Retire from 8 to 5 

Well congratulations! You got the job! Now, its time to learn the fine print and decide how to make it work best for you. There is more to a job offer than the base salary – 401k, pensions, health plans, stock options, etc. If the base salary is low, but the other aspects compensate adequately, then it is still a good deal for you.

If you have negotiated multiple offers, this blog is probably not going to be a value-added for you. If you are on your first or second job offer, read this article carefully, and ask your future employer these financial questions, not related to your base salary, when you get your offer letter.

Do you offer a 401k? There is no legal obligation for a company to offer a 401k, however most major companies do offer it. Smaller companies will consider it a matter of pride to offer a 401k.

What kind of 401k is it? Some companies offer a traditional 401k, similar to a brokerage account, with plenty of index funds to choose from. Other companies offer a 401k which invests exclusively in the company stock, and no other index funds. We’re not a fan of the latter, since it ties your retirement funds to one company’s success only.

Who is the 401k provider? 401k providers can be relatively unknown third-party companies that provide a collection of target funds from the big brokerage firms. These smaller companies, unfortunately, have very high expense ratios, which is a nuisance. Providers can change frequently as well, and historical data may not carry over from one provider to the next. In one of the jobs S held for 11yrs, there were 4 providers who stayed for 1-3yrs each.

What is the company match for employee contributions to 401k? Anywhere from 1-7% is normal. Ask and you shall find out. And there might be a graded match as well, i.e., for the first 5%, the match is 100% and for the next 5%, the match is 50%, and for anything higher, the match is 0%. Lots of nuances here, ensure you ask and get the information. This can change during your employment, and likely impacts the entire company, but the employer will typically give you significant notice.

Is there a minimum vesting period for company contributions? This is an annoying one and I simply don’t agree with vesting periods, of any duration. More on this later. A lot of companies offer immediate vesting, i.e., the matching funds become yours the same-day they are matched in your 401k. Other companies, mostly more traditional companies, have a 1-3yr vesting period, i.e., the employee needs to stay with the company for this minimum duration before the match is officially the employee’s funds.

Do you offer stock options? Yes, or no. If yes, is there a vesting schedule. It does depend on what level you enter the company. Are stock options provided annually?

Do you offer RSU? Restricted Stock Units. Yes, or no. If yes, is there a vesting schedule. Again, this too depends on what level you enter the company. Are RSUs provided annually? RSU and stocks look similar, but they have different tax implications. More on this later.

Do you offer annual bonus? Yes, or no. If yes, is there a vesting schedule. If no, then what is the alternate financial incentive tied to employee performance?

Do you have an employee pension plan? A lot of companies are phasing out pensions. When S joined a company in 2011, and K joined the same company in 2013, pensions were being offered. Legacy employees told us that our pension plans were much worse than what they received when they joined the company in 1990s and 200s. However, the same company, from 2014 onwards, stopped offering pensions for new employees. I would still take some pension, over no-pension. Ask about vesting schedule – typically, employers will require you to stay with the company for a year or two before allowing you to keep the pension.

If the answers to any of these questions are unclear, and are not deal breakers to you starting the job, then ask your colleagues within a few days of starting the job. Your colleagues want to give you the benefit of their experience, will probably be happy to share this information to help newcomers.