Americans are changing jobs more quickly than ever before. According to Harvard Business Review, the average monthly job quit rate has been rising since 2009. This trend culminated with the “Great Receipt” of 2021. This trend has an impact on how investment professionals approach their strategy.
American workers love the idea of a new position that offers better pay and better company culture. However, it can have a negative impact on your investment strategy. Ty Young, Ty J., is the CEO of Ty J. Young Wealth Management shares what you need to know about the impact of changing jobs on your retirement planning.
How the changing job market impacts your investment plans
Your retirement investment plans can be affected by job changes, such as your 401k.
Ty Young explains that when you contribute to a retirement plan or 401(k), there is usually a matching contribution. This matching contribution is most likely tied to an expiration schedule. That means you could leave part of the matching contributions with an old company if you decide to leave the company.
You could lose out on one your key benefits if you don’t time it right. Young clarifies that this is not a reason to quit your job and find a better one. It’s just something to keep in mind.”
The Hidden Costs Of Job-Hopping
There are some risks to changing jobs. One, you are assuming your next job will be the one that you truly want.
Ty Young explains that if you job hop too many times, eventually there won’t be a new place for you to go if things don’t go your way. This could cause unemployment, which would most likely impact long-term retirement plans.
The end of the road for job hunting can be a dead-end. This could also affect the timing and quantity you invest.
You will be unable to build wealth over the long term, at a minimum. However, underemployment or unemployment can lead to you losing the support you receive from a company’s match 401(k), or other retirement benefits.
Here are some things to know before you change jobs
Are you still considering changing jobs? These factors don’t mean to discourage you. They are just something to think about as you consider changing your job. Here are some tips and tricks for people who are changing careers.
1. Keep Your Retirement Accounts together
Ty Young says that people often leave their 401(k),s at their former employers when they change jobs. This is a mistake. Most people will choose to convert their 401(k), into a self-directed IRA, and then invest according to their investment objectives.
This approach is sensible. This is a good approach if you are constantly changing jobs. However, these individual plans won’t help you accumulate wealth as much as a centralized IRA. Your retirement accounts should be kept together.
2. Time it right
Your employer may match your retirement contributions. If yes, ensure that you continue to work at your current job so you can reap the benefits of this match. If you do not, you may be missing out on an important benefit.
3. Avoid Jumping Too Often
According to the old saying, the grass is always greener where it meets the ground. Be sure to find the right job before you make a career change. If you don’t, you might regret it and have negative long-term consequences for your family.
Make your retirement count
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