New deductibles, fewer vacation days: 4 unexpected costs to be mindful of when starting a new job

When you start a new job and new health coverage, "you get a whole new deductible."


Millions of Americans are starting new jobs. Hires reached 6.7 million in June, an increase of 697,000 from the previous month, according to the Department of Labor.

Many of those switching roles have done so in search of better pay and benefits. But there can be unexpected costs to starting a new job, too. "There is nothing wrong with wanting to change jobs," says Marguerita Cheng, a certified financial planner and the chief executive officer at Blue Ocean Global Wealth in Gaithersburg, Maryland. "But you want to be mindful" about gaps in benefits, including 401(k) contributions and paid leave.

When you start a job, 'you get a whole new deductible'

Many health insurance policies offered through work require a deductible, which is a set amount of money you have to pay for health services before your insurance plan starts to pay.

When you start a new job and new health coverage, "you get a whole new deductible," says Carolyn McClanahan, a certified financial planner and the director of financial planning at Life Planning Partners in Jacksonville, Florida. "That could be more money out of your pocket if you need to use health care." Among workplace plans that have a deductible, the average is $1,644, according to the Kaiser Family Foundation.

Consider what medical appointments or procedures you might want to get done before you leave your current job without having to shoulder the full cost of meeting your new deductible.

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Some retirement plans require a year of employment before you can contribute

Depending on your new employer, it may be some time before you can contribute to the retirement plan or receive the employer match on your contributions. In 2020, 70% of Vanguard retirement plans offered immediate eligibility, according to a recent report. The rest stipulated a wait of one month or more before a new employee can contribute — including 9% that required one year of service.

Even if you can make your own contributions, it might take longer to get the employer match. In Vanguard's report, just 59% of companies made new employees immediately eligible for matching contributions; among the rest, 20% required a year of service for eligibility.

Any gaps in your contributions could mean your savings lag by thousands of dollars. Over the 12 months ending March 31, 2021, employees contributed an average $7,330 to their 401(k)s, and employers added an average $3,970, according to a report from Fidelity.

If you're planning on starting a new job, consider how you'll bridge a potential gap by contributing to an IRA instead or boosting your cash savings in the interim. That way, whenever you become eligible to contribute, you have the flexibility to catch up by contributing a higher share of your paycheck for a while.

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Bonuses could depend on 'when your company's fiscal year ends'

Companies' bonus or raise schedules vary. You may not be immediately eligible to earn or receive a bonus, depending on where the company is in its cycle when you join. "Look to see when your company's fiscal year ends," says Cheng, and note key dates for its bonus and raise schedule. "You don't want to leave that on the table."

Likewise, make sure you're not leaving your current company at a point where you'll just miss receiving a bonus. You may forfeit funds if you leave before the review cycle, or before bonuses are paid out.

PTO for new employees is often prorated

When you start a job, your paid sick or vacation days may be prorated depending on your start date. For example, if your offer includes two weeks' paid vacation and you start halfway through the calendar year, you might only have access to half that.

Even in your current job, it's worth understanding how many days you have left, so you can use them or more accurately anticipate their value if you want to get those paid out.

In 1998, as Cheng planned to quit her job at a financial advisory firm to take care of her two kids and work toward becoming a financial planner herself, she didn't take any of her annual leave. "I just took my six weeks [parental leave] after I gave birth to my son," she says, "And then, because my last day was December 28, 1998, my vacation, my sick leave, there's also those floating holidays ― all paid out in early '99."

She knew having that extra cash after she left would help in the transition between jobs, and she planned ahead to make sure she got it.

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