Don’t let changing jobs derail your retirement plans

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It seems like everyone is finding a new job or thinking about it.

Many people have recently changed jobs, and with low unemployment rates nationwide, even more Americans say they want to take advantage of new career opportunities, according to Allianz Life’s 2022 Retirement Risk Readiness Study* . More importantly, workers have the upper hand in labor right now with what has been dubbed the Great Resignation continuing.

Among those 10 years or more from retirement, more than a quarter said they were likely to take up a new job this year, either with a new business (31%) or going freelance ( 26%). Even more near-retirees (those within 10 years of retirement) plan to change jobs in 2022: 33% with a new company and 32% plan to move into self-employment. Some said they wanted a new job with higher pay due to continued inflation.

While some new jobs come with higher salaries and better benefits, others unfortunately don’t. Some worry that changing jobs will affect how they pay for necessities like housing and food (57%), according to the study. What is of concern here is how workers think a job change might affect their retirement security:

• 60% fear that a new job will reduce the amount they can save for retirement.

• 56% fear it will force them to stop saving for retirement altogether.

Ideally, a new job will increase your salary and help you increase the amount you invest in your retirement goals. Either way, a job change is the perfect time to review your financial strategy. Here are some points to consider.

Lifestyle creep is real

More than half (54%) of non-retirees in the study admitted to spending too much money on unnecessary things – and this trend can be multiplied when we start earning more money. Improving your lifestyle when you get a raise feels good. You can indulge yourself, within reason. Don’t improve all aspects of your life at once. Beware of how lifestyle change could limit your ability to save for retirement.

It’s good practice to continue to maintain (and check regularly) a budget, even if your salary has increased. This cuts down on unbridled spending.

Instead, take this opportunity to do another kind of upgrade – for your savings. This extra money on your check can be used to meet financial goals like paying off debt, increasing (or starting) your emergency fund, or setting aside money for a down payment on a house. . It would also be a good idea to increase your contributions to retirement plans, such as a 401(k). If you increase your contribution rate when you change jobs or your salary increases, you won’t see the amount you’re contributing, so you won’t miss it. Trying to increase it later makes you more aware of the income you are carrying forward, and it may feel like more of a sacrifice.

Spending now gives instant gratification, but investing for your future could pay off in the end, because time is your best friend when saving for retirement.

Don’t lose by leaving

Depending on the length of your current employment, you may not have full ownership of your 401(k) plan, profit sharing, or stock options. This presents its own wrinkle to deciding whether you should stay or go.

Many employers require employees to stay with the company for a set period of time to be fully invested in the 401(k) business. This means that until this time has elapsed, employees do not own full ownership of the funds or shares that the employer matches. So if you leave before the end of this period, you lose the benefits you had planned to receive, which could jeopardize your retirement plans.

Consider your acquisition situation before deciding to leave an employer. If you’re close to the deadline – or if you’re not – it could affect how you want to proceed with a potential job change. This is one reason why people who change jobs often can fall behind when it comes to retirement savings.

Take a long-term view of your new job offer

A new job with a higher salary sounds like a win, but you should think about how the salary and benefits will work for you in the future.

When evaluating a job offer, consider how salary, benefits, and other non-salary compensation might help you prepare for retirement. Although retirement may seem a long way off, these benefits and long-term planning can help you achieve the retirement you envision.

Compare how much employers will pay on 401(k) contributions or contribute to employer-sponsored health care plans and health savings accounts. Annuities are also now an option for employer-sponsored savings plans due to the SECURE Act. This option allows members to save money to provide a guaranteed lifetime income that can protect against various risks in retirement.

Keep track of your old 401(k)

There are several options for what to do with an employer-sponsored 401(k) plan when you leave a company. You can just leave it there, transfer it to your new employer, transfer it to a traditional or Roth IRA, or cash it out. (Clients should consult a tax advisor to determine what is appropriate for their particular situation and discuss potential tax consequences.)

Which choice makes the most sense to you will depend on your own situation. Don’t let it languish. The last thing you want to do, however, is forget about it. It’s money you’ve earned that you can use for a better retirement!

Consult a finance professional

A new job is a good reason to review your finances, including your short-term and long-term goals. Your financial situation has likely changed, and your spending and saving priorities may need to be redefined. A qualified financial professional can help you assess your finances and come up with a strategy that can include a written retirement savings and income plan that will work for you now and help you prepare for your future.

*Allianz Life conducted an online survey, the 2022 Retirement Risk Readiness Study, in February 2022 among a nationally representative sample of 1,000 people aged 25 and over in the contiguous United States with an annual household income of 50 $000+ (single) / $75,000+ (married/partnership) OR $150,000 investable assets.

This content is for general educational purposes only. However, it is not intended to provide fiduciary, tax or legal advice and may not be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please note that Allianz Life Insurance Company of North America, its affiliates and their representatives and employees do not render fiduciary, tax or legal advice. Clients are encouraged to consult their tax advisor or attorney.
Coverages are backed by the financial strength and claims-paying ability of the issuing insurance company.
Products are issued by Allianz Life Insurance Company of North America.
Allianz Life Insurance Company of New York, a subsidiary of Allianz Life Insurance Company of North America, may offer insurance products in the State of New York.

Vice President, Advanced Markets, Allianz Life

Kelly LaVigne is Vice President of Advanced Markets for Allianz Life Insurance Co., where he is responsible for developing programs that help financial professionals serve clients with retirement, estate planning and tax strategies.

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