According to a new Vanguard study, 28% of workers who rolled over their Vanguard IRA from from a 401(k) left funds uninvested for at least seven years. Empower CEO Ed Murphy joins Wealth! to discuss this critical mistake and how you can avoid it when planning for your retirement.
Murphy explains that one way to avoid leaving funds uninvested is to stay in your retirement plan when you change jobs or retire. "You don't necessarily have to take the money out and roll it to an IRA. Oftentimes, it's better to leave it in the plan and get the benefit of better pricing," he explains. If you choose to roll over, he emphasizes the importance of consulting an advisor to ensure the money not only gets properly invested, but invested in a way that meets your personal finance goals.
He notes that not all Americans are able to enroll in retirement plans through their employers, and that when there is no automatic payroll deduction, many Americans don't save for retirement at all. Thus, he stresses the importance of getting more small companies to offer retirement plans.
It's time to get retirement ready. You could be missing out on substantial investment gains, and guess what? You may not even realize it. Workers who pull their retirement savings out of the stock market when switching jobs are at risk of losing millions of dollars. According to a new Vanguard study, 28% of workers who rolled over their Vanguard IRA form from a 401k left funds uninvested for at least seven years. Here to discuss how investors can avoid this mistake is Ed Murphy, Empower Chief Executive Officer. So, Ed, you know, how often do you see this mistake, and what can people do to avoid it?
Well, I think it unfortunately happens more often than it should. There's a couple things that you can do to avoid it. One is, you can stay in the plan. So when you change jobs or retire, you don't necessarily have to take the money out and roll it to an IRA. Often times it's better to leave it in the plan and get the benefit of better pricing, uh, often times a different product set or diversified product set that you can take advantage of. But to the extent that people do want to roll it over, it's really important that you consult with an advisor so that when you do roll it to another institution and you roll it into an IRA, the money doesn't sit there, it actually gets put to work based on what your investment objectives are.
Got it. And looking more broadly across the retirement space, you say that the future of retirement looks bright, and I think some might take that view, that contrarian viewpoint, and say, well, inflation's high, prices are high, why are you so optimistic?
Well, if you think about it, today we have 150 million Americans that are in the workplace system, and between what they have in defined contribution and IRA accounts, they've saved $24 trillion. And many people are saving at a rate of about 8%. But not everybody's in the system. So it's a, it's a work in progress for sure. And what we're focused on at Empower is trying to get more Americans enrolled in the system because what we know is if you don't have access to workplace savings through payroll deduction, you just don't save. And so there's a big movement to try to get more of these small companies, typically 50 employees and less, to offer retirement plans to their employees.
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This post was written by Melanie Riehl