23 minute read

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Getting a job offer, especially your first one is incredibly exciting. But before you settle into your new role, there are some critical decisions, options, and information you should know from negotiating

Your salary to understanding what happens to benefits. When you leave your job, we’ll cover 10 critical things every first time or seasoned employee should know. And if you’re thinking well, Laura, I’ve been in the work world for decades. Stay with me. I’m going to cover some often overlooked tips. You need to know too about retirement insurance and how to transition to a new job or even to self-employment. Hey everyone. And welcome back to the money girl podcast. My name is Laura Adams. I’m a leading personal finance and small business expert, and award-winning author. I’ve been writing and hosting this show since 2008. I am so grateful and honored that you keep tuning in and downloading each weekly episode. Thank you for sharing it with your friends, submitting reviews and ratings and subscribing. And by the way, if you don’t have your podcast app set for automatic downloads, be sure to turn on that feature so that you’re going to get each new episode in your player.

As soon as it’s released every Wednesday, I want you to stay subscribed because this show is all about delivering money, tips and advice that will take your financial education to the next level. I’m looking out for you, and I’m always bringing you the best topics to help you make wise decisions and improve your financial life. Sometimes you may not even know the right questions to ask when it comes to your money. So I’m kicking off each show with some of your questions. Before we get into the main topic and for today’s questions, both of them involve employee retirement plan. So they fit in with our theme. The first question is from Christine, who says I’ve been listening to your podcast for a few years now, and it inspired me to open a Roth IRA back in 2017 through the years, my and my husband’s salaries have increased.

If we exceed the Roth IRA income limit as a married couple filing taxes jointly, is there another way to contribute to a Roth? Christine? Thank you so much. I’m so glad to hear that you opened a Roth IRA. Now, if you earn too much for the Roth IRA, remember that there is no income limit on a Roth at work, such as a Roth 401k or a Roth 4 0 3 B. So I’d recommend using those accounts. If that’s an option for you, if it’s not, you could do a backdoor Roth IRA. This involves making a nondeductible or taxable contribution to a traditional IRA, and then converting that money to a Roth IRA. You’ve got to still pay tax on any converted amounts and any of their investment earnings. Plus, if you already have pre-tax money in a traditional IRA tax must be prorated over all your IRAs.

If this gets a little complicated, but basically what it means is that you may not save a whole lot of money. So what I’d like you to do is listen to podcast 666, it’s called what is a backdoor Roth IRA that will give you a lot more information and also give you a workaround strategy that you might consider if you do have a workplace retirement plan. All right, another question comes from Betsy, who says my husband has a 401k with a former employer with over $200,000 in it. Should he open an IRA and do a rollover or roll it into his current 401k plan that say, thank you so much. This is a common dilemma. Knowing what to do with an old retirement plan, he should definitely do a rollover, but there are distinct pros and cons for having funds in an IRA versus in an employer plan, you get more legal protections for funds in a 401k, but you get a lot more flexibility with funds in an IRA.

Since this can get a little complicated, I’m going to refer you to podcast number 652 called five options for your retirement account. When leaving a job, it reviews the options in much more detail than I can cover for you here. And once you listened to that show, I think you’ll have your answer. Thanks again to Christina and Betsy for those great questions. Now let’s get to today’s topic, which is 10 things every first time or seasoned employee, no, the first tip kind of like the foundation for your job. And that is how to negotiate wisely. Two things you’ve got to carefully negotiate when considering a job offer or salary, and if available stock options, be sure to spend some time researching what you should ask for and preparing your talking points for the best outcome note that smaller companies may be more flexible with offering benefits.

So negotiating them maybe easier than if you’re applying to a large firm that you know, may not negotiate benefits as much. However, it’s helpful to that. Working with a professional recruiter or a negotiator could be worthwhile if you’re up for a high level job, let’s say, especially if negotiating is not your strong suit, the time to negotiate your salary is before you accept an employment offer, you want to avoid agreeing to a conditional salary offer such as getting a six month review and a potential salary bump down the road. Unfortunately, those types of conditional offers may not pan out. There could be changes in the economy management or even the financials of your company that would prevent you from getting that salary increase. But on the other hand, you don’t want to negotiate your salary too early, either such as why you’re still interviewing for a role.

