How to Optimize Your Career to Fund a Better Retirement

When you choose a career path or apply for a job, you might not think about how those choices will impact your retirement, especially if it’s still decades away. However, your income potential is one of the greatest determinant of your financial well-being—including your ability to fund your happiest, healthiest, most productive life in retirement.

Given that you’ll spend about 30 percent of your lifetime hours working, it’s important to balance the desire to earn more with the value of pursuing a meaningful career that allows you to engage in work you enjoy. Assuming you have that base covered, the following tips can help you optimize your career to build a portfolio that enables you to live the life you hope to in retirement.

Maximize Your Compensation

Since your lifetime earnings greatly impact the eventual size of your retirement portfolio, maximizing every aspect of your compensation is one of the best ways to grow your wealth.

Salary. Of course, it’s beneficial to negotiate salary upfront during the hiring process. Yet, it doesn’t end there; if you feel you’re not compensated properly in your current position—or you’ve taken on more responsibilities—then consider asking for an increase. Websites like PayScale and Glassdoor can help you determine industry averages for your current position or a role you’re applying for, so you can stay in line with benchmarks. Your annual performance review is also an opportunity to demonstrate your value and boost your salary.

Stock. For senior-level roles that include stock options, negotiating a better package when you change companies or receive a promotion can make a significant difference in your portfolio over time.

Bonus. If your company pays merit-based bonuses and you’re performing at a high level relative to your peers, document your achievements and state your case ahead of bonus payouts. Keeping a running list of achievements—with metrics that align with the key performance indicators (KPIs) most relevant to your company—is a great way to ensure you’re prepared when the time is right for a bonus discussion.

Job or career change. When you change jobs or careers, money may be just one factor driving the decision. But all other things being equal, such a move may be an effective way to increase your earning potential.

When you switch employers to take a higher-level position or to join a company with a more competitive pay scale, that single decision can make a large impact on your lifetime earnings. However, be careful not to job-hop so often that employers avoid hiring you. And keep in mind that every time you change jobs, you may face a waiting period to enroll in the new employer’s 401k plan and you may lose some of the old employer’s matching funds, depending on the vesting schedule. Both can reduce the total amount you invest over the long run.

A more significant move like changing careers can pay dividends if you choose a field with generally higher pay scales. On the other hand, if a career move would enable you to do more fulfilling work, but would require a pay cut, talk to a financial advisor to ensure you can make the numbers work short term and to assess the impact on your retirement portfolio long term.

Leverage Your Benefits Package

Many employees take their benefits package for granted, but it’s another factor in your lifetime earnings. When you consider a job change, try to find out as much as you can about the benefits before you accept the position, at least for big-ticket benefits such as a 401k.

Then once you’ve joined the company, make the most of any benefits available to you. For instance, always aim to contribute the maximum allowable amount to your 401k, especially if your company matches a portion of your contributions.

If your employer offers a health savings account (HSA)—a type of account tied to a high-deductible health plan—you can use this triple tax-advantaged fund to boost your long-term savings. HSA contributions are made with pre-tax money, the funds grow tax-free, and your withdrawals are tax-free as long as you use the money for qualified medical expenses. (Once you’re 65 you can use your HSA funds for any purpose without penalty, though you’ll pay tax on withdrawals that aren’t used for qualified medical expenses.)

Engage in Professional Development

You’ve probably heard the phrase “invest in yourself.” When it comes to using your career as a means to build wealth, prioritizing your professional development is one of the best investments you can make.

Look for training and other development opportunities that can help advance your career by positioning you to take on new responsibilities, earn a promotion, or compete for higher-paying jobs. Webinars and workshops can help you brush up on skills, while a multi-day training program, certification program, or advanced degree might be just what you need to take your career to the next level. If your company offers a tuition or training reimbursement benefit, you might not need to invest anything but your time.

Maintaining a solid professional network is another way to invest in yourself and your development. Whether through LinkedIn, the local chapter of an industry association, or other group, staying connected with colleagues can help you gain new ideas, learn from your peers, and develop and enhance the personal brand that can help propel your career forward.

Start a New Business

Leaving a salaried position to start your own venture opens the door to potentially higher earnings over the long term, since you won’t be constrained by how much an employer is willing to pay you. However, there is always a degree of risk in forming a new business. You’ll likely take a pay cut at first, you might need to tap your investments for start-up capital, and there is no guarantee that the company will succeed. Before leaving a staff position to open a new business, evaluate the upside potential vs the downside risk and ensure you can weather the inevitable challenges of getting your idea off the ground.

Wherever you are in your career, meeting with a financial advisor can help you determine if certain career strategies will improve your lifetime earning potential and boost your retirement portfolio. Contact the fee-only advisors at Marshall Financial Group to schedule a consultation.

Disclosure:

Marshall Financial Group, Inc (“Marshall Financial”) is an SEC-registered investment adviser with its principal place of business in Doylestown, Pennsylvania.   This newsletter is limited to the dissemination of general information pertaining to Marshall Financial Group’s investment advisory services.  Investing involves risk, including risk of loss.  References to market indices are included for informational purposes only as it is not possible to directly invest in an index. The historical performance results of an index do not reflect the deduction of transaction, custodial, and management fees, which would decrease performance results. It should not be assumed that your account performance or the volatility of any securities held in your account will correspond directly to any comparative benchmark index.

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