Changing Jobs? Don’t derail your 401-K Here’s how to get it right.

Ralph
00:00:00

Have you ever found yourself in a position where you were changing jobs and you're wondering what to do with your  401(k)? It's a critical moment for your retirement savings, and making the right decision can have a significant impact on your long term financial well-being. Well today, we're going to answer a listener's question about managing their 401(k) during a job transition.

So stick around as we dive into the options available to you and how to make the best choice for your financial future.

Podcast Announcer
00:00:25

In a world where crushing debt keeps you trapped, where living paycheck to paycheck has become your new normal, and where the dream of retirement seems impossibly out of reach, there's hope. Join financial evangelist Ralph Estep Jr. A man who's walked through the fire of financial failure and emerged stronger on the other side.

Welcome to Ask Ralph, the show where real world experience meets biblical truth to break the bondage of financial despair.

Get ready to take control of your money, break free from the financial stress and align your resources with God's purpose for your life. This is Ask Ralph with Ralph Estep Jr.

Ralph
00:01:02

Welcome to the show. Thank you for joining me today. I am your financial evangelist, and I'm here to combine my financial advice with Christian principles to help you achieve freedom while growing in your faith.

Now, if you missed yesterday's show, we talked about the importance of securing your phone. Hey, everybody's carrying these phones with them, and we discussed nine shocking risks that you might be ignoring. So if you missed that episode, be sure to go check it out. It is packed with valuable information that could save you from some major headaches.
Well, let's get right to our listener question today.

Today, we have a question from a listener named Candice and she writes this, "Hi Ralph, I'm in a bit of a panic right now. I've just been offered an amazing new job, but I'm also incredibly stressed about what to do with my 401(k).

I've worked so hard to build up my retirement savings, and I don't want to make a mistake that could set me back. I've heard about rolling it over to an IRA, but I'm completely lost when it comes to understanding the pros and cons of each option. I feel like I'm at a crossroads, and every decision seems to have major consequences.

Can you please help me understand my choices and what the best decision might be? I need some guidance to navigate this stressful time." Well Candice, I hear you. Changing jobs is an exciting time. It's filled with new opportunities, but it can also be overwhelming when it comes to managing your retirement savings.

The stress of making the right decision can feel paralyzing, but don't worry, we're going to break it down step by step today. Cause I remember when I changed jobs, it's been a long time ago but I remember I had that similar dilemma. It's a big decision, but with the right information and a prayerful approach, you can make the best choice for your future.

Now, before we dive in, I'll give you a quick reminder. If you've got a financial question, just like Candice, you can head over to justaskralph.com and submit your question. And don't forget, every Tuesday I go live at 1 PM Eastern time. You can get to that by going to askralphpodcast.com/live. I answer questions every Tuesday, one o'clock Eastern time. So I hope to see you in the chat.

Well, today's topic connects beautifully with the biblical principles about stewardship and wisdom. So we find that in the book of Luke.

That's chapter 16, verses 10 to 12. And it says this, and I've used this on the show many times because it really ties in to this merging of faith and finance. And it says this, "Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much.

So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches? And if you've not been trustworthy with someone else's property, who will give you property of your own?" Wow. I mean that one cuts and this passage reminds us of the importance of being faithful. It reminds us of the importance of being responsible with the resources that God has entrusted to us.

And as Christians, we're called to be good stewards of our finances, which Candice, that leads me right back to your question.

So I am grateful for the opportunity to help you navigate this important financial decision. So let's trust in God's guidance as we explore your options and make the best choice for your future.

When you change jobs, it's easy to get caught up in the excitement of that new role and forget about that  401(k). In fact, I was just working with a client yesterday and she had changed jobs several years ago, and she said to me during our tax preparation call, she said, Ralph, I really should sit down with you and talk about what I should do with my 401(k) for my old employer.

We were looking at her current tax year and I noticed she wasn't really maximizing her  401(k) and it brought on this discussion. And a lot of people get derailed by this because they're worried about making that wrong decision that could lead to long-term financial problems. I mean, imagine if you will. You just been offered an amazing new job.

You're thrilled about the opportunity, but amidst all that excitement, you realize you need to decide what to do with your  401(k). You're not even sure where to start. It was tough enough moving on to this new job. So a lot of people, they just leave it with their old employer. Maybe, they roll it over to a new employer's plan or transfer it to their IRA.
And each of those options has its pros and cons, but that decision can feel overwhelming. But don't worry. That's exactly what I'm going to cover today. Well, let me tell you about a friend of mine. His name is Ben, and Ben found himself in this very same situation a few years ago. He had a great job.

