Americans are switching jobs faster than ever. According to Harvard Business Review the average monthly leave rate has been increasing since 2009. This trend reached a peak with the 2021 “Great Resignation”. This trend is changing the way professionals approach investing strategy.
American workers are attracted to the possibility of a job that pays more or has a better work culture. It can also affect your investment strategy. Ty Young, Ty J. CEO, discusses these issues in this article. Young Wealth Management will explain how changing careers can affect your retirement planning.
How Changing Jobs Influence Your Investment Plans
Changes in your job can lead to changes in your retirement investment plans (e.g., your 401(k)).
Ty Young explains: “When you contribute to retirement plans or 401(k), there’s often a matching donation. And that matching contribution is likely to be tied to vesting schedules. It means that you could lose a part of the matching donation if your company is sold.
Also, it is possible to miss one of the key benefits you have if your timing is not right. Young points out that this is no excuse to leave your current job for a better position. It’s a fact you should know.
Hidden costs of job-hopping
Although it has its benefits, changing jobs comes with risks. First, you assume that your next job would be the one you really want.
Ty Young explains: “If you job-hop enough times, at some point there might not be another place to hop to in case things don’t go according to plan.” This could lead to unemployment, which can have a negative impact on a long-term plan for retirement.
In other words, job hunting can result in a dead-end which could impact your ability to make investments.
That will reduce your ability over time to accumulate wealth. Worst, unemployment and underemployment can result in you losing your support from a company’s matching 401k or other retirement benefits.
Things to Consider Before You Change Jobs
Are you thinking about switching jobs? These factors shouldn’t discourage you. Here are some suggestions for people changing jobs.
1. Keep your Retirement Accounts Together
Ty Young observes, “When people are moving jobs, they tend to leave their 401 (k)s at the old employer. This can be dangerous. For most people, the best thing to do is roll your old 401ks into a self managed IRA. This will allow you to invest according to your investment goals.
This approach makes sense. If you frequently change jobs, you will have many smaller 401k plans. These individual plans will not help you accumulate wealth like a centralized IRA. You should ensure that you keep your retirement accounts separate.
2. Get the timing right
Does your employer match your retirement savings? If you are eligible, your employer may match your retirement contributions. A lack of commitment could mean you are missing an important benefit.
3. Avoid Jumping Too Often
As the saying goes, the grass always grows on the other side of a fence. You should ensure that the next job you are considering is a good match before making a major career move. A bad decision could lead to regrettable financial decisions for you and your family.
Make Your Retirement Special
Ty J. Young is determined to help investors reach their full potential, regardless of whether they are looking for retirement or an investment strategy that will last a lifetime. Ty J. has the right team to help you build a solid strategy for investing. Young today.