Why Should I Roll Over My 401-k?

I get this question a lot from clients.  I have a 401-k at my previous job, what should I do with it, should I leave it where it is or should I roll it over to my new job or roll it over to an IRA?  Given the options available, the best solution would be to roll over the 401-k to an IRA.

Growth

When you leave a company, you no longer contribute to the 401-k, likewise the company no longer matches your contributions, that means your investment does not grow as much as it used to while you were working.  Rolling over your 401-k to an IRA will allow you to continue making contributions and help grow your nest egg.

Expenses

401-k accounts have generally high administration fees that are passed on to investors, the reason why most investors don’t pay attention to the fees is because the company they work for typically offers a match and helps offset some of the costs.  Leaving your 401-k at your previous jobs, leaves it vulnerable to expenses that continue to eat at the amount saved, rolling over to an IRA helps you avoid some of these costs by giving you more control over your money.

More Options

401-k options are usually very limited to what the company offers.  There is a huge investing universe and rolling over to an IRA gives you many more investment options, than those available at your company.  The IRA becomes the vehicle with which to invest, in virtually anything, it can be real estate, commodities, stock, bonds, venture capitalism, the possibilities are endless.

Risk Management

Rolling over your funds to an IRA also allows you to use strategies to reduce your overall risk by employing risk management strategies that are not usually available through your 401-k, for example the use of stop losses; a stop loss is an order that tells a broker to sell a security once it reaches a certain price, it can be placed below or above the market price of a security, when placed above  the market price, it allows the client to retain the profits gained once the stock reaches the agreed stop loss price and sold by the broker at that price.  Vice-Versa, a stop loss placed below the market price of the security protects the client from large losses, the stop loss order is activated when the market price of the security reaches the stop loss price, this tells the broker to sell the security and large losses can be avoided.  Risk management strategies can help you retain more of your money when times are great in the stock market and safely reduce your losses when the market takes a downturn. 

If you keep your money in your old 401-k, your money can only grow so much without regular contributions, you have less investment options available and usually have no access to tools to manage market risks and expensive fees that can eat into your savings, or you can roll over into an IRA and have more control in growing your nest egg.  Speak to adviser today about rolling over your old 401-k and happy Investing!

What was your experience rolling over your retirement?  What did you Invest in that was not offered at your company's 401-K? Leave a comment below and best wishes.

Blessings

Bernice

Bernice Njoroge is  a senior financial adviser with Yatalie Capital Management whose main business objective is to create and preserve Investor wealth.  http://myyatalie.com

What Is your economic Worth? 4 Ways To Reach Your Full Economic Potential.

Have you ever wondered whatever happened to all the people that you went to high school  or college with?  I don’t mean close friends I just mean folks in general that are not your friends on face book or social media.  School was great for me because it was a time of big dreams.  It was a protected environment, I could sit and journal what I wanted to do in the future.

I took an assessment of where former school mates were 10 years later and of course, there those that just took off, they seemed to have everything together, they were not necessarily rich, but they were really on the road to success and it showed.  And then, there was the other group, they hadn't quite figured out what they wanted, were not happy with where they were in life, and it also showed.

So what made the first group more successful than the 2^nd? Well it turns out there some basic universal truths and principles that, if employed, would allow everyone to reach their full economic potential no matter what profession or career or business they choose.

Principle of Hard work

My mother must said this to me over and over until she was blue in the face, “You have to work hard G (my middle name) , in this life, if you want anything, you have to work for it”. The older I get the more true this principle becomes.  It’s usually not talent or education that makes you successful, its hard work.  Hard work is more than showing up to work and working harder or longer than anyone else, it’s about the quality of work. 

Quality hard work requires more from you, it requires bettering yourself, it requires thinking about your company or department and thinking of way to increase production, or save the company money or think of ways the company can make more money.  Quality hard work requires  not just showing up physically, but being fully engaged, those employees are quality employees and are deeply valued by the companies they work for, they are also rare so it doesn't take long to be noticed and promoted which leads to more money.

Principle of social skills and communication skills

Having good social skills is important because people want to be around people they like, being personable makes you memorable, in a good way.  I used to have a real problem with this principle because I thought people I worked with, who socialized with their managers were really fake and were basically kissing their (you know what) to get ahead.  But as time has progressed, I have started to think differently about having good social skills at work along with great communication skills together.

 Good social skills opens doors for you.  Building social bonds by being positive and pleasant becomes valuable when you have to ask for a raise, or a promotion or want to pitch a new Idea or product to clients or managers, the social skills gets you a seat at the table, a face to face meeting and coupled with good communication skills, it puts you in a position to sell yourself and your skills and leverage them for more money.

Principle of Discipline and self control

Every one of us has to work even though we don’t feel like it.  We have to get to work on time, we have to execute tasks.  Work is not always exciting or sexy; it can be monotonous and mundane.  

There is a really dangerous message out on the blogs, TV and magazines telling people to “live your dream/passion” and “work does not feel like work if it’s your passion”.  The problem I have with this “live your passion” movement is, that it is very emotional, and emotions are temporary. What happens when this passionate job becomes like all jobs, which is monotonous and mundane? Does that mean you are doing the wrong thing?  Should you move on to your next passion?  Unfortunately most people just move on to the next thing that interests them. This jumping around from career to career means, you never really get good at one thing, and therefore never maximize your earnings in any one career, it also means, you are always starting over and everyone knows, you make the least money, when you are new to a career or starting a new business,  So stay disciplined and stick and, it will pay off eventually.