I mean, Ben was living the high life. He had a solid  401(k) plan, but then he was offered this position at a new company. He had better opportunities. I remember him calling me one day and he says, Ralph, you're never going to believe this opportunity I've been offered. And I said, Ben, that's fantastic. That is outstanding.

And Ben was excited about it, but he was also worried about his retirement savings. You know, he was one of these guys that from a very young age had been putting into his retirement. He took my advice. He took the advice of a lot of financial sage people, and he started doing that in his early twenties.

So when he considered leaving his  401(k) and when he consider leaving his job, he wanted to know what could I do with my  401(k)? Cause it seemed like the easiest option. And I remember him saying this to me on a phone call, he said, Ralph, I can just leave it where it's at. And I said, Ben, let's talk this through.

Let's have a discussion. That's exactly what I'm gonna cover today. And after we did some research, he consulted with another financial advisor, more of a broker person. I don't do brokerage. I help people, you know, design the house, but then we go to the actual broker to build the house and actually do the construction.

And he decided to roll over his  401(k) into an IRA. Now Ben's decision might not be the same as your decision, but I'm going to break down the pros and cons of each of these things today. Now, in his case, he wanted to do that because that IRA gave him more control over his investments. And he had a wider range of investment options.

And I'll talk about that in a few minutes. If he left it with his employer, it would have been a more small area for what he could invest in. And in the end, Ben's decision paid off because he was able to tailor his investment strategy to his specific needs and goals. And that's what we all want to do.

We want to find what is our specific needs and our specific goals and his savings continued to grow. Now that doesn't mean he doesn't participate in his new company's  401(k), but for him, it really made the same, it made the most sense to do that. Now you might be saying, Ralph, that's great, but tell us about how this plays out.

You know, over the years I've worked with clients who've made mistakes when they cashed out these  401(k). I can't tell you how many times a client has come in to get their taxes done. And they'll say to me, Hey, Ralph, I got this great opportunity. I moved to a new job, but when I left my old job, they told me I needed to do something with my retirement account.
So I said, well, there's not that much in it. Let me just cash it out. And then they get their surprise of their life when I tell them, well, guess what? Now you've got a big level of taxable income. And if you're under 59 and a half, which most of these people were that I've worked with, you're going to get hit with an extra 10% penalty.

Let me talk about one of my clients and that was Lisa. Lisa decided to cash out her  401(k) when she left her job. She thought she would use that money to start a new business. It was a great idea. She said, Ralph, I'm really excited. I want to do this online business. There's a huge opportunity here. But what she didn't realize, cause she didn't ask me before she did it.

She didn't realize the tax implications of that. And she ended up paying almost 40 percent of that money she cashed out of that retirement plan. When we added in the taxes and she didn't have the money to pay the taxes, she ended up having to pay interest and she paid penalties and her retirement savings took a huge hit.

Let me tell you about another client I worked with. His name is Mark. Now, Mark cashed out his  401(k) to pay off some debts. He thought it was a good idea at the time, but he didn't consider the long-term consequences. Yes, he was in debt. He was paying interest. There is financial impact to that. But what Mark learned later on was that he found himself with a lot less retirement savings and he struggled to make ends meet in his retirement years.
So the thing you need to understand, it's crucial that you understand this before we move into the next section. And that is, it's crucial to understand the power of compound interest and the value of starting your retirement savings early, just like Ben did. Let me give you an example. Let's say you start saving a hundred dollars a month at the age of 25. Doesn't seem like a lot of money.

A hundred dollars a month. Most of us could find that. Well, guess what? And this is just at a hundred dollars a month. By the time you reach age 65, assuming an annual average return of 7%, you will have accumulated $150,000 and think about that for a second. That's just a hundred dollars a month.

Let's flip the script a little bit. Let's say you don't start at 25. You wait till 35. This is where that compound interest is going to rock your world. So you wait till 35, you start saving that same amount. You have that same return. Well, guess what you have at age 65. You've only got $75,000. So think about that, 25 and 35, 10 year difference, and it cuts your savings in half.

That's a huge difference. So if you don't listen to anything else I say, listen to this. The earlier you start saving, the more time your money has to grow, and the more value you build up over your work in life. And that's the whole point of today's discussion, because I want to really warn you about what you do
if you're changing jobs and you've already changed jobs. You got to understand how this is going to impact both now and later.

