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Career 19 March 2018
Retirement is a lifelong investment that ideally begins at the start of your career. The Balance reports today; the average person changes jobs ten to fifteen times (with an average of job changes) during his or her career. A survey by Deloitte also found that two-thirds of millennials plan to leave their company in five years or less. Whether you’re looking for greater fulfillment or more compensation, you want to make sure your retirement plan takes the move with you. Since you can’t just throw your retirement plan in a brown box like you can with your desk supplies, it’s important to know how you can move your 401(k). Typically, you have three options that all come with pros and cons: You can leave your 401k plan with your former employer, roll over your account into an individual retirement account (IRA) or transfer your old 401(k) into your new company’s plan.
If you are making a job change soon, here’s some insight on what you can do with your 401(k):
Have you borrowed from yourself?
Changing jobs is very exciting, but you need to make sure you deal with your outstanding loan if you borrowed money from your retirement plan. If you’ve borrowed any money from your 401(k), you need to pay it in full before leaving the company. Typically the loan balance is due within 60 days from the day you leave your company, whether you are terminated or got a new job. If you fail to repay the loan and you are under the age of 59.5 the amount owed will become an early withdrawal which can add an additional 10 percent tax penalty and or additional fees if you are under the age of 59.5.
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The IRS will treat the loan as an early withdrawal from your 401(k) retirement plan. If you fail to pay back the loan within the fixed period, it may become a very costly decision. Luckily, if your loan becomes a tax liability, employers do not report defaults to the credit bureaus, so your credit score will not be affected. However, you should still avoid borrowing from your nest egg, being that most won’t be able to pay back the amount borrowed within the 60-day window. Be sure to check with your HR department before you leave to find out what the rules are on 401 (k) loans when an employee leaves the company.
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Leaving Your 401(k) with Your Former Employer
While this may be convenient, leaving your monies at your old company’s plan limits your investment choices. This is usually an option when you have a certain balance amount; typically $5,000. Most companies will permit you to keep your retirement savings in their plans after you leave your company. If your balance is less than $1,000, your employer may close your account and send you a check for the balance. While procrastination may be the main reason 401(k)s are left at your old company, you may want to stick with leaving your 401(k) at your old company until you are ready to make an informed decision. Depending upon your plan, some plans limit the number of transactions, assess extra service fees or restrict beneficiary options for terminated employees. Leaving your money in a 401(k) does offer ultimate creditor protection. Federal law prohibits creditors from ceasing 401(k) accounts.
Roll Your 401(k) over into an IRA
You may want to consider rolling your 401(K) into an IRA. Majority of people roll their money over to an IRA because it offers more investment options. For some, having the opportunity to pick and choose any variety of funds is important to them. If you contribute to your employer’s retirement plan, you may end up with lesser options chosen by the plan administrator. You can also rollover other 401(k) accounts you have with other employers into one IRA, making it easier to track your money.
Some may be hesitant to roll over, due to the fear of extra taxes. If you roll over your employer-sponsored plan efficiently, there should be no tax consequences of moving your funds into an IRA. With regards to taxes when rolling over, you should look to use a direct rollover method to prevent tax consequences. Also, a rollover from a traditional 401(k) should enter a traditional IRA. A rollover from a Roth (401(l should result in a Roth IRA. Additionally, if you roll over from a traditional retirement plan into a Roth IRA, you will have to pay income taxes on the money. When deciding if you should roll over to an IRA you may want to consider your personal situation and preferences. It’s important to note that with an IRA, you can get back on track with your retirement savings months before you are eligible for a new employer’s 401(k).
Roll Over 401(k) into Your New Employer’s Plan
This can be a great option, being that you join a company that allows you to participate in their 401(k) right away. Seek out if your new employer has a defined contribution plan that allows rollovers from other plans. Reiterating, you will be limited regarding investment choices, but a big benefit is credit protection. If you have the option, you may want to do a direct, trustee-to-trustee, transfer from your old retirement plan to your new employer’s plan. Transferring your old 401(k) currencies to your new plan may make it easier to track your retirement savings.
The world of retirement planning is not always so straightforward. Research all the details of your current account and consult tax professional and other advisors with any questions to avoid costly mistakes.
3 Min Read
I think we can all agree that we are living in unprecedented times, and many of us are experiencing challenges in both our personal and professional lives. But it is important to remember that often, challenging moments present opportunities for change. Right now, companies and individuals are using this time to rethink how they conduct their business, the resources critical to their success, and how they go about their daily activities. And what we are seeing is that more and more people, especially women, are taking control of their lives by starting their own businesses.
While it is estimated that the number of women-owned businesses is one-quarter to one-third of all enterprises worldwide, there are still many women who aspire to make entrepreneurship a reality. A new Herbalife Nutrition survey conducted by OnePoll of 9,000 women across 15 countries, including 2,000 women in the U.S., found that globally, 72% of women want to open their own business. Of those, 50% don't yet have a business and 22% have one but would like to open another.
Women want to have more control over their future, but they are committed to helping future generations by being a role model for younger women; 80% believe this is a strong motivating factor.
The second annual survey, which explores women and entrepreneurship globally, revealed the overwhelming challenges women experience in the traditional workplace compared to their male colleagues. In fact, more than 60% of women said they would like to start a business due to unfair treatment in previous job roles. Of the women surveyed, 7 in 10 believe that women must work harder to have the same opportunities as men in the workforce. Results also revealed that 43% of women have delayed having children because they thought it would negatively affect their career, and 25% said they had faced pregnancy discrimination. 42% believe they've been unfairly overlooked for a raise or promotion because of their gender — and of those, the average respondents had it happen three separate times. These are a few of the challenges that have been a catalyst for the surge in entrepreneurship among women.
The irony is that startups founded and cofounded by women performed better than their men counterparts: on average women-owned firms generated 10% higher cumulative revenue over five years, compared with men.
With the barriers and negative experiences women cited in the workforce, it is not surprising that across the globe, the top motivation for starting a business is to run it themselves (61%). Women want to have more control over their future, but they are committed to helping future generations by being a role model for younger women; 80% believe this is a strong motivating factor.
But the women surveyed don't expect entrepreneurship to be smooth sailing: one-third of women with plans for entrepreneurship are "very worried" about their business — or future business — failing in the next five years. The top three challenges when starting a business center around finances — earning enough money to offset costs, having enough budget to grow, and financing their business. And when it comes to financing, women face stark disparities in the capital they often need to fund their business. Boston Consulting Group found that women entrepreneurs averaged $935,000 in investments, which is less than half the average of $2.1 million invested in companies founded by men entrepreneurs. The irony is that startups founded and cofounded by women performed better than their men counterparts: on average women-owned firms generated 10% higher cumulative revenue over five years, compared with men.
Women entrepreneurs create a source of income for themselves and their families. They are a vital part of our world's economic engine that society needs to support with flexible opportunities, mentorship, and access to capital. Herbalife Nutrition is proud that more than half of our independent distributors worldwide are women who set up their businesses and decide when and where they work and do so on their terms. We need to invest in women entrepreneurs, not only to help one generation, but to offer role models for the next.