If you receive a verbal salary offer requested in writing. So you can have time to carefully review it and think about it, then use these tips for a successful negotiation, research, average salaries for people in your field who have the same level of education, experience and skills and figure a range that you would consider accepting. You can look at places like indeed and glass door, uh, for comparable salary ranges allow a potential employer to make the first offer just in case it exceeds the salary range you had in mind. But if a firm presses you for your desired salary, always propose a range that exceeds average salaries for similar people in your field. So you’ve got some room to negotiate if needed and make a list of specific reasons why you believe you deserve the salary. You want such as impressive results you’ve achieved in the past your years of experience and any in-demand certifications or skills you possess.

And as I mentioned, get your final salary and your benefits package in writing. So it can not be disputed later if your potential employer offers salary plus stock options. Be sure you understand their value. Some companies such as startups provide stock options to sweeten the deal because they don’t really offer competitive salaries. They may not be able to afford it. Agreeing to a lower salary with stock options can be risky. If those options don’t work out. However, if you believe the company has a profitable future, owning stock options might be worth it in the long run. Be sure you understand the number of shares you’ll receive and their vesting schedule. That’s how long you must be employed to own them fully consider getting help from a professional, such as a financial advisor or an attorney to review a complex offer. If a potential employer is privately held, be aware of what’s called stock dilution.

For example, let’s say they offer you a percentage of stocks, such as 1%. Your financial interests decreases as the firm provides options for more and more new employees or investors consider requesting that your stock options will not be subject to dilution. So your interest in the company never decreases. All right. The second thing you need to know is which employment forms you must submit. If you’ve had a job before, you know, these forms, every new employee has got to fill out paperwork required by their employer and by the IRS, you should get familiar with two forms. One is form w for the employees withholding certificate and form I nine employment, eligibility verification. The purpose of the first one of the w four is to indicate how much federal income tax your employer should deduct from your paycheck. You do this by claiming allowances, and you do like one for yourself, one for your spouse, one for any dependents that you have, and the more allowances you claim, the less tax will get withheld from your pay.

However, if you claim too many allowances, you risk having too little withholding throughout the year and then owing taxes when tax day comes around. And if you claim too few allowances, what happens is you underpay taxes throughout the year, but you receive a refund when you file taxes. If you’re not sure about the right way to complete your w four, you can use the IRS tax withholding estimator. I’ll put a link to that in the notes for the show that’s in the money girl section@quickanddirtytips.com, or you might speak with a tax accountant for advice. And the [inaudible] for new employees is to prove your identity and your eligibility to work in the United States. You have to provide original documentation such as a document that establishes your identity and your work authorization such as a us passport or a permanent resident card. And if you don’t have either of those documents, you can provide two documents such as a state or a federal ID card or driver’s license and a social security card, or an original or certified birth certificate.

And you are supposed to provide the original document. So this is one of the few times when you actually will need to pull out that social security card. All right? The third thing you need to know is when you can enroll in benefits, you can usually sign up for benefits. As soon as you start work for a new company. However, there may be a waiting period before they begin such as 30, or even up to 90 days after your initial benefit enrollment, you can only make changes to your selections during what’s called open enrollment season. This is a period each year when workers can renew or change their benefit options, such as health, dental, and life insurance, most companies schedule open enrollment in the month or two before enrollment forms are due. For instance, if the employer’s benefit plan starts on January 1st, open enrollment may be set during the month of November.

The fourth thing you need to know is how to invest for retirement, whether it’s you’re offered a retirement plan at work or not is up to your employer. Many medium to large size companies and government agencies provide things that we’ve already been talking about in the show, a 401k, a 4 0 3 B or even a 4 57 plan. In the case of government agencies, you contribute a portion of your salary, any amount that you elect up to certain limits, and you select from a menu of investments, such as mutual funds or exchange traded funds, these tax advantage, retirement accounts, shelter, your income from taxes upfront, or when you make withdrawals down the road in retirement. Some employers even offer matching funds, which is an amazing benefit. It could be something like paying 50 per percent of your contributions up to 6% of your salary. So always contribute at least enough to max out that match while 401ks are offered by for profit firms, 4 0 3 BS are offered by tax exempt organizations, such as public schools, churches, hospitals, and nonprofits with a 401k employers may offer matching contributions and state and local governments.