So let's get into some practical steps. One of the things I bring to the table every day with the show is I want to give you some practical advice.

I want to give you some practical steps about what you can do to impact yourself in a positive way. So here are your options. And we're going to talk about basically the main options. The first option. And Ben came across this. You can leave it with your previous employer. Assuming your employer doesn't make you or mandate you in leaving the plan.

Some do. It just depends on the individual plan. You can leave it with your previous employer. So what are the pros to that? Well, here's the thing. If you're happy with the investment options and the fees they're charging you are reasonable, this is the easiest choice. You don't have to do anything. It doesn't cause you to do anything else.

You just sort of leave it out there and let it simmer like a pot on the stove. Just let it cook all day long. You won't have to deal with a hassle of transferring your funds. You don't have to worry about doing that rollover or any of those things. It is the most simplest way to handle it. Now you might be saying, Ralph, that sounds great, but what are the downsides?

Here's the problem. You're not going to be able to make any new contributions. And also there might be limited investment options, or maybe there's higher fees. A lot of these  401(k) plans, once you leave employment, they lock you into whatever your investment was at that point. And I can't speak to every plan, but that is a big issue.

You also may be subject to any changes in the plan rules, which could affect your investments as you move forward, because you're not actively engaged with that business anymore. You don't have that, you know, ear to the payment. You don't know what's going on, but absolutely the easiest thing to do is to leave it with your previous employer.
But we talked about the pros and cons of that. Now, another option you could have, and again, this depends on your new employer. You might be able to transfer to your new employer's plan. You could take that  401(k) or that 403(b), you know, pack it up in a suitcase and move it to your new plan. Now, you're not touching the money.

It's a direct rollover. So you might be saying, Ralph, what is the positives of that? Well, this allows you to consolidate your retirement savings and take advantage of any benefits offered by your new employer's plan. You've left the old employer for a reason. Maybe it's because you saw a new opportunity.

And now you've got this opportunity to participate in this new plan and this consolidation, cause a lot of times people don't realize this. I work with a lot of people as they're getting older and they have this retirement piece here and this retirement piece here and it creates all kinds of issues.

We're actually going to talk about that tomorrow show, I'm going to be talking about what happens if someone you care for passes away. And what are the tax impacts of that? Well, one of the problems that we run into sometimes is people don't tell their loved ones about all the little pieces of the puzzle they have.

So one of the benefits to rolling it into your new plan is you consolidate it. It's all in one place. You can get that statement every month. You could check that online in one spot. Now there are some cons to this as well, because not all employers will allow you to do rollovers and some plans have waiting periods and restrictions.

So you have to really check with the new employer. Honestly, I think that's one of the things you might want to talk about during the interview stage or when they ask you that question, Hey, do you have any questions that I haven't asked you? Are you interested in the job? I think that shows that you have a buy in in that company's future.

So that's one of the questions you might want to ask. And you also need to compare the investment options and the fees of your new employer's plan with your old plan, or if you decided to take it out, like Ben did and put it into an IRA. So that's option two and that's transfer to a new employer's plan.

Option three is exactly what Ben did. You can roll it over to an IRA. Now hear me on this. You're not getting the money. You're taking that. You're doing what I call a direct transfer from one party to the other. If you touch the money, it causes all kinds of tax issues we're going to talk about later. So you can decide to roll it over.

What's the pro to this? Well, it gives you more control over your investments and a wider range of investment options. We'll talk about those in a few minutes, but now it's your IRA. It's not subject to any employer's plan. You can basically invest it in whatever you want to invest it in. You can choose between a traditional or Roth.

Now we'll talk about that conversion to a Roth because that's a tax issue. Each of those have different tax implications. I'll address that in a few minutes. But see, here's the thing, in general, IRAs typically offer more investment choices that allows you to better tailor your investments to your specific needs and your risk tolerance, because then you can look at the investors.

If you're working with your old employer's plan, or you're working with a new employer plan, you're going to be subject to that investment mix. A lot of them have investment mixes. You know, you've got some stuff that's very conservative. They got some stuff that's very middle of the road, and then they have some stuff which are higher performers were more volatility.

