A career change can be one of the biggest pivots in life, everything from simply a bigger paycheck, to a life-changing step up, mid-career reboot, or on the other end, a downshift requiring you to reconsider some of the things you have taken for granted.
Berkeley Capital Management specializes in helping people with financial planning at important transitions, including career changes.
Update Your Retirement Planning
Changes to your income and household spending likely change your outlook on retirement.
A higher income can support higher spending—but if that level of spending continues into retirement, it requires accumulating substantially higher account balances to sustain it long term. Alternatively, if you hold spending steady you may be able to retire much earlier than you previously thought. Working through different scenarios to see how changing savings, spending projections, and timelines can help clarify what is possible and what is required to get there.
For some people, career changes can take them above the income limits for popular retirement accounts like the Roth IRA, and others may need more than the max contribution to their 401(k) to meet their goals. Investing beyond the confines of your employer plan opens up a new world of opportunities with thousands of choices. An experienced portfolio manager can help build a customized portfolio matched to your specific plans.
Organize and Integrate Old Retirement Accounts
According to a recent estimate from a fintech firm, Americans have left $2.1 Trillion in 401(k) plans at old employers.
A job change is the perfect time to roll over your old retirement plan and any old plans you have left at former employers. In many cases rolling over an employer plan to an IRA gives investors more investment options, the ability to consolidate their assets in one place, work with a trusted professional and simplifies both retirement and estate planning.
Optimize Your New Employer Plan
You probably also have a new plan to set up. Selecting the best investment option from the menu your plan allows is a key decision. Your portfolio should match up with your timeframe, risk tolerance, and current market conditions.
Beneficiary designation is a key point that is easy to overlook, breeze through or fail to update. The beneficiary designation on your retirement plan trumps any decisions you make in your will or trust. In most situations, the assets in your retirement account will be transferred to the designated beneficiary, so making sure you get it right is important.
What About Employer Stock?
Employer stock options or restricted stock can be a great source of wealth but can also result in holding a concentrated portfolio. Employer equity can cause you to have a meaningful, and difficult to change, allocation to your employer stock and your industry. Especially if you work in an economically sensitive or cyclical industry you may consider tailoring the rest of your portfolio to get more balance and mitigate the industry concentration created by your employer equity position.
Navigating a Longer-Than-Expected Career Transition
Extended job searches can be stressful and take a toll on your investments. In some cases, it may be smart to allocate some of your assets to more conservative, income-producing investments with less volatility if you can see yourself drawing down assets over a longer period of time.
Your asset allocation should always reflect reality and if your circumstances and if plans have changed, your allocation should reflect that. Setting aside a larger portion of assets in conservative investments lets you have a reliable source of living expenses that aren’t as exposed to a potential market downturn when you need them.
Consult an Experienced Advisor
A good financial advisor always starts with understanding you, your goals and your current situation. A career change can have a huge impact on those facts and when the facts change, so should the plan.
Reach out to a trusted, qualified advisor to discuss your situation and investigate the right moves for you.