And some nonprofit organizations offer a 4 57 plan, which is similar to these other types of retirement plans, but they don’t allow matching funds. The fifth thing to know is, is how to choose a health plan. Your new employer may offer several health plans such as HMO’s [inaudible] and HDH PS. The best plan for you is one that’s affordable and meet your healthcare needs. Here’s a summary of each of those types of plans. HMO stands for health maintenance organization plan. This offers a network of doctors, service providers and hospitals that you can choose from. You’ve got to select a primary care physician who refers you to any specialists, such as an allergist or a cardiologist. Your benefits begin after you meet an annual deductible, and you’re responsible for co-insurance, which is a percentage of healthcare, your costs and copays for doctor visits and prescriptions, and typically costs less than other plans because it has fewer options, but it’s a good choice.

If you’re in relatively good health and you want to keep your healthcare costs low, another type of all plan is the PPO or preferred provider organization. This is like an HMO because you choose healthcare providers from network. However, you don’t have to choose a primary care physician or get referrals to see specialists. You’re also allowed to seek out of network care because PO comes with more choices. It’s typically more expensive than other plans. If you get care outside of the network, you often receive less coverage. And that means got higher out of pocket costs, just like an HMO. You meet an annual deductible co-insurance and co-pays, that’s all part of having a PPO. So a PPO is a good option. If you can afford higher premiums and those healthcare expenses, but you prefer to see out of network doctors and you don’t want the hassle of having to Garrett referrals to see specialists.

And the last plan I mentioned is the HDHP that stands for high deductible health plan. And these can be any type of plan. It could be an HMO or a PPO. The difference is that it has a much lower monthly premium that comes with a much higher annual deductible. Additionally, you’re typically eligible for a health savings account or HSA when you opt for this type of plan. And I’ll tell you more about HSA in just a moment. If you’re in relatively good health and you want much lower premiums and you believe an HSA could cover your healthcare expenses and HDHP can be option writing this podcast for 13 years, I’ve learned how much good writing matters. So when you’re writing for work or school call on word tune to help word tune is the first AI powered online writing tool that understands meaning word tune, suggest ways to make your writing more clear, compelling, and authentic.

I write every day and use word tune to make sure the tone is just right by finding the perfect adjective. It saves time and makes really great suggestions for better ways to rephrase an important sentence. Word tune works anywhere. You’re working online. Google docs, slack, outlook, web WhatsApp, and more and money. Girl listeners can try word tune for free at word tune.com/money. Girl, if you’re away from your computer, just use your phone and go to word, tune.com/money girl, and enter your email. They’ll send you a link to make it easy to get started. Get help writing your emails, reports, presentations, resumes, and blogs today. Go to w O R D T U N e.com/money girl. Before I go on, here’s a word from today’s sponsor policy genius. Policy genius makes it easy to compare quotes from over a dozen top insurers. All in one place, you could save 50% or more on life insurance by comparing quotes with policy genius, you could save $1,300 or more per year on life insurance by using policy genius to compare policies in minutes, you can work out how much coverage you need and compare personalized quotes to find your best price policy genius.

We’ll handle all the paperwork and they never add extra fees. Plus eligible applicants can get covered in as little as a week, thanks to an award-winning policy option that swaps the standard medical exam requirement for a simple phone call. That’s why policy genius has earned thousands of five star reviews from happy people, head to policy genius.com to get started right now, policy genius when it comes to insurance, it’s nice to get it right. The sixth thing you need to know is when to use a medical savings account. So I just mentioned the health savings account or HSA. There’s another type that you might get at work, which is called a flexible spending account or FSA. These are two types of medical savings accounts that your employer may offer. Both of them allow you to pay for health care expenses on a pretax basis, which saves a lot of money to be eligible for the HSA.

You’ve got to be enrolled in a high deductible health plan, as I just mentioned, and you can get that high deductible plan on your own or through an employer with an HSA you elect to make pre-tax contributions up to an annual limit. And then you get to spend those funds on qualified medical vision, dental hearing expenses, and a long list of other types of qualified expenses. Contributions to an HSA can be made by you, your employer, or even somebody else like a family member. Some employee benefit plans do provide regular deposits into an HSA, such as a certain amount every quarter or a matching contribution. And those amounts do not get included in your taxable income, which is really nice. When you have unused HSA balances, they can just stay in the account. They roll over each year without any penalty, you can even earn interest and choose investments to grow the funds in your HSA on a tax-free basis, except in some states, some states do, uh, impose a state income tax on HSHS, but unlike an HSA and FSA, the flexible spending account can only be offered by employers.