But if you're doing your own IRA, I mean, literally you could take that IRA. You could buy gold IRAs. You could buy precious metals like silver. You can buy cryptocurrency. You can buy even apartment buildings. You can do all kinds of stuff with that because you have the ability to direct that. You just need to make sure it stays in the character of the IRA. Now there are some cons to this approach as well, though. There is less creditor protection. You don't have that protection that you might've had in that employer sponsored plan. You can't borrow against it. One of the big things I see a lot of clients are doing is they actually take loans from time to time against their  401(k).

Now, I'm not a big proponent of that. I'll talk about that in another show coming up, but with your own IRA, you can't borrow against it. And then you also have those required minimum distributions for traditional IRAs that hit when you're like 73 or 74. You also really, and listen to me on this one, you really need to do some research and choose an IRA provider that suits your needs.

So if you're going to make that move and you're going to do it in your own IRA, then pay attention to who you're doing that. So let's talk a little bit about while we're here, let's dive into a little bit deeper in the investment choices of an IRA, because they typically have a wider range of investment options than some  401(k).

So I just wanted to give you a few of those things. The first thing you can invest in is stocks. You can invest in individual company stocks. You can do stock mutual funds, and that's nothing more than somebody pulling money together as investors. There's usually a manager of that mutual fund. So for example, you could take your  401(k) money from your prior employer, drop it into your own IRA, and you could invest in a low cost S&P 500 index fund.

And that gives you more flexibility and that tracks performance of, you know, it's, again, this is an investment choice. I don't get into making an individual investment decisions, but that would be something that chart that goes with the 500 largest companies. Another thing you could do if you have a little bit more risk aversion, you could actually buy bonds.

You can invest in individual bonds by either corporations or governments. You can do bond mutual funds, and that might give you that diversification and that professional management that you want in lieu of buying individual stocks. If you don't have a lot of money to work with and you're not managing this every day, I am never a proponent of saying, Hey, go buy individual stocks and play that stock market game.

You're going to get yourself in trouble. Which leads me to the next thing. You could also invest in mutual funds. Again, we talked about this where people are pulling money from all these different investors and they're doing what we call like a more balanced asset allocation. They might have stocks in that, they might have bonds in that, they may even have some real estate in that.

There are all kinds of mutual funds. They have varying differing, you know, investment objectives and risk profiles. Like you might say this, Hey, look, you might say, look, I've got a target date. Would I want to be able to cash out of this retirement investment. So you can set a mutual fund that has that target date in mind and it'll change as it gets closer to retirement.

I'm not going to spend a lot of time talking about this, but there's also these things called exchange traded funds. They're similar to mutual funds. My oldest son actually got into doing these, but they trade on exchanges like a stock market and those things could offer additional diversification, low costs and tax efficiency.

Now you also could take your IRA, I talked about this a few minutes ago. Some IRAs will allow you to invest in alternate assets such as real estate. I've got one client that has what he calls a self directed IRA and he's actually buying apartment buildings with it. He sees that as a benefit. I've got another client that's buying rental properties with him.
You could buy money in and private equity like I talked about you can get into commodities, gold, silver, cryptocurrency. And see there's where the difference is here. So if you go to that product, you move away from that traditional  401(k) plan that the employer offers and you dump it into your IRA.

Now, listen, you got to understand something. You are in control of this. Ultimately, you're responsible for it, but it gives you more ideas and more options and more choices. So that's really number three is you can go like bend it and roll over to the IRA. Now, the last thing on my list, number four.

And I'm going to put up the big red flashing warning signs. This is not the best option. Hear me on this. This is not the best option. Option four is to cash it out. Now you might be saying, Ralph,I've only got a couple thousand dollars. I've only got 10, 20 pick a number. Yes, you get immediate access to your money.

And that can be real tempting. Like Mark, he said, Ralph, I've got all these bills. I've got all this debt that's accumulated and I could really use this money. So it's tempting. If you've got those immediate financial needs or debts to pay off, you can say, well, and I've had many clients that have done this.

And sometimes I'll say to them, that's fine. Like I had a particular client this past year and it was somebody, I think they worked at Dunkin Donuts, like a part time job. And they had been there for several years and they had built up about $2000 into their  401(k). They were changing jobs.

And they said, Ralph, what should we do with this? I said, well, actually if you really want to, you could just cash it out. Yes, you're going to pay a little bit of tax, but they weren't making a lot of income. Wasn't a big deal. But if you're talking about numbers over and above that, this is a big, big no, no, don't do this.

