What Issues Should I Consider If I Get A Promotion Or Raise At Work?
When an individual receives a promotion or raise at work, it is important for them to consider how this change will impact their overall financial situation. One key area to review is the impact on cash flow and income. The individual should assess whether their new compensation will result in a change in their cash flow and income, and if so, they should consider adjusting their budget and increasing their savings in areas such as their retirement plan or health savings account.
Another area to consider is employee benefits. A promotion may come with added benefits, such as stock-based compensation or deferred compensation, which the individual should carefully review and understand. Additionally, retirement plans and deferred compensation may be affected by the promotion, which may impact the individual's ability to make contributions to a Roth IRA or deduct contributions to a traditional IRA. It is important for the individual to ensure they are fully funding their employer-sponsored retirement plan and to consider the planning issues that may arise if they receive stock options or restricted stock as part of their promotion.
Tax and insurance planning are also important considerations when receiving a promotion or raise. The individual's higher compensation may result in additional tax planning issues, such as ensuring proper withholding to avoid a hefty tax payment due. Additionally, their new income may warrant an increase in life or disability insurance coverage.
Overall, it is important for individuals to carefully review and assess the potential impact of a promotion or raise on their overall financial situation. This comprehensive checklist outlines key areas to consider and can serve as a helpful guide to making the most of a career advancement.
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Robert J. Pyle, CFP®, CFA, AEP® founded Diversified Asset Management, Inc., in 1996 to provide personalized, comprehensive wealth management services to successful individuals, families, single women, and business owners. His specialty is addressing the complex financial needs of self-employed professionals, corporate executives, and small-business owners. Our disclosure can be found here. The views, opinion, information, and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting, or tax advice.