
Age Starting Contributions |
# Years contributing |
Amount Contributed |
Accumulation amount at age 65 |
| Mary |
$2,400 |
25 |
10 |
$24,000 |
$368,183 |
| Walter |
$2,400 |
35 |
30 |
$72,000 |
$298,072 |
There is no guarantee that these figures will be attainable in the future. This hypothetical illustration is not meant to represent the return of any specific investment.
As you can see, starting early potentially has huge financial rewards. To illustrate the cost of waiting or the benefit of starting now, check out our
financial calculators.
Talk to an agent or advisor about managing your retirement savings when changing jobs.