So let's talk about the cons of this. Like the pros are you get immediate access to your money and if you've got that immediate financial need, it can seem like such a great idea, but here's the problem. And this is why I say this is the least desirable option. It can result in major taxes. Just like Lisa learned. She wanted to start that business.

She said, Oh Ralph, I can get the seed money from this, but she wasn't expecting that 40% haircut. And if you're over 59 and a half, they're going to add 10 percent onto it. So not only is it ordinary income. So let's just say it's a $50,000 deal and you've got a new job. So you're making a salary.

Well, that could push your income well over a hundred thousand dollars, perhaps. Now you're paying ordinary income tax on that. Maybe because you took that distribution, your ordinary income rate is up to 22 or 24%. And another 10% on top of that for penalty, and if you live in a state where they tax retirement at another eight or seven or whatever that is percent.
Hey, that's what I'm saying. You could be close to 40 to 45% of your money. Now there are some exceptions to that 10% penalty. If you have a hardship, a financial hardship, they will allow you to take that without that 10% penalty. Maybe you've got some medical expenses that exceed a certain amount of your income.

But even if you don't pay that 10% penalty, you're still going to pay tax on that as ordinary income. And that money that you work so hard to put away is going to diminish right in front of your eyes. So let's talk about the tax consequences. I sort of been going around and beating around the outside of this.

So let's talk about some specific things that you can do and what happens tax related wise. So if you take that traditional 401(k), just like Ben did and you move it to a traditional IRA, this rollover, it's what we call roll over. You're basically rolling this stone from one company to the other.

It is completely tax free and your money continues to grow tax deferred until you take it out in retirement or take a distribution later. Like I said, you're only going to pay taxes on that when you take that money out in retirement. Well, let's say you have that traditional  401(k) and you roll into a Roth IRA.

Now, this changes the picture completely. And a lot of people like to do this. I will tell you the same client I met with yesterday, we had this long discussion about Roth IRAs where she's working, she's actually doing, putting money into a Roth IRA. So we had a discussion about how, you know, that really doesn't help you on your taxes now and her and her husband are in their earning years.

They're making a really good money. So this money that they're putting into the Roth, yes, it's going to grow tax free, but when they go to take the money out, it's going to be non-taxable. But right now, I advise them to, why don't you consider at least putting a portion of that into that traditional  401(k), which is tax deductible.

Let's say you decide, you know what, Ralph, I'm going to take that traditional  401(k), I'm going to roll it into a Roth IRA. Well, here's the deal and hear me on this. You're going to have to pay taxes on the amount that you roll over in the year of that conversion. So you're going to pay taxes on whatever the value, let's use a simple example.

So let's say you've got a hundred thousand dollar  401(k) with your prior employer and you say, Ralph, you know what? I'm going to start a new  401(k) with a new company, but this is really an opportunity for me to have that Roth deal. A lot of people are talking around the water cooler about how great these Roths are.

That's a discussion for a whole another day. So you take that $100,000 out. Now you're going to have to pay taxes on that. That's going to be ordinary income to you. And now, of course, it grows tax free after that, and when you go to take the money out, it's not going to cost you any tax, but you're paying that tax now.

And here's a dirty little secret nobody talks about. You cannot use the money from that conversion to pay the taxes unless you take some of that in cash. And then you've got that 10 percent penalty and it just exacerbates the problem. So really think hard about whether you want to do that. And it depends on your situation.

I've had clients that have done traditional  401(k)s, the Roths, because maybe they retired. Maybe they had a disability, they had a lot less income in that year and there was a benefit to doing that. But this is where you really want to talk to a professional tax advisor. Now another option is to take a Roth  401(k) to a Roth IRA.

So some employers actually offer, and this client that I was working with yesterday actually has this. You can actually contribute to a traditional  401(k), or you can contribute to a Roth  401(k). Now, just so we understand each other, those contributions through your paycheck to that Roth  401(k) are not tax deductible.

They don't reduce your federal taxable income, but again, they will grow tax free. And when you go to take that money out, there's no tax on it. I did my live show yesterday and we were talking about this thing. And I made a statement. The IRS is going to get their pound of flesh. They're either going to get it now or they're going to get it later.

But if you decide, let's say you have that Roth  401(k) and you say, Hey, what I'm going to do because my new employer doesn't even offer a Roth  401(k), I'm going to roll it into a Roth IRA. And this rollover is tax free because you're going to think about it like this. You're going from the same character to the same character.

