You just got your first official job offer! The everlasting job search, creating personalized resumes, and networking with individuals is finally over, and your career is finally starting. As exciting as this is, it can also be nerve-wracking and a little scary. Since this is your first full-time job, you may be unaware of the full compensations offered. We often only think about performing the job responsibilities and in return, getting paid a salary. But, what about insurance, an HSA plan, profit sharing, and a 401k? The real question we should be asking ourselves is how does all of that play a part in the job offer? Below, we explain a few of these topics in a little more depth.
What’s an HSA?
An HSA, otherwise known as a Health Savings Plan, is a plan that helps you save for medical emergencies. As an individual, you are able to start an HSA plan if you have a High Deductible Health Plan (HDHP). Ask your insurance company, or a local bank if you qualify. Along with this, some companies choose to contribute to their employees’ HSA. If this is true for you, you are able to use the funds from your HSA for any medical expense. The other nice thing about an HSA is that it rolls over from year-to-year. This makes it convenient if you have one awesome healthy year and a not-so-awesome unhealthy year. Overall, an HSA is a benefit when thinking about accepting a job offer.
How does a 401k work?
A 401k is a retirement savings plan provided by an employer. A traditional 401k allows employees to invest a certain percentage of their paycheck into a retirement fund before taxes are taken out. A Roth 401k means you pay the taxes up front. For younger employees, Roth is usually a good option if it’s available, since you’re most likely going to be in a higher tax bracket when you retire than when you’re first starting out.
Most employers, but not all, will also match a portion of the 401k. Most commonly, an employer will match around 3%. For instance, if your employer decides to match 3% of your paycheck, and your annual salary is $40,000, as long as you invest 3% ($1,200) of your paycheck into your 401k, they also will invest $1,200 into your 401k. With this being said, you are not limited to saving a higher percentage of your paycheck into your 401k, you will just not be matched higher than 3%. So, the higher 401k match your employer provides, the more money you can save for retirement.
What are the advantages of Profit Sharing?
A deferred profit-sharing plan (DPSP) is almost exactly what it says; a company shares a portion of their profits with their employees. This money then gets put into a retirement savings plan, with restrictions made by the business. Usually, an employer provides an opportunity for their employees to invest in profit-sharing after being a loyal employee for a few years. This can help the company bring in loyal employees, while the employees also get a sense of ownership. Another thing to note is that employers can make their own restrictions on allocating the profit-sharing funds, but they are prohibited from discriminating in favor of certain employees.
In addition to these three main benefits, also think about more “intangible” benefits, such as whether snacks, coffee, soda, or other food is provided to employees. Not having to buy lunch every day can really add up to some big savings over time!
These few things discussed are essential to know when you are thinking about accepting a job offer. By understanding these topics better, you are able to make a more informed decision about the job, looking at all the benefits and costs included.