Gone are the days of getting hired fresh out of college and sticking with the same company all the way to retirement. These days, switching jobs is practically a rite of passage. According to the U.S. Bureau of Labor Statistics, the average employee tenure at the same company is 4.6 years, and in some industries, that figure is considerably lower. But while changing jobs often comes with the immediate benefit of a higher salary, believe it or not, you might stand to lose money by pursuing a new opportunity.
Here are some of ways switching jobs can cost you.
1. Inferior health coverage
The amount of money you pay toward your health insurance premium usually doesn't represent the full cost of getting coverage under that plan. There's a good chance your employer kicks in a substantial portion of that premium to ease the burden for you. Before you accept a new opportunity, take the time to understand the type of health coverage you'll be offered and, more importantly, how much it'll cost you. Keep in mind that it's not just higher premiums you could be facing by switching jobs; your annual out-of-pocket costs could climb as well, depending on the type of plan your new company offers.
Say your current employer pays 60% of your $500 monthly insurance premium, leaving you to pay the $200 balance. Even if you're looking at that same $200 at your next job, your new plan might come with a $35 in-office copay, whereas your old one might have charged just $15. Similarly, that prescription medicine you take each month might cost $50 under your new plan as opposed to $30 under your old one. Over the course of a year, you could wind up spending hundreds of extra dollars on medical costs as you navigate your new insurance coverage.
2. A mediocre retirement plan
Don't be fooled into thinking that all retirement plans are created equal. Before you take a new job, find out what type of 401(k) plan comes with it. You could end up losing out if you get stuck with a plan that offers fewer investment options and higher fees than your current plan. If, for example, your current plan's fees equal 1% of managed assets and your new plan's fees equal 1.5%, you'll lose a substantial portion of your retirement savings to extra administrative costs. That might sound like a small difference, but over the course of your career, it could cost you tens of thousands. Ask to see your new plan's summary description to get a sense of what your costs will be.
Another way you might lose money is moving to a company that doesn't offer a 401(k) match. Say you currently earn $50,000 and your employer offers a 3% match, or $1,500 in free retirement dollars each year. If you're offered more money to jump ship but your prospective employer doesn't provide a match, you can essentially deduct that $1,500 from your potential new salary, as you'll be losing out on the money your current company would've given you.
And if your new employer does offer a match, beware lengthy vesting schedules that reduce your chances of actually getting your hands on that money. Some companies also don't allow their employees to contribute to a 401(k) plan until they've worked for a year or longer. If that's the case, you'll pay taxes on more of your income and lose out on valuable time to grow your savings.
3. Less paid time off
Some companies offer more generous vacation benefits than others. If your new job offers less paid time off than you're accustomed to, you may get stuck taking some of those non-work days unpaid. Additionally, in some situations, you may not be eligible for paid time off at all -- including sick time -- until you've been with the company for three to six months or longer. No matter the circumstances, unpaid time off from work can end up costing you. Say your take-home pay is $1,000 a week, or $200 a day, but a nasty bout of the flu forces you to miss four days of work for which you aren't paid. That's an $800 loss right off the bat, which can be a major one-time blow to your budget.
Remember, the amount of money you make at any job isn't just a simple matter of how much you're paid in salary. There are numerous factors that go into calculating your overall compensation package. Before you rush to embrace a new career opportunity, take the time to understand not only what you're getting, but also what you're giving up.