Roll It, Ignore It or Grow It?

You work hard for your money!

If you are like many people, you won’t work for just one company for 30 plus years. Employment trends tell us that people new to the job market will change jobs at least seven times during their working career. Seven times or more – WOW! In addition to a new job other things enter our lives: relocations, family additions, aging parents, and all the other “stuff” that happens to us during our lifetimes.

It’s easy to forget about the retirement plan you had where you worked in the past. If you have less than $5000 in the plan you will hear from the retirement plan custodian soon after leaving telling you that an election must be made; you can’t keep the money in the plan because it isn’t enough. Companies don’t want to have to keep up with all your address changes and the expense of chasing you down in the future.  This is the rule and you can’t change it!  News like this make you feel bad and you often don’t know what to do with this money. The line of least resistance is to simply take the money, pay the 20% withholding tax, report it for income tax purposes and spend it. Not a wise decision.

For example, guess what amount you would accumulate if you invested just $5000 – one time – and annually compounded it at 8% for 30 years? What would you have? $25,000? $47,,000? $110,000? You would have $50,313.28. If you just added $100/month to your original $5000 for the same time period you would amass $186,253.14. Given these figures don’t you think it would make sense to save and invest rather than spend your $5000?

If you have more than $5000 in your plan, you have more options.

Our focus at Preferred Financial Strategies is to help you make smart money moves.  Review the attached article about options for your 401-k when you leave a company.

Changing Jobs? What to do with your 401-k?

photo by: 401(K) 2012

About Sara Seasholtz

Sara Seasholtz, CFP®, was voted one of "50 Most Influential Women in Charlotte" by The Mecklenburg Times in 2011, and has assisted her clients with their financial planning needs for over 40 years. Have a financial question? ASK SARA!


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