TOGETHER WITH  | Good day to you. Can you guess among the following countries, which one is expected to have the lowest unemployment rate in 2023? a. Singapore, b. U.S., c. France. Follow the wave 🌊 below for the answer. Today's personal finance topics are: - What to do with your old 401(k)
- Financial moves to make if you lose your job
- Busting homebuying myths
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FINANCIAL PLANNING What To Do With Your Old 401(k) | | | | Whether it's quitting, getting laid off, a career transition, or old-fashioned retirement, there are a lot of reasons why you and your 401(k) might become estranged. We talk a lot about investing and retirement planning, but what about contingency planning? What happens when you and the 401(k) sponsor are no longer together? Well, there are a few options. Choose your player - Leave it: You can leave your 401(k) under the management of your former employer as long as your balance is north of $5,000. This is a convenient option, but one with some drawbacks — you won't be able to make additional contributions to it anymore. It might work for some time, but eventually, you might grow tired of keeping up with multiple retirement plans.
- Transfer it: If you're transitioning to a new company and they happen to offer a retirement plan analogous to your former employer's plan, rolling your account over to the new plan is an option. After surveying the options available with your new plan, you'll need to contact your plan coordinators on both ends and fill