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Tips to Navigate the Benefits at Your First Job

Congratulations on landing your first full-time job! Now that you’ve joined the workforce, it’s important to understand the benefits provided by your employer and how they can help your financial plan. Your employer may offer many different types of benefits, and we’ll discuss a few of them here.

Employer-Sponsored Retirement Plans

While retirement may seem far off, retirement planning is crucial for your financial future. Compared to earlier generations, Gen Z recognizes the importance of saving early for retirement. One of the best ways to save for retirement is through an employer-sponsored retirement plan. If you learn the basics of your plan, you can get the most out of it. The 401(k) is a common employer-sponsored retirement plan, although other types of plans exist.

Employer Match Contributions

First, review the retirement plan to determine whether your employer matches your contributions. Some plans will match a percentage of your contributions up to a threshold. For example, a 401(k) plan might offer a match of 100% of up to 3% of your compensation and then match 50% on the next 2% of compensation. If your annual salary is $60,000, and you contribute 5% of that ($3,000), your employer will match another $2,400. It’s important to contribute enough to maximize your employer match — you don’t want to leave money on the table.

Invest Early to Harness the Power of Compound Interest

Compound interest is interest calculated on your initial deposit, plus the accumulated interest from previous periods. For example, if your total annual contribution is $5,400 ($3,000 from you, plus $2,400 matched by your employer), assuming a 7% return compounded annually, these contributions would grow to approximately $96,597 over 12 years. That’s a significant amount of growth with just $3,000 annual contributions on your end.

401(k) Plan Tax Benefits

Regardless of whether your employer offers employer-matching benefits, 401(k) plans may be worth contributing to for the tax benefits. 401(k) contributions are tax deductible and reduce your taxable income. For example, if your annual salary is $60,000 and you contribute $3,000 per year, your taxable income would fall to $57,000. If your tax rate is 25%, that’s $750 in annual tax savings.

The Importance of Health Insurance

It’s no secret that health care in the U.S. is expensive. As such, employer-provided health insurance may be one of the most critical employee benefits. However, not all plans are created equal, so learning about the coverage can help you avoid surprises later.

At the most basic level, employer-provided health insurance falls into two categories — HMO (health maintenance organization) or PPO (preferred provider organization). HMOs are typically lower cost, while PPOs are more flexible. Even if you’re young and healthy, scheduling regular check-ups and maintaining good health are some of the best cost-saving measures you can take for your future.

Other Types of Insurance Benefits

Your employer may offer other types of insurance benefits. For example, disability insurance will compensate you if you become disabled and are no longer able to work. Statistically, disability is one of the bigger risks for the newly employed, so don’t overlook it. Life insurance may also be important, especially if you have family members to support.

Employers often offer group plans for insurance coverage at a lower cost than what you can get as an individual. The caveat is that group plans may have less flexibility on terms and coverage. Therefore, it’s important to compare rates and coverage terms for group plans versus individual plans.

Evaluating Benefits in the Context of Your Financial Plan

Your employer may offer other benefits, such as tuition reimbursement, health savings accounts or employee stock purchase plans, to name a few. These can all be vital to meeting your financial goals.

Learning about different benefits can help you figure out what’s consistent with your goals and objectives, and help you secure your financial future.

While you may be comfortable handling employee benefit decisions on your own, you may benefit from working with a CERTIFIED FINANCIAL PLANNER™ professional. A CFP® professional has the experience and expertise to look at how those decisions interact with your overall financial plan. To find a financial planner who can help, visit

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