That so that’s not something that you can have. Let’s say if you’re self-employed, the significant difference is that you’ve got to spend all or most of the funds in an FSA each year. Additionally, it typically allows you to pay for additional expenses, such as childcare expenses on a tax-free basis. In addition to health care expenses. And the seventh thing you need to know is how much life insurance you need. Many employers offer life insurance in their benefits package. However, it’s important to note that life insurance through your employer ends when you voluntarily or involuntarily, leave your job. If you’ve got loved ones who would be hurt financially by your death, you need to evaluate your life. Insurance needs carefully. In many cases, you need more live coverage than what’s offered at work. For instance, let’s say you make a hundred thousand dollars. You may need a million dollar life insurance policy depending on your financial situation and your family situation.

A good rule of thumb is to have 10 times your annual income. So consider buying your own life insurance policy to ensure that you’ve got enough coverage and you wouldn’t have any gap. If you did leave your job. When you’re thinking about how much life insurance you need. As I mentioned, there are various factors you want to look at your total savings, your debts, your future goals, you know, things like paying for a child’s education or leaving money for errors. If you’re not sure, definitely speak with a licensed insurance professional, when you need some help choosing coverage. The eight thing to know is who needs disability insurance. Your new employer may also offer short and long-term disability policies. Here’s a summary of each short-term disability replaces a percentage of your income for a period, such as three to six months. If you have a temporary disability that makes it impossible for you to work cover disability may include illnesses, maternity leave and injuries from accidents.

Now long-term disability is similar. It replaces a percentage of your income when you’re unable to work, or you can only work part-time due to a disability. Cover disability may include things like neurological disorders, lung diseases, or vision loss. When you compare this to the short term disability plan, it has a more extended waiting period for benefits to begin such as 90 days. And coverage may last from several years up to retirement age, depending on the policy. So because the long-term disability can take quite a while and you know, weeks or even months before benefits begin, many people will also purchase a short-term policy to help cover the cost before the long-term coverage would begin. The nice thing to know is when do you use the family and medical leave act? This gets shortened to F M L a. It’s a federal law that gives eligible employees unpaid leave for up to 12 weeks during a 12 month period, when you need to care for a new baby or adopted child care for a foster child care for an immediate family member with a serious health condition.

Take time from work. After a family member gets called to active military duty or recover from your own medical treatment. If you suffer from a serious condition, FMLA also provides up to 26 weeks of unpaid leave to care for a covered service member in your family who has a serious illness or injury note that some employers may offer financial benefits. In addition to what’s mandated by the FM LA, but they’re not required to do so. So for instance, some employers might pay 20% of your salary while you’re away, but again, they’re not required to do that. And the last, the 10th thing you need to know is what happens to your benefits when your job ends, when the time comes to leave your job, you lose some benefits at the end of the month, such as life and disability insurance. However you may elect to continue other benefits.

If you had a group health plan at your old job, you’re eligible for Cobra. Cobra stands for consolidated omnibus budget reconciliation act. And basically it’s a law that allows you to have what’s called continuation coverage. It allows you to keep your health, dental, and vision benefits for you and your family for a period, which is usually up to 18 months. However, you got to pay the entire cost of coverage, plus a small administrative charge. And note that Cobra does not include a life or disability coverage. Those things typically end the month that you separate from your employer. If Cobra is unaffordable, another option is to shop for an ACA or affordable care act qualified plan. There are many ways to do that. You can go directly to healthcare.gov. You can work with an independent insurance broker, or you can go to health sites online. You may qualify for an ACA subsidy depending on your income and family size, which can make health insurance much more affordable than Cobra.

Now let’s talk about retirement. If you’re John provided a retirement plan, you might have unvested matching funds that you’ll forfeit when you leave. But the contributions that you put in are always 100% vested. As I mentioned earlier, you can do a tax-free rollover of your vested balance to an IRA, which is an individual retirement account or to a retirement plan with a new employer. Those are the best options. The worst option is cashing out your retirement. You want to make sure you keep those funds invested for the long-term. Now let’s say you’ve got an HSA through your employer. That is a portable account that you can continue using for qualified medical expenses. After you leave your job. In fact, if you want to use a different bank than your employer uses, you can transfer the funds from one HSA account to a new HSA account.

