How Job Hopping Can Impact Your Investment Strategy

(MENAFN- ValueWalk)
Free-Photos / Pixabay

Americans are shifting jobs faster than ever before. According to the Harvard Business Review, the average monthly quit rate has been on the rise since 2009, a trend that came to a head with the“Great Resignation” of 2021. This trend is impacting how many professionals approach their investment strategy .

For the American workforce, the prospect of a new job offers better pay or better company culture. But it can also impact your investment strategy. In this article, Ty Young , CEO of Ty J. Young Wealth Management, explains what you should know about how changing jobs impacts your retirement planning.

Get The Full Walter Schloss Series in PDF

Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q2 2022 hedge fund letters, conferences and more

Stanley Druckenmiller and Paul Tudor Jones are some of the most successful traders of all time. At the 2016 Robin Hood conference these two Wall Street legends took to the stage to discuss trading, investing and their investment careers. The video has just been made available to the public. You can see more recent thoughts Read More

• 1. How Changing Jobs Impacts Your Investment Plans
• 2. The Hidden Costs of Job-Hopping
• 3. What to Know Before Changing Jobs
  • 3.1. Keep Your Retirement Accounts Together
  • 3.2. Get the Timing Right
  • 3.3. Avoid Jumping Too Often
• 4. Make Your Retirement Count

Every time you change jobs, you potentially change your retirement investment plans, such as your 401(k).

Ty Young explains that 'when you make contributions to a 401(k) or retirement plan, there is often a matching contribution, [and] that matching contribution is very likely tied to a vesting schedule. What that means is, as you leave a company, you could be leaving part of the matching contribution with the old company.'

In other words, if you get the timing wrong, you could miss out on one of your key benefits. But as Young explains, 'it's not a reason not to take a new and better job. It's just a consideration that you should be aware of.'

Changing jobs has its appeal, but there are risks. For one thing, you're assuming that your next job is the one you really want to land on.

As Ty Young explains, 'If you job hop enough times...at some point, there might not be a new place to hop to if things don't go well. This could lead to a period of unemployment which likely would negatively impact a long-term retirement plan .'

Job hunting can therefore lead to a dead-end, which also disrupts the timing and quantity of your investments.

At a minimum, that limits your ability to accumulate wealth over time. But at worst, unemployment or underemployment will separate you from the support you'd receive from a company's matching 401(k) or other retirement benefits.

Are you still thinking about changing jobs? These factors aren't meant to deter you, only to give you something to consider as you do. Here are some tips for those changing jobs.

Ty Young observes that 'when people are changing jobs, they leave their 401(k)s at their previous employer. That can be a mistake. The best course of action, for most people, is to roll those old 401(k)s into a self-directed IRA and invest according to your investment objectives.'

This approach makes sense. If you make frequent job changes, you'll have a lot of smaller 401(k) plans. But these small individual plans don't help you accumulate wealth the way that a centralized IRA can. Make sure to keep your retirement accounts together.

Does your employer match your retirement contributions? If so, make sure to stay at your current job long enough that you reap the benefit of this contribution. Otherwise, you could be leaving an important benefit behind.

The grass is always greener on the other side of the fence, as they say. Before you make a drastic career move, make sure that your next job is a good fit. Otherwise, you could be making a decision that you regret — one that has long-term financial effects for you or your family.

Ty J. Young is committed to helping investors reach their potential, whether your goals are retirement or an investment strategy more immediate. If you want to develop a solid investing strategy, contact the team at Ty J. Young today.

Article by Deanna Ritchie, ReadWrite

MENAFN06092022005205011743ID1104822106