You’ve graduated college and found a job. Congratulations! Now prepare yourself for the realization that they didn’t teach you some really important stuff you’ll need to know the very first day of your new job.
That’s right, if you’re lucky enough to have found a job then you’ll be lucky enough to have the opportunity to wade through the confusion of 401Ks, health-care plans and paid time off.
For retirement there are several options you might encounter. You surely will have noticed something called the FICA (Federal Income Contributions Act) tax coming out of your paycheck over the years-that’s your Social Security retirement plan beginning.
And perhaps you’ve been smart enough to start your own IRA. If you started a Traditional IRA, your contributions could be deducted from your taxes when you file next year, but you will be taxed on the earnings when you begin withdrawing money later. If you started a Roth IRA you can’t claim it on your taxes, but you won’t have to pay taxes when you begin withdrawals; those can be at any time, since there are no age specifications like there are with the Traditional IRA.
In the best case scenario, your employer will offer you a qualified retirement plan that meets the requirements set forth by the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 (ERISA) and that matches your contributions.
Basically, you want a plan that your employer has run by the IRS so you’re not stuck playing taxes on it each year. If they do it right, you will be able to put money into your retirement and not have to pay taxes on it until you start to take money out, and maybe not even then.
The plan your employer will offer may either be a defined benefit plan or a defined contribution plan. When the benefits are defined, you’ll know exactly what to expect in payments upon retirement, usually some magical math that includes your age, salary and years of service with the employer. If the contributions are defined, that means your employer promises to put a certain amount into the account and you end up with what you put in. Often, defined contribution plans will come with the employer matching your contributions.
And if you’re lucky enough to get an employer that will match your contributions, or make any at all to your retirement-well, you’re on a roll.
And really, none of this will work for you if you’re rich. If that happens, go see an investor and send me a check.
On the topic of health care plans, I’ll try to get to the point before you fall asleep. Alaska doesn’t have one of the most popular health care plans, HMO (Health Maintenance Organizations) which requires a primary care doctor that can refer you to any specialist. If your employer offers a PPO (Preferred Provider Organization), you’ll be able to see almost any doctor and see specialists as you deem fit, but you likely will pay more.
Some employers offer Health Savings Accounts, which allows you and your employer to put money in an account that can be used, tax free, for medical expenses.
But, just to make things more complicated, you might be forced by your employer to make a choice for yourself on your health care options. One of the best resources available is called the Consumer Assessment of Health Plans (CAHPS). Most plans you are likely to be offered will have been rated on this system and you can check out what people using the plans have think about them. Or you can see if the health care plan has a Facebook fan page. Whichever.
And now we move on to the most important aspect of your new job: time off from your new job. Bad news first: It may be a while before you get much.
In most jobs you will have to earn your time off, as they don’t give you any to begin with. Sometimes that is as simple as working two weeks to get one day accrued. Other times employers will put the new employee on a probationary period that can last weeks or months in which they can accrue leave but cannot take any.
Many employers are moving to a new system of Paid Time Off (PTO) that doesn’t differentiate between beach days and sick days. That is, you will get a certain amount of days off based on how much you work, and how you use them is completely up to you. Employers sold on this idea believe it results in fewer fake sick calls.
There is one last important government acronym that you should be aware of: FMLA. If you’re eligible, the Family and Medical Leave Act covers you in the event that you need an extended period of leave. The reasons for this leave can range from pregnancy to needing to care for a parent who has a serious health condition. FMLA protects your job for 12 weeks if you need to be absent for the reasons above, or even if something happens to you that keeps you out of the office, like a serious car accident.
That’s just a little of the information that will help you at a new job.