You've got an orange in one hand, and you've got an orange in the other. They're the same, no tax consequence. And this is a great way to start to build that retirement portfolio where you've got a mix of tax free investments. Well, let's talk about the dirty little cash out. I think you're hearing me that is not the best option.

So here's what's going to happen on a tax basis. If you do that cash out, you're going to owe income taxes on the entire distribution. And like I've said a couple of times, if you're under 59 and a half, you're probably going to pay that 10 percent penalty unless you've got one of those exceptions. And what that does is it significantly reduces your retirement savings because now not only have you taken that money out, think about this for a second. Not only have you taken that money out, now you've paid tax on it.

So let's use a hundred thousand dollar example. You paid $40,000 in tax. So now you've got $60,000 in real money after this. It's also come out of your retirement savings. So it's not earning that compound interest. It's not invested. Now. A lot of people say that's fine, Ralph. I'm going to take that and put it into after tax investments.

That's fine. But you just took a 40,000 hit. It takes a lot of time to make up for that. So that's why I am, if you hear anything that I say today, I am not a huge fan of cashing it out. Now there are things that happen. Life happens to people. I get it. You have a financial hardship and you have to do it at the least then meet with somebody like me and let's figure out how to structure that to at least get you out of that 10 percent penalty.
Now let's talk about  401(k) loans because this is something that a lot of people aren't aware of. We talked a little bit about if you've got an employer that allows you to borrow against your  401(k), you can take those loans, but here's the thing you need to understand. If you're contemplating changing jobs and you have a  401(k) loan, and nobody talks about this until it's too late.

You need to understand the tax implications of that because some employers are going to require you to repay the loan in full within a short period of time of leaving that employer, basically 60 days. And here's the problem. If you can't repay that loan, it's going to be considered taxable distribution.

Just like you took the money out in cash. And you're going to be subject to tax and you're going to be subject to that penalty. So here's the deal. I'm not a huge fan of these  401(k) loans, because let's say you get fired. Let's say you lose your job. You know, who knows what could happen downsizing in your company?

Well, if you've got that  401(k) loan outstanding, they're going to basically start a timer and they're going to say, Hey, uh, Louis, guess what, dude, you've got 60 days to give us the money back, or we're going to nail you with a distribution. That can be a major nightmare. Now, one of the other things you can consider here is taking advantage of the rule of 55.

I'm not going to go down a wormhole here, but I want you to understand what I'm talking about here. Talked about this on the show about a month or so ago. This rule allows you to take penalty free withdrawals from your  401(k). If you leave your job in or after the year you turn 55. Now, So this is a very specific thing.

And this rule applies to your current employer's plan only not to funds rolled over from previous employers. So if you plan to retire early, this could be a way to get that money out of that retirement. But again, all you're doing is you're saving that penalty. You're still paying tax on it. You're still paying federal tax.

If you live in a state that has state income taxes, you're still paying state income taxes, but you're saving that 10%. So let's talk about those Roth conversion options. So let's say you convert that traditional  401(k) to a Roth IRA. That is great because that's going to provide you with those tax free withdrawals in retirement.

But again, remember, listen to me on this. You're paying tax on that at the time that you make that that transfer, when you do that rollover. Now the only time I see that as beneficial, is if you've got a year where your income is way down. I worked with a client a few years ago, they sold a business and they lost a ton on the sale of their business.
So they had this huge loss. But one of the things that she did, and it was wise to do it. She took, she had all this money in traditional IRAs. She rolled those things into Roth because she knew she had this big loss so she could offset those distributions with those losses. But that's not the case for most people.

Now, the only time that I'm a huge fan of Roth is if you really believe that your tax rate is going to be greater in retirement. So that's the big deal with it. You know, and we can do a whole discussion. I've done discussions on that. If you want to check out the show notes, you can go to askralph.com, click on the search icon and look at those Roth conversions, because that is a really specific area of tax coup.

Now, you know, I'm not going to let you go without talking about some biblical wisdom. Because they're in this whole process, you know, I've given you the four options. There's really four, keep it with your current employer, roll it into the new transfer to an IRA or cash it out. But you need to understand the biblical concept of this because as you navigate this job transition and you make decisions about your retirement or your  401(k), remember, seek God's wisdom and apply these Christian principles.

And what are those Christian principles. I'm going to give you a few of them. Number one is stewardship. We're called to be wise stewards of our resources that God has given us. If you listen to me, you know, I say this all the time. It's not yours. God has entrusted you to steward this. He's entrusted you to manage this.