Principle of good Partnerships

This is the part where most people do not want to talk about, because it involves making a choice with heart and your head simultaneously.  What am I talking about?  Personal relationships, spouses and significant others, who do you surround yourself with?  In an Ideal world, you want a spouse or significant other who shares the same values, and belief system around money and hard work, in simpler terms, a saver should hook up with a saver and a spender should hook up with a spender.  Likewise a hardworking person should hook up with another hardworking person. 

When you work hard, keep opening doors for yourself using those great social skills and communication skills and maintain discipline and self control, you will make money, you will maximize your earnings, but it is pointless to make the money if you cannot retain it, and having a partner who does not share your goals or is not supportive, can erode all your hard work, and all your great potential.  I have come to realize again, over time, that actions speak much louder than words and talk is dirt cheap.  Look at a person’s habits before making any long term commitments, a lazy person will never tell you they are lazy, but you can tell from their actions, a spender’s actions will reveal who they are, without them ever speaking a word.  So align yourself with those people whose habits will allow you to be your most successful version of yourself in order to maximize your earnings over your lifetime, and stay far away from those who will minimize your efforts.

Maximizing your earnings sounds easy in theory, but it is a difficult task to execute.  It requires making a serious decision to be the most successful you that you can be, and then recommitting to that decision every single day.  It is not impossible though, and can be done; all you have to do is make that decision to, for lack of better words, “Be all you can be”.

What other principles do you think can increase your economic potential? Share in your comment below, I would love to know what you think, and we can all learn from one another.

Blessings

Bernice

Photo Credit: Google Images

The Roaring 20’s: Why Starting A Business In Your 20’s Can Be Advantageous

Starting a business and being self employed is one of the most challenging and the most rewarding things I have ever done.  It is mind numbingly scary at times and at times gives a huge sense of freedom and satisfaction.  In terms of personal development, having a business is the vehicle through which I have been allowed to grow, to be more creative, and to become bolder than I have ever been.  The benefits have been enormous; the challenges have been enormous too, but the benefits by far outnumber the challenges.  The only thing I would do over given the chance is go into business earlier; yup I would have loved to go into business when I was in my twenties. 

Right now 20-somethings are the most Impressive generation out there.  They have so much potential and skills that no other generation has ever possessed at such an early age and if harnessed properly, those skills can be parlayed into creating successful businesses and companies.

Learn quickly

Most 20 something’s grew up in a technological world.  They practically have had access to the internet their entire lives.  The therefore are very used to teaching themselves about different topics and things that they are interested in, if they don’t know something, information is at their fingertips.  They learn faster, and know way more than previous generations did in their 20’s.  In the world of entrepreneurship, this quickness comes in handy in the form of adaptability.  Adaptability is important in order to stay current, it also helps in quick assessment of what works, what does not work, and constantly thinking about increasing efficiency, and productivity.  Adaptability is a major key to key to success in business.  The ability to learn quickly and absorb large pieces of information that many 20 year olds take for granted would really put them at an advantage if they used those skills in entrepreneurship.

This is the first generation that was home schooled, which means that for the most part their education has been self- directed, and, self taught, and that makes this generation very good at knowing what they want and what they are good at.  They are quick and decisive and that is a great quality to have in business where you are faced with lots of decisions to make in a day.

Great at marketing, branding and communication

Since most 20- something’s grew up with technology, they have found great creative ways to use technology.  On YouTube you find young people that have created massive audiences who watch them discussing things that are interesting to them.  These young people are so charismatic and confident and sometimes are able to influence their audiences to buy one product or avoid another based on their review of a product.  Many brands would love to have access to that sort of audience and sometimes go into partnership with different YouTube channels and Gurus and market their products directly or indirectly to these built up audiences.

These young you-tubers inadvertently have become experts at defining and communicating their brand and if they created their own products, they already have an audience that could be potential customers to market their products to.

 One of the biggest YouTube gurus is Michelle Phan, she loved make up and started doing make up tutorials.  Something about her approachable style resonated with viewers and she built her channel to over 3 million followers with 720 million video views.  Michelle Phan then partnered with You tube, Lancôme,  NYX  and is now in talks to launch her own make up brand, she is worth according to celebrity net worth in 2012, 3 million dollars and is 25 yrs old. She is known as the accidental millionaire on YouTube and by using technology and combining with something she was interested in she has managed to be very successful at a very young age.

Energy and Youth

Running a business requires a lot of energy, and enthusiasm, it requires to be self motivated and to motivate others.  These are things that 20 something age group posses naturally, think about it, how many times did you party all night in college and make it to class the next day and still function? I know without a doubt I cannot do that anymore.  If that energy was harnessed into running and operating a business, imagine how productive and successful that business would be.

 Think of how enthusiastic and excited about life most young people are, they haven’t had a chance to get disillusioned yet, bad habits have not set in yet or if they have, they are still young enough to correct them without any major consequences to their lives.  That enthusiasm for life is also contagious and draws people in. It motivates others to listen more closely to their point of view or motivates them to work with them or go into business with them, and if harnessed properly that enthusiasm and positivity  and of course  having great products and services can play a huge part growing a large successful organization (think Google!).

The point is, young, entrepreneurial-minded people in their twenties can be very successful by just using the skills that they have picked up and that are unique to their generation.  Some of the most successful business people in the world today started their businesses in their twenties like  billionaire investor Warren Buffet, Microsoft's Bill Gates,  Facebook's Mark Zuckerburg;  they harnessed those unique qualities to work in their favor and created products and services that the world needs today.  What’s your Idea? Can you turn it into a business?  Then truly consider going into business and do not let age be a factor because believe it or not each generation has unique qualities that can be tapped into a successful business. 

Photo Credit: Google Images