Raise your hand if you have changed jobs in the past five years. Go on, do it.
Odds are you either have your hand in the air right now, or you just have an issue participating in fun exercises.
Your rebellious spirit aside, the point is still valid.
This isn’t the 1950s, Eisenhower is definitely not president, pension plans are virtually extinct, and the days of an average employee spending an entire career with one company are firmly planted in our past.
There are a number of factors contributing to this change in workforce mentality.
Technology for one has created thousands of new job opportunities, given us easier access to the details of those jobs, and made it convenient to acquire a lot of the skills necessary to land those jobs.
There also seems to have been a shift in the employer-employee dynamic.
More and more I hear people grumble about a lack of job security, looming layoffs, an ill-equipped boss, or a general feeling of being a number that could easily be disposed.
Whether or not our company is going to take care of us, we seem to have adopted the idea that we are going to look out for ourselves anyway. And why not?
The marketplace is desperate for quality, experienced, driven talent to push their own agenda forward; and most of the time they’ll promise you a new challenge, more money, more appreciation, better schedule flexibility, or just a nice change of scenery.
Studies show that the average worker will change jobs 12 times in their career. TWELVE TIMES! That’s a lot of scenery changes.
You know what else it’s a lot of?
Retirement Plans Left Behind – Old 401k, 403b, 457
Before we know it, we have a trail of 401k baggage that eventually seems too daunting to want to deal with.
Let’s be honest, one old retirement plan is too much for most of us to want to commit the time to properly relocate.
So what do we do with that old 401k, 403b, 457 (and so on) plan when we change jobs?
This is where you’ll hear a chorus of “expert” opinions, none of which will have your unique situation properly analyzed.
The most common options are to cash out, leave it alone, roll it to an IRA, or roll it to the new employer plan.
Rolling Your 401k over to an IRA
Most of the time, rolling an old employer retirement plan to the appropriate type of IRA is going to be in your best interest.
The biggest reason why is you strip your old company’s plan rules off of your money.
What this does is expand your investment options from minimal to maximum, gives more flexibility and control over when and where you move that money, opens up more beneficiary control, and in most cases gives you easier access to investment guidance or advice from the financial professional(s) of your choice.
Not to mention, it’s one central account to stash all of the old plans you accumulate along the way.
Not so fast, though. There are all sorts of cost, performance, and tax considerations to examine before hitting “GO” on the rollover.
Some employer sponsored retirement plans could have lower costs associated with them, and some states offer more legal protection in the employer plan than they do in an IRA.
Additionally you want to inspect your holdings for highly appreciated company stock, funds that pay guaranteed interest, and outstanding loans.
You will also want to think twice if you retire from your company between the age of 55 and 59.5, especially if you plan on making withdrawals from a retirement account.
Check With a Licensed Financial Professor
How can you know for sure? Generally all it takes is a quick consultation with an appropriately licensed financial professional.
The best decisions for money movement are made after careful analysis of your goals, risk tolerance, and the many other factors that contribute to your unique situation.
Steer clear of anyone that gives you a blanket recommendation without looking at all of your particulars first.
When it comes to moving your money around, make sure you have the right voice in your ear.
With the holidays right around the corner, what better time than right now to get your financial life organized?
Give our office a call if you’d like a complimentary review of your investments, no matter how scattered about they might be.