07/15/2024
🚨 If I asked you to give me $10,000 out of your 401k, would you? 🚨
If yes, let's chat! Jk, the likely answer is no.
So why are you giving that money to a complete stranger?
I speak to clients all the time who have old 401ks just sitting at a former employer. It’s kind of a standard practice, quite honestly it’s the last thing you think about as you're gearing up for your next working adventure. I am guilty of it as well.
You don’t think about it because it’s not a physical bill (like electric) you have to pay, or one that you can see coming out of your checking account.
Leaving it with them feels safe. It's been there and did fine. You don’t want to bother with the hassle, you'll worry about it when you retire... etc. Lots of reasons why we choose to leave them there.
But did you know that leaving your 401k with a former employer could be riskier than you think? 🤔
Most everyone wants to retire early, or at the least retire comfortably. We just haven't been educated properly to know the repercussions of not moving that old 401k.
Here are a few reasons why it’s important to take action:
Higher Fees: Often, 401k plans with former employers come with higher management fees, which can eat away at your hard-earned savings over time. Example: Total all-in fees at an employer could be as high as 2.25%. If you have $100,000 with them, that’s $2,200 per year! If you were to invest $2,200/year and it grew at 10% over 20 years, that’s $140,000! You just gave up $140,000 that could have been in your retirement plan. If you had $50k starting, you lost $70k; $25k starting, you lost $35k over the 20-year period.
Limited Control: When you leave your 401k with an old employer, you have limited control over your investment choices and how your money is managed.
Lost Opportunities: By rolling over your 401k into an IRA or your new employer’s plan, you can have more investment options and potentially better growth opportunities. Typically, there are fewer than 20 options that your employer chooses to work with. There could be less expensive funds to invest in with the same returns and better diversification.
Complexity in Management: Keeping track of multiple retirement accounts can be confusing and increase the chances of missing important updates or changes.
Risk of Neglect: An old 401k may not get the attention it needs, leading to suboptimal performance or missed opportunities for rebalancing and optimizing your investments.
🔍 What Can You Do?
Consider a Rollover: Moving your 401k to an IRA plan can provide better control, lower fees, and more investment options. Sometimes you can even add it to your new employer’s plan, but the IRA is typically a better choice. There are no tax consequences to doing this.
Consult a Financial Advisor: Get professional advice to ensure your retirement savings are working as hard as you do. There are lots of other options, each depending on your unique situation. There are even no-fee options which could maximize your overall growth.
💡 Take Charge of Your Future Today! Don’t let your old 401k sit idle. Contact us to learn more about how we can help you make the most of your retirement savings.
If you have any questions, let me know, or you can book a consultation here: https://calendar.google.com/calendar/u/0/appointments/schedules/AcZssZ2FuzUWHlYRGtzqbOP-ZBfiLD4ZAM91WH6KmJ9Ul1xfE-026Xr5UwD1ua3u9fOLe9TY0BqvlNwi