And what does that mean by stewardship? A lot of people get hung up on that. It just means managing our finances responsibly and with integrity. Look at the book of Colossians chapter 3, verses 23 and 24 reminds us of this and hear me on this. "Whatever you do, work at it with all your heart as working for the Lord, not for a human master, since you know that you will receive an inheritance from the Lord as a reward.

It is the Lord Christ you are serving." So think about the stewardship of that as you're making that decision. You know, it can be really tempting to cash that out and say, you know, I'm going to solve this problem. I'm going to go on a vacation. I'm going to buy that car I've always wanted, but are you really doing a good job of stewarding what the Lord has given you?

Second biblical principle. Contentment. Look at 1 Timothy chapter 6 verse 6, it reminds us that Godliness with contentment is great gain. So this is a time to check your motives, check your ego here and don't let the pursuit of wealth consume you. Cause it's real easy to get bogged down in this belief that, Oh, I've got to make the right decision.

I got to do everything I can do to you know, to build that wealth. This is a time to take that off and say, wait a second, let me make the best decision. Let me meet with somebody like Ralph, somebody I trust. But this is the time to really think about, you know, find satisfaction in your work and in God's provision.

Don't get so caught up on, Oh, I got to grow this. I got to grow this. Yes. We want to do that. I'm a capitalist. I believe in that, but I really believe that this is a time to check that and make sure you're being content. What's another one? Generosity. We're called to be generous with our resources and to use them to bless others.

So this may be an opportunity to be generous. Proverbs 22:9 says that "The generous will themselves be blessed, for they share their food with the poor." Now, I don't know exactly what that means to you. Does that mean that, you know, you make a good decision? It's up to you, but be generous in this whole thing.

And finally, this one is the crucial biblical principle as it relates to this. You got to trust in God. Hear me on that. Trust in God as you pray about this decision. You know, when you listen to me, I always say, start with prayer. So when you're changing jobs and you're thinking, you know, it sounds like a such a good deal.

Like Ben went through. Ralph, this sounds like a great deal, man. It's going to be such a better thing. I'm going to have better work hours. I'm going to have more time with family. I'm going to make more money. Pray about it and trust in God. Proverbs chapter 3:5 and 6 encourage us this. "Trust in the Lord with all your heart and lean not on your own understanding; in all your ways submit to him, and he will make your past straight."

So as you're going through this, yes, it can be overwhelming. Yes, it can be emotional and you feel like you're going to make the wrong decision, but listen to me, Candice, everyone else listening, I'm speaking directly to you. Submit yourself in prayer and then trust that God is going to work this out and find people that can help you. Trust that God's going to put people in your path.

Maybe you're listening to this show right now. And this because the teacher appeared when the student was ready. Just like yesterday. It was interesting. I'm having this conversation with this client about taxes. And we went into this whole discussion about retirement. She had been putting this off and putting this off.

And now she's going to book appointment with me. We're going to sit down. We're going to go over and talk about, okay, what can we do with this? What are our best options?


Now, I've covered a lot today, but if you want to get even deeper into this, every day I write a blog post where I get more into the resources and references.
I got a lot of them in today's blog, and you can check that out by going to askralphpodcast.com/blog. Remember, I write one for every day show. So once you listen to the show or you watch the show, I'm going to encourage you to go check out the blog because I go a little deeper and here's the other side of the blog,

when I say something on the show, I can back it up and I always put my references in the blog post. So you know you can trust me. I'm going to be your financial evangelist. You need to trust me. So that's why I put those things in the blog.

So let's get to our reflection questions, because I want to help you apply what we've learned today.

Number one question. What are the main factors you need to consider when deciding what to do with your  401(k) after changing jobs? Consider those investment options. Consider the fees. Understand all those. Understand how much control over your investments you want to have. Evaluate the tax implications.

Think about that potential for long term growth as we talked about that 25 starting or 35 starting and how those huge difference in that. Think about your overall financial goals and how each of those options, those four things we talked about, how they align with your financial goals and your faith.

So that's number one. Number two, how does understanding the tax implications of each of these options influence your decision making process? I hope you heard what I was saying about taking the money out. If you understand the tax consequences that can help you avoid unnecessary penalties, and it can help you maximize your retirement savings.

It can guide you to choose the options that provide the most tax efficient growth for your investments and understanding the differences. And this is crucial. If you understand the difference between traditional and Roth IRAs, they can help you manage future tax liabilities. And I'm not going to spend time talking about the benefits of Roth, we got into a little bit today, but really think on that.

