How do you really nab the job and pay you deserve? Follow these tips for salary success.
By Nadine Boisnier
Contributing Writer
Enjoy the time you have left in school because soon you will start having to be a grown up, or at least make decisions like one. Why not be fully prepared, so that after graduation you’ll feel confident in the investment choices you make when getting your first job.
Let’s first assume you get the job of your dreams, or at least a job you will stay with for a few years. First you will be inundated with forms from the human resources department — facts about company policies, where the nearest fire escape route is, etcetera. In addition to trying to retain all of this information during your orientation, you will be told about your benefits. These should be beneficial to you, hence the word “benefit.” You’ll be told about your health coverage options, dental plans, insurance and asked whether you would like to participate in the company’s 401k.
“It’s a number one rule when you get hired to find out if your company offers a retirement plan,” said Sevan Babadjanian, an investment adviser at Invest Financial Corp. “No matter where you are working or what your salary is, find out about your 401k.”
401K? WHAT’S THAT?
A 401k is a retirement plan that enables your company to pay you first before taxation. You want all of your hard earned money for you, not the government. Every dollar that you put into your 401k goes in BEFORE they take out taxes. This is a highly important piece of information to remember. When you get your first paycheck you will know what I mean.
On your paycheck you will see your total payout for the week, or two weeks, then below this you will see an itemized list of all of the deductions your company takes out of your paycheck; health insurance, state taxes, federal taxes, dental and a deduction for your 401k. You will probably feel cheated when you see all the minuses across the board. But remember, the 401k contribution is just like putting your money into a separate bank account that you cannot touch. You won’t see the money, so you won’t be tempted to spend it. And this money cannot be taxed. It’s a beautiful thing.
PARTICIPATE NOT ALLOCATE
Now once you decide you want to participate, which I highly recommend you do, you may have to ask yourself, “How much do I want to contribute percentage wise, and which funds do I choose?”
“Maximize your contribution,” Babadjanian said. “The maximum percentage is 15 percent, and also look into how much the company is matching.”
Your company will match each dollar you invest in the 401k depending on the percentage you decide to contribute. Make sure to ask about matching information when you sign up for your plan.
When it comes to picking your assets, you may want to consult an adviser before you blindly choose different funds. Some fund choices you may be confronted with include, blue chip, value, growth and index funds, in addition to various bond selections.
“Go to an adviser and they will put you on the right track,” Babadjanian said. “People don’t know what to invest in, that’s why they lose a lot of money.”
Sevan also mentioned that if you are given a questionnaire, take them under serious consideration. This will guide you to make better investments based on your objectives.
If you decide to leave your job after a couple of years you have a few options. You can leave your money in the existing plan if it’s more than $5,000. But if it’s under $5,000, your company will force you to take it out.
“One option is you can roll it over to your new employer plan, and you can transfer without taxable consequences or fees,” Sevan said. “Another option is you can take the lump sum, but you will be penalized 10 percent based on your age and you’ll have to pay taxes.”
Advantages for this type of plan could not be more obvious.
“The growth potential in the 401k is tax deferred,” Babadjanian said. “You are paying yourself first, prior to paying taxes.”
— Nadine Boisnier has a master’s in communication from Pepperdine University, and currently works at an investment company in Santa Monica. Questions? E-mail her at nadineboisnier@hotmail.com.
April 03, 2003