I’ve done that before, simply because I found an HSA that I liked better than the one that my old employer was using. However, you won’t be able to make any additional contributions to an HSA unless you’re enrolled in an HSA eligible health plan member. That’s the high deductible health plan. And again, you can get that on your own or with a new employer, unlike HSA, because you can’t take any F S a funds with you when you separate from an employer. So if possible, you want to spend that balance before the end of the month when your employment ends. I hope these tips have been helpful. No matter if you’re in college, thinking about getting your first job or you’ve been out in the working world for decades, I hope you’ll stay in touch with me. One way is to follow me on Instagram at Laura D. Adams, you might also join my private Facebook group.

It is an amazing group of folks it’s called dominate your dollars. You can send me a quick text to get your invitation to the group. Just text the word dollars. D O L L a R S to the number 3, 3, 4, 4, 4. Also be sure to visit Laura D adams.com to sign up for my newsletter and learn more about me, my books and online courses. And I’d love to hear from you. You can always leave me a voicemail with your question, comment or idea for a future show by calling 3 0 2 3 6 4 0 3 0 8. That’s all for now. I’ll talk to you next week until then here’s to living a richer life. Money girl is produced by the audio wizard, Steve Ricky Berg with editorial support from Biatta Santura. If you’ve been enjoying the podcast, it would mean the world to us. If you would rate and review the show, and don’t forget the backlist episodes and show notes are always available@quickanddirtytips.com

Congrats on your new job offer!

But before you settle into your new role, there are some critical decisions you must make.  From negotiating your salary to understanding what happens to benefits when you leave your job, this episode will cover 10 critical things every employee should know.

Tip #1: How to negotiate wisely

Two things you must carefully negotiate when considering a job offer are salary and, if available, stock options. Be sure to spend some time researching what you should ask for and preparing your talking points for the best outcome.

Note that smaller companies may be more flexible with offering benefits, but negotiating them may not be as easy if you’re applying to work for a larger firm. Working with a professional recruiter or negotiator may be worthwhile if you’re up for a high-level job, especially if negotiating is not your strong suit.

The time to negotiate your salary is before you accept an employment offer. Avoid agreeing to a conditional salary offer, such as getting a six-month review and a potential salary bump down the road. Unfortunately, those offers may not pan out due to changes in the economy, management, or company financials.

But don’t negotiate your salary too early, such as while you’re still interviewing for a role. If you receive a verbal salary offer, request it in writing so you can carefully review it. Then, use these tips for a successful negotiation:

  • Research average salaries for people in your field who have the same level of education, experience, and skills, and figure a range you’d consider accepting.
  • Allow a potential employer to make the first offer just in case it exceeds the salary range you had in mind.
  • If a firm presses you for your desired salary, always propose a range that exceeds average salaries for similar people in your field, so you have room to negotiate if needed.
  • Make a list of specific reasons why you deserve the salary you want, such as impressive results you’ve achieved in past positions, your years of experience, and any in-demand certifications or skills you possess.
  • Get your final salary and benefits agreement in writing so it can’t be disputed later.

If your potential employer offers salary plus stock options, be sure you understand their value. Some companies, such as startups, provide stock options to sweeten the deal when they don’t offer competitive salaries.

Agreeing to a lower salary in return for stock options can be risky if they don’t pan out. However, if you believe the company has a profitable future, owning stock options might be worthwhile in the long run.

Be sure you understand the number of shares you’ll receive and their vesting schedule, which is how long you must be employed to own them fully. Consider getting help from a professional, such as a financial advisor attorney, to review the offer.

If a potential employer is a privately held company, beware of stock dilution. For example, if they offer you a percentage of stock, such as 1%, your financial interest decreases as the firm provides options for new employees or investors. Consider requesting that your stock options won’t be subject to dilution, so your interest in the company never decreases.

Tip #2: Employment forms 

Every new employee must fill out the paperwork required by their employer and the IRS. You should be familiar with two forms: Form W-4, Employee’s Withholding Certificate, and Form I-9, Employment Eligibility Verification.

The purpose of the W-4 is to indicate how much federal income tax your employer should deduct from your paycheck. You do this by claiming allowances, including one for yourself, one for your spouse, and one for each dependent. The more allowances you have, the less tax gets withheld from your pay.

However, if you claim too many allowances, you risk having too little withholding throughout the year and owing taxes. If you claim too few, you underpay taxes but receive a refund when you file taxes. If you’re unsure about completing the W-4, use the IRS Tax Withholding Estimator or speak with a tax accountant for advice.