And the third and final reflection question for today. What steps can you take to ensure that your retirement savings continue to grow even during job transitions? You know, the title of the show was don't let a job change derail your  401(k). So you've got to invest in this. You've got to research and compare the options available to you.

You know, including, like I said, leave it with your former employer, transferring it to the new employer, rolling it over to a new plan, transferring to an IRA. But listen to me, seek professional advice. I'm a qualified financial advisor to tailor the investment strategy to your specific needs and goals.

And I really think you want to talk to two people. I think you want to talk to number one, somebody like me, an accountant, somebody who understands the tax implications. And then once you make that decision, find that broker, find that Christian-based counselor, that financial person that you can trust.

And then what you want to do is work with them to build that tailored plan for you that meets your specific needs and meet your specific goals. And then listen, you got to stay informed. You got to understand the rules governing  401(k)s and IRAs and continue to make the wise decisions for your financial future.

Now you might be saying, Ralph, that's great. You covered a lot. I get the whole four things, but man, I still don't know what to do. I'm feeling overwhelmed. I got this financial situation, just like my client yesterday, and I need your guidance. Well, here's the great part. I can offer you that guidance directly.

You can go to ASKRALPH.COM. You can book a call with me. When you get to the website, you'll see a button right at the top says book a call with Ralph and let's meet. Doesn't matter where you are with Zoom. We can do it from wherever you are and let me help you navigate this decision. So you make the choice that's best for you because I am here to help you navigate these challenges and achieve your financial goals.

And I want to also ask you for a favor. I will ask you to support the show because your support keeps the show going and it helps spread the message of hope and Christian faith to others. I hope you heard the hope today. It wasn't about negativity.

It was about there is hope. There is a way to start to plant those seeds for retirement. So if you find value in the show, consider buying a virtual cup of coffee for the show. And you can do that right at askralphpodcast.com/support. No one's going to show up at my door with a actual bucket of coffee or a cup of coffee.

I don't even drink coffee. I drink hot tea in the morning, but it's a virtual coffee. And the benefit to that is it allows us to grow the show. We can put it on more platforms. We can reach out to engage with more people. So please, do that. And if you can't do that, I'm going to ask you for one final favor.

And that is share the show with other people. We all live around other people and you know, people that are changing jobs, are thinking about changing jobs. Do me a huge favor, do them a favor bigger than that is just saying, Hey, you know what? You should listen to this guy, Ralph. He gives some really good financial advice and he blends that with faith.
It's not some secular, I can make you get rich overnight scheme that you're never going to hear that from me. Let's share that, just direct them to askralph.com where they can find more episodes and resources. Now, so in today's episode, we discussed the options available for managing your  401(k). Those four things.

We explored the pros and cons of each option. We talked about the tax implications and we also talked about the importance of making a diligent and prayerful decision. I share with you some stories of clients that I've worked with over the years who have made different choices. And you saw the long term effects of those things.

We talked about how starting early makes such a huge option. So I'm going to encourage you if you missed it, you can go back and read the show notes. You can also go listen at our blog post. Now tomorrow, we're going to be discussing a sensitive topic. I alluded to this a little bit earlier, and this is one that hurts.

I got a message from a listener that really broke my heart when I read it, but it's something so important. We're going to be talking about. When you've lost a loved one and you're facing tax questions, I'm going to go through everything you need to know, just like I did today. I'm going to give you a step by step plan of how to do this.

Now, maybe you're not suffering with this. You've not lost somebody, but you know, somebody who has, encourage them. Hey, check out Ralph's show tomorrow. He's going to talk about what you do when this happens. As I close today, remember this. My passion is to help you achieve financial success. I want to see you grow in your faith.

I want to see you live out your dreams and I want to see you build that retirement savings because you don't want to be that person. And I see these folks every day in my practice who are struggling because they wish they could have, would have, ought to made that decision. That's a kind of a funny thing.

My grandmother used to say, could have, would have, ought to, should have, but they, they wish they had made that decision before. Don't let yourself fall into that. Stay engaged with the show. Reach out to me. If I can help you individually, because I know this, together, we can master your finances from that Christian perspective.
So stay financially savvy and God bless. Thank you for joining me today. And until next time, here's my thing for you today. Keep seeking God's wisdom in all of your financial decisions.

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