What Issues Should I Consider If I Get A Promotion Or Raise At Work?
When you receive a promotion or a raise at work, this change can come with a number of changes that might impact your financial situation.
In this checklist we focus on reviewing the potential financial impact of a raise or a promotion, including:
Cash flow and income
Will your income and cash flow change due to the raise or any additional compensation that comes with the promotion?
Will this change impact their ability to save for retirement and other goals? If so, work with them to increase their savings in areas like their 401(k), their HSA and others.
In the case of a promotion, does the new job come with added benefits they need to consider? These additional benefits might include stock-based compensation or deferred compensation.
Retirement plans and deferred comp
As part of a promotion will you now have an equity position in their company? If so, there are a number of planning issues to consider.
Will your higher income impact their ability to contribute to an IRA? Will their income now prohibit the ability to contribute to a Roth IRA or to a traditional IRA on a pre-tax basis?
Be sure you are fully funding their 401(k) or similar retirement plan.
If you received non-qualified stock options or restricted stock options as part of their promotion, there are a number of planning items to review.
Tax and insurance planning
The higher compensation may carry some additional tax planning issues. At the very least, they will want to ensure that that their withholding is adjusted to ensure you don’t have a hefty tax payment due. Your new income might dictate increases in life insurance coverage and /or disability insurance coverage.