Americans have become a society on the move
Moves on, moves up, moves out, moves constantly.
More of our children (the less than two, on average, that we have) are living halfway across the country or in some cases, halfway across the world. Twenty years ago, Americans found a job, for good or for worse that job became a career and we stuck with it through thick and thin. After landing the initial job, we married, bought a home, raised kids and retired from that same company. The pension offered was a Defined Benefit Plan in which after retiring, the former employee received a fixed amount of monthly income for the rest of his/her life and, if so desired, for the remainder of the life of the surviving spouse. With our careers, as with the vast majority of our lives, predictability reigned. Once in the pension plan, we put in our time and eventually retired feeling happy and secure. That was then, this is now.
These days, fewer companies offer that same type of job security and upward job mobility. Furthermore, even if they did, would we want this security. On average, Americans now change jobs four times during the course of a business career. Guaranteed monthly income for life after retirement is quickly going the way of the dinosaur. These so-called defined benefit plans are now being replaced by employer-sponsored defined contribution plans such as the 401(k) and 403(b). Unlike the plans of yesterday, 401(k)’s and 403(b)’s offer a multitude of investment choices and require contributions and thus attention from the employees. Now, your standard of living in retirement is predicated upon the choices you make during your working years. There is no free ride.
With the American worker on the move, an often neglected part of that turnover is the 401(k) and 403(b). Quite often after changing jobs we tend to leave these plans with our former employers, as if we left that employer like a like some unwanted remnant of an unplanned, midnight flight. There these plans sit without the attention or input that will, once again, ultimately determine the life you lead in retirement.
After changing jobs, an individual has the right to roll over and old 401(k) or 403(b) into an IRA. We are convinced that it makes financial sense to consider taking this action due to the unlimited investment options (no-load funds, stocks, bonds even CD’s) offered by an IRA, especially when compared to an employer-sponsored plan. It also makes sense to consolidate old 401(k)’s or 403(b)’s so that you can more easily track the results and growth of your retirement dollars. Getting four separate 401(k) statements can be flattering but it is both time consuming and confusing for most investors to manage effectively.
Our advice is quite simple, take a minute or two to look at your plan statements from former employers (even from decades ago) and make a concerted effort to consider consolidating these into an IRA. This will prove time well spent and could make the difference in how you spend your retirement. Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial adviser. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial adviser prior to making any changes to your portfolio. To contact Fagan Associates, Please call 518-279-1044.