Americans are shifting their jobs faster now than ever. According to Harvard Business Review’s data, the average monthly resignation rate has been on the rise from 2009 to present. This trend came to an end with the “Great Resentment” in 2021. This trend is affecting the way that professionals approach their investment strategy.
American workers like the prospect of finding a new job with better pay and a better company culture. But, it can also impact your investment strategies. Ty Young is Ty J. Young Wealth Management provides information about how changing work can impact retirement planning.
How changing jobs can impact your investment plans
Each time you move jobs, your retirement investment plans like your 401(k), can change.
Ty Young explains how “when you make contributions into a 401 (k) or retirement program, there is often also a match contribution. That matching contribution is almost always tied to a vesting plan. You could also be leaving a part or all of the matching contribution if you are leaving a company.
The bottom line is that you may miss out on key benefits if your timing is off. Young explained that this does not mean you should not look for a new job. It’s something that you should consider.
Hidden Costs to Job-Hopping
Change of jobs is a great option, but it comes with some risks. For one, you may assume that your next job is the one that you want.
Ty Young explains, “If you job hop enough…at some point, it might not exist a new spot to hop to if everything doesn’t work out.” This could result in unemployment which will likely have negative consequences for a long-term pension plan.
The job hunt can become a dead-end and disrupt the timing of your investments.
It will limit your ability accumulate wealth over time. Unemployment or underemployment could lead to your losing access to the retirement benefits and support provided by a company’s matching401(k).
What you need to know before changing jobs
Are you still contemplating changing careers? These factors should not be discouraged, but they can give you some ideas to think about. Here are some tips that will help you when changing your job.
1. Keep Your Retirement Savings Accounts Together
Ty Young observes that many people leave their 401ks with their previous employers when they move jobs. This can lead people to make a wrong decision. The best way to move those 401k’s into a selfdirected IRA is to invest according your investment goals.
This approach makes perfect sense. You will likely have more smaller 401k (k) plans if your job is constantly changing. These small plans can’t help build wealth the same way as a centralized IRA. It is important to keep all your retirement accounts together.
2. Get the timing right
Does your employer match retirement contributions? If so, be sure to keep your job and reap the rewards of your employer’s match. In this case, you might be losing an important benefit.
3. Avoid Jumping Too Often
As the saying goes: The grass is always kinder on the other side. Before you make a big career move, ensure that your next job will be a good fit. Or you could regret making a difficult career decision.
Make Your Retirement Matter
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