In the two decades that I’ve been covering personal finance, I’ve worked for three big companies. I like to practice what I preach, like in the video above, where I explain some simple ways that you can manage your 401(k) when you change jobs and potentially save yourself more than $60,000 in about 30 minutes.
The backstory that you don’t catch above is this:
I’ve participated in the 401(k) at each employer I’ve worked at over the years, contributing the most money I could afford and always meeting the threshold to get the prized company match.
But on my way out the door, I’ve always taken my money with me, rolling over my hard-earned retirement funds into another qualified investment opportunity.
Workers have some choices when they leave a job. They typically can leave assets with the former employer, move it to an IRA or roll it into a 401(k) plan at their new job. (They also could cash it out – something I don’t recommend because of the tax penalties and it’s supposed to be there for retirement.)
Past performance is no guarantee of future results, as the saying goes. But a new Fidelity Investments analysis of what’s happened to retirement investors’ portfolios since the 2008-2009 market crash is worth considering if you’re tempted to pull money off the table during the market’s current volatility.
The big message: Investors who held on tight through the harrowing 2008-2009 crash have been richly rewarded since then.
Retirement investors have struggled with a Jekyll and Hyde economy these past two years, where Dr. Jekyll lives very well on Wall Street while Mr. Hyde runs roughshod over a terrified Main Street.
On Main Street, the jobless rate tops 9 percent and 14 million residential mortgages are underwater – a figure Deutsche Bank thinks will hit 25 million, or 48 percent of all home loans, before the housing bust ends.
Who wouldn’t want to get a significantly higher yield than a plain-vanilla money market fund — but with limited risk? Most of us in 401(k)s and other tax-deferred savings plan will recognize the stable value fund option as the let-you-sleep-at-night investment.
That promise of a steady performance and protection against losses has made stable value funds one of the most popular choices in tax-deferred savings plans like 401(k)s. Indeed, on average, about 13 percent of all defined contribution (DC) assets, or $540 billion, are allocated to stable value funds and half of all DC plans offer this option, according to EBRI/ICI and the Stable Value Investment Association annual 2010 survey, respectively.
The “boomerang generation”– young adults who live at home with their parents — are increasingly turning to mom and dad for further financial support. But will caring for your adult children jeopardize your retirement security?
Charles Schwab has long been a leader in low-cost retail investing. Now, it’s gearing up for a run at the 401(k) market by hitching its wagon to two ideas whose time may have come: low-cost passive investing and investment advice for plan participants.
Schwab has never been a major player in administering 401(k) plans for employers. The market is dominated by companies like Fidelity Investments, Vanguard and Aon Hewitt. But Schwab is preparing to roll out a new platform for 401(k) plans that it hopes will help it to crack the code.
That may sound like a wild idea, especially in an era when policymakers are talking about privatizing Medicare. But it has advocates within the retirement industry. The upside, according to Martha Tejera, a veteran retirement plan consultant, is that retirees who bought annuities guaranteed by Uncle Sam would feel like their retirement funds were secure. They wouldn’t have to worry about managing their own nest egg, running out of money, or handing their funds over to a Madoff-style crook.
Thanks to automatic enrollment and an improved stock market, employees are stashing money in employer-sponsored retirement plans at a record-high rate, according to a new Aon Hewitt study.
The consulting firm’s analysis of three million employees across 120 large companies shows that 75.8 percent of eligible employees participated in their company’s defined contribution plan — usually a 401(k) plan — in 2010. That’s the highest level since 2002, when the firm began tracking defined contribution plans, the company reported. In 2009, participation was 73.7 percent.
If you’re feeling discouraged about reaching your ambitious retirement goals, rest assured you are not alone.
According to the newly-released study called Shedding Light on Retirement, 55 percent of Americans don’t know how to achieve their retirement goals.
Step one: Take professional money managers responsible for the portfolios of large pension funds, and throw them into a vicious bear market.
Step two: Let them compete against individual retirement investors to achieve the best rate of return. Who are you going to bet on?