Insights to help you plan, live and invest well.

New job, new retirement plan

Changing jobs means changing to a new slew of benefits. While you may have gotten a giant new hire packet and tossed it aside for leisure reading, make sure you are proactive about learning a few things about your new 401(k) plan. What you were used to at one job is likely very different at your new job. Make sure you know the answers to these questions to get started:

When can I enter the plan?

Check to see when you are eligible to enter the plan. What is the service requirement? Once you’ve completed the service requirement, you also need to know when you can enroll. If, for instance, your plan requires a year of service and quarterly entry, it’s pretty easy to let a year roll by and miss entering the next quarter. You don’t want to have to wait another quarter because you missed your first opportunity to enroll.

Do I need to opt in or is this an auto-enrollment plan?

Let’s assume in the above example your plan utilized auto-enrollment. That means unless you affirmatively opt out, you will be enrolled as soon as you are eligible at a set deferral percentage. Typically, auto-enrollment percentages can be set rather low – maybe as low as 2%. Just because that’s what you were defaulted into, don’t assume that is appropriate for you. Maybe your plan has a Roth 401(k) option but your auto-enrolled dollars are going into the pre-tax bucket. It’s important to review when you are being defaulted, in what percentage, and in what investment vehicle.

Is there a Roth 401(k) feature?

Roth features are all the rage these days, so there’s a good chance your plan has one. Remember that choosing between regular pre-tax deferrals and after-tax Roth deferrals is not an either/or decision. As long as you do not exceed the annual deferral limits, you can split your contributions in each bucket. Just remember that any contributions from your employer such as a match will always be pre-tax, regardless of how you defer your own money.

Is there a company contribution?

You likely asked this question before accepting a job offer, but make sure you explore the details of your company’s contributions, if any. You want to know things like whether it is a match or if it is non-elective. What’s the vesting schedule? If there is a match, you need to know how it is credited to your account (Is it deposited per pay period? Is there a true-up?). I’ll do a deeper dive on different types of employer contributions in another post.

What investment options are available?

Your new plan may have a limited selection of funds or a larger menu. If you are a do-it-yourself person, you’ll want to explore what you have to work with; if you are more hands off, you want to look at the target date options, or if there is an asset allocation fund that makes sense.