New employees must complete an I-9 to prove their identity and eligibility to work in the U.S. Acceptable documentation includes one document that establishes both your identity and work authorization, such as a U.S. passport or permanent resident card.

If you don’t have a single document that proves both your identity and work authorization, you can provide two documents, such as a state or federal ID card or driver’s license, Social Security card, or original or certified birth certificate.

Tip #3: Enrolling in benefits

You can usually sign up for benefits as soon as you start working for a new company. However, there may be a waiting period before they begin, such as 30 to 90 days.

After your initial benefit enrollment, you can only make changes to your selections during open enrollment season. That’s a period each year when workers can renew or change their benefit options, such as health, dental, and life insurance.

Most companies schedule open enrollment in the month or two before enrollment forms are due. For instance, if the employer’s benefit plan starts on January 1, open enrollment may be set for November.

Tip #4: Investing for retirement

Whether you’re offered a retirement plan at work is up to your employer. Many medium- to large-size companies and government agencies provide 401(k), 403(b), or 457 plans.

You contribute a portion of your salary and select from a menu of investments, such as mutual funds and exchange-traded funds (ETFs). These tax-advantaged accounts shelter your income from taxes upfront or when you make withdrawals in retirement. Some employers offer matching funds, such as paying 50% of your contributions, up to 6% of your salary.

While 401(k)s are offered by for-profit firms, 403(b)s are offered by tax-exempt organizations, such as public schools, churches, hospitals, and nonprofits. Like with a 401(k), employers may offer matching contributions. State and local governments and some nonprofit organizations offer 457 plans, which are similar to other types of retirement plans but don’t allow matching funds.

Tip #5: Choosing a health plan

Your new employer may offer several health plans, such as HMOs, PPOs, and HDHPs. The best plan for you is one that’s affordable and meets your healthcare needs. Here’s a summary of each plan type:

  • HMO or health maintenance organization plan offers a network of doctors, service providers, and hospitals you can choose from. You must select a primary care physician who refers you to any specialists, such as an allergist or cardiologist. Your benefits begin after you meet an annual deductible. You’re responsible for coinsurance, a percentage of healthcare costs, and copays for doctor’s visits and prescriptions. An HMO typically costs less than other plans because it offers fewer options. But it’s a good choice if you’re in relatively good health and you want to keep healthcare costs low.
  • PPO or preferred provider organization plan is like an HMO because you choose healthcare providers from a network. However, you don’t have to choose a primary care physician or get referrals to see specialists. You’re also allowed to seek out-of-network care. Because a PPO comes with more choices, it’s typically more expensive than other plans. If you get care outside of the network, you’ll often receive less coverage with higher out-of-pocket expenses. Just like an HMO, meeting an annual deductible, coinsurance, and copays are all part of having a PPO. A PPO is a good option if you can afford higher premiums and healthcare expenses, prefer to see out-of-network doctors, and don’t want to hassle with getting referrals to see specialists.
  • HDHP or high-deductible health plans can be an HMO or a PPO. The difference is that it has lower monthly premiums but a much higher deductible. Additionally, you’re eligible for a health savings account or HSA if you opt for this type of plan (more about that in a moment). If you’re in relatively good health, want lower premiums, and believe an HSA would cover your healthcare expenses, an HDHP can be a good option.

Tip #6: Using a medical savings account  

health savings account (HSA) and flexible spending account (FSA) are two types of medical savings accounts your employer may offer. Both allow you to pay for healthcare expenses on a pre-tax basis, which saves money.

To be eligible for an HSA, you must be enrolled in an HDHP (on your own or through an employer) and have no other medical insurance. You elect to make pre-tax contributions up to an annual limit that you can spend on qualified medical, vision, dental, and hearing expenses.

Contributions to an HSA can be made by you, your employer, or someone else. Some employee benefit plans provide regular deposits into an HSA, such as a certain amount every quarter or a matching contribution, which don’t get included in your taxable income.

Unused HSA balances roll over each year without penalty. You can earn interest and choose investments to grow your funds on a tax-free basis (except in some states).

Unlike an HSA, an FSA can only be offered by employers. The significant difference is that you must spend all or most of the funds each year. Additionally, it typically allows you to pay for childcare expenses on a tax-free basis.

Tip #7: Life insurance

Many employers offer life insurance in their benefits package. However, it’s important to note that life insurance through your employer ends when you voluntarily or involuntarily leave your job. If you have loved ones who would be hurt financially by your death, you need to evaluate your life insurance needs carefully.

In many cases, you need more life coverage than what’s offered at work. For instance, if you make $100,000, you may need a $1 million policy. A good rule of thumb is to have 10 times your annual income. Consider shopping and comparing term life insurance quotes at sites such as TopQuoteLifeInsurance.com to make sure you have enough coverage even if you left your job.

When determining how much life insurance you need, factor in your total savings, debts, and future goals, such as paying for a child’s education or leaving money for heirs. Speak with a licensed insurance professional if you need help choosing coverage.

Tip #8: Disability insurance

Your new employer may also offer short- and long-term disability insurance. Here’s a summary of each:

  • Short-term disability replaces a percentage of your income for a period, such as three to six months, if you have a temporary disability that makes it impossible for you to work. Covered disabilities may include illnesses, maternity leave, and injuries from accidents.
  • Long-term disability replaces a percentage of your income when you’re unable to work or can only work part-time due to a disability. Covered disabilities may include neurological disorders, lung diseases, or vision loss. Compared to the short-term, it has a more extended waiting period for benefits to begin (such as 90 days), and coverage may last from several years to retirement age, depending on the policy.

Because long-term disability can take weeks or months before benefits begin, consider purchasing a short-term policy to help cover costs before then.

Tip #9: Family and Medical Leave Act (FMLA)

The Family and Medical Leave Act (FMLA) is a federal law that gives eligible employees unpaid leave for up to 12 weeks during a 12-month period when you need to:

  • Care for a new baby or adopted child.
  • Care for a foster child.
  • Care for an immediate family member with a serious health condition.
  • Take time from work after a family member gets called to active military duty.
  • Recover after medical treatment for a serious condition.

FMLA also provides up to 26 weeks of unpaid leave to care for a covered servicemember in your family who has a serious illness or injury. Note that some employers may offer financial benefits in addition to what’s mandated by FMLA, but they aren’t required to.

Tip #10: What happens to benefits when your job ends

When the time comes to leave your job, you lose some benefits at the end of the month, such as life and disability insurance. However, you may elect to continue with others.

If you had a group health plan, you’re eligible for COBRA (Consolidated Omnibus Budget Reconciliation Act) continuation coverage. It allows you to keep your health, dental and vision benefits for you and your family for a period, usually up to 18 months. However, you must pay the entire cost of coverage plus an administrative charge.

If COBRA is unaffordable, you can shop for an ACA-qualified plan through Healthcare.gov, an insurance broker, or online sites. You may qualify for an ACA subsidy, depending on your income and family size, which can make health insurance more affordable than COBRA coverage.

If your job provided a retirement plan, you might have unvested matching funds that you’ll forfeit. You can do a tax-free rollover of your vested balance to an IRA (Individual Retirement Account) or a retirement plan with a new employer.

If you have an HSA, it’s a portable account that you can continue using for qualified medical expenses after you leave your job. However, you won’t be able to make additional contributions unless you’re enrolled in an HSA-eligible health plan on your own or with a new employer.

Unlike HSAs, you can’t take FSA funds with you when you separate from an employer. So, if possible, spend the balance before the end of the month when your employment ends.

This article originally appeared on Quick and Dirty Tips.

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About the Author

Laura Adams, Quick and Dirty Tips

Laura Adams, Quick and Dirty Tips

Laura Adams is an award-winning author of multiple books, including Money Girl’s Smart Moves to Grow Rich. Her newest title, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, is an Amazon No. 1 New Release. Laura’s been the writer and host of the popular Money Girl Podcast, a top weekly audio show in Apple Podcasts, since 2008. She’s a frequent source for the national media and has been featured on most major news outlets including NBC, CBS, ABC FOX, Bloomberg, NPR, The New York Times, The Wall Street Journal, The Washington Post, Money, Time, Kiplinger’s, USA Today, U.S News, Huffington Post, Marketplace, Forbes, Fortune, Consumer Reports, MSN, and many other radio, print, and online publications. Millions of readers and listeners benefit from her practical financial advice. Her mission is to empower consumers to live richer lives through her podcasting, speaking, spokesperson, teaching, and advocacy work. Laura received an MBA from the University of Florida. Visit LauraDAdams.com to learn more and connect with her.

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