How can a job change affect your investment strategy?
Americans are switching jobs faster than ever. According to the Harvard Business Review, the average monthly quit rate has been increasing since 2009, a trend that began to emerge as “Great resignation“For 2021. This trend is impacting the way many professionals approach their investment strategies.
For the American workforce, the prospect of a new job pays better or a better company culture. But it can also impact your investment strategy. In this article, Ty YoungTy J. Young Wealth Management CEO, explains what you should know about how a job change affects your retirement plans.
How does a job change affect your investment plans?
Every time you change jobs, you have the potential to change your retirement investment plan, such as your 401(k).
Ty Young explains that “when you contribute to a 401(k) or retirement plan, there is usually a matching contribution, [and] that matching contributions are most likely bound to a check schedule. That means, when you leave a company, you can leave a matching contribution with the old company. “
In other words, if you choose the wrong time, you could miss out on one of your main benefits. But as Young explains, “that’s not why Not to get a new and better job. It’s just a consideration that you should keep in mind.”
Hidden costs of job hopping
Changing jobs has its appeal, but also risks. For one thing, you’re assuming that your next job is the one you really want to achieve.
As Ty Young explains, “If you dance enough… at some point, there might not be a new place to dance if things don’t go well. This can lead to a period of unemployment and will likely negatively impact long-term retirement planning.”
As a result, the job search can come to an end, which also disrupts the time and volume of your investments.
At a minimum, that limits your ability to accumulate wealth over time. But at worst, being unemployed or underemployed will separate you from the support you get from matching company 401(k) benefits or other retirement benefits.
Things to know before changing jobs
Are you still thinking about changing jobs? These factors are not intended to deter you but to give you something to consider when doing. Here are some tips for job changes.
1. Keep your retirement accounts together
Ty Young commented that “when people change jobs, they leave their 401(k) to their former employer. That could be a mistake. For most people, the best course of action is to roll that old 401(k) into a self-directed IRA and invest according to your investment goals.”
This approach makes sense. If you change jobs often, you’ll have plenty of smaller 401(k) plans. But these mini-personal plans don’t help you accumulate assets the way a centralized IRA can. Make sure to keep your retirement accounts together.
2. Get on time
Will your employer match your retirement contributions? If so, make sure to stay in your current job long enough for you to reap the benefits of this contribution. Otherwise, you could be leaving behind an important benefit.
3. Avoid jumping too often
The grass is always greener on the other side of the fence, as they say. Before you make a dramatic career move, make sure your next job is a good fit. Otherwise, you may have to make a decision you regret – one that has long-term financial consequences for you or your family.
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Ty J. Young is committed to helping investors reach their potential, no matter what your goal is retirement or a more instant investment strategy. If you want to develop a solid investment strategy, contact Ty J. Young’s team today.
Featured image credit: Olya Kobruseva; Bark; Thank you!