Monday Market Update – August 23

Forefront’s Monday Market Update

The Misplaced 401K

Right now, an estimated 65% of Americans are looking for a new job, which makes sense as those who can see the opportunity in front of them are taking advantage of a labor shortage to show just how valuable they are, and to find a company and job that recognizes that value. Over the course of the past 6 months, I have had dozens of clients move into new positions or new companies and advance their careers and I suspect that trend isn’t going to slow down anytime soon.

What to do when changing jobs

Changing jobs is exciting but nerve wracking, and generally comes with a number of different things you need to do to both prepare for the new position, as well as once it has started. Due to the nature of getting accustomed to this drastic change in your life, many things tend to take a back seat and end up costing you in the long run.

Exploring your benefits is a dry and boring exercise because most people don’t enjoy reading about high deductible health care plans in their free time. None the less, this is one of the single most important steps that you can take because understanding and utilizing your benefits can save you thousands of dollars.

My wife is a school teacher in NJ, and she moved from the Newark School District to another a few years ago. While her and I were exploring her new benefits we learned about something her district called a flex spending account. Simply put, we could save money pretax and use it for child care, like my children’s aftercare program or summer camp. We utilize this benefit to the maximum we are allowed which is $6,000. Based on our tax bracket, this simple move saves us $2000+ dollars a year. When was the last time you did a deep dive into your benefits?

Old 401Ks

As I have helped my dozens of clients navigate this change of jobs, I have discovered a troubling trend that prompted me to write about it today. A number of people tend to leave their old 401Ks in their old employer’s plan and then forget about them! This makes my soul hurt!

Knowing where your money is, and more importantly having a set goal for each basket of money is paramount to creating an organized system. That system promotes long term savings and financial behavior that is proven to be successful.

The 401K Dilemma

401Ks are incredible tools, but like all great things, have their limitations. The number one 401K dilemma is the lack of investment choices. Most plans are severely limited in what you can invest in, with many plans simply providing target date funds for you to put all of your money into. Changing jobs offers you the ability to move your old 401K into an IRA and the options become endless. Perhaps we want to convert the old 401K into a ROTH IRA, pay the taxes now so we can have an account that will grow tax free for the remainder of your life? Perhaps you just want the ability to buy stock in a company you believe in and want to support? Regardless, the options open up exponentially, as does the ability to organize your dollars and give each bucket of money a set task to accomplish.

Don’t let the overwhelming nature of having to move your account, or study your benefits deter you from taking the time to put in the work, or work with your advisor for guidance. It has the potential to add tens and even hundreds of thousands of dollars to your bottom line over the course of your life.

So What?

So how does this impact all of you?

  • Even if its boring, learn your benefits and use ALL that apply for your life.
  • Don’t leave old 401Ks at your old employer

Stock market calendar this week:

Thursday August 26h:

Initial and continuing Jobless Claims @ 8:30AM

Most anticipated earnings for this week:

Want to learn more about finding value and assessing risk? Listen to the newest episode of Understanding the Power of Money and find out how an advisor SHOULD be providing you value. HINT: it is not performance!
Listen to episode 14 of Understanding the Power of Money.