Resumes, interviews, negotiations – there’s a lot to think about once you have made the decision to change jobs, or even careers. One thing that can be easily overlooked during the transition is your retirement plan. If you are making a change in your work life, there are five important things you should think about with regards to your retirement savings.
Think about what you want to do with your retirement account. There are three options when handling the account from the job you are leaving – leave the money in the account with your previous employer, take it with you by rolling it into your new employer’s plan or roll it into an IRA. Each option may have its advantages – maybe you like the investment options available in your old plan, or the fees are lower in your new plan. Perhaps you like to have as few accounts to keep track of as possible, so you choose to roll it into an IRA.
The average employee stays in a job for 4.6 years, according to the Bureau of Labor Statistics. By the time a person turns 40, that translates to about four different retirement accounts. If that trend continues until a person retires at age 65, an employee could be trying to manage nine separate accounts. That’s a challenge for even the most financially savvy among us.
Talk to a financial advisor. Even if you have just one consolidated account, retirement can be daunting. In fact, 68 percent of Americans say trying to understand their retirement plan options can be an overwhelming process. This is a great opportunity to talk to a financial advisor, who can help you understand your options, as well as what income you will need in retirement and how much you should save to get there.
Decide where to invest. A financial advisor can also help you figure out where to invest the money in your account. When looking at investment options, you’ll want to think about how much risk you’re comfortable with, and how far away you are from retirement. If you’re nearing retirement, you may want to have a more conservative investment strategy than someone who is 22 years old and just beginning to save for retirement.
Set your goals. Another important step you can take is to set a savings goal. People who have a specific goal for how much they want to save are four times more likely to feel confident when they think about retirement, according to the Lincoln Retirement Power Participant Engagement Study.
Boost your contributions. That new job you are accepting means a new, hopefully higher, salary. It’s the perfect opportunity to increase your contribution rate. When thinking about how much you should save for retirement, a good rule of thumb is to aim to save between 10 and 15 percent – including the employer match. Since you won’t be used to the amount of your new paycheck, you most likely won’t even notice the extra money you’re putting away. No matter what, remember, if you’re not meeting the employer match you’re leaving free money on the table.
Even if you’re not looking for a new job, it’s always a good time to take a look at your retirement plan, to ensure you are making the most of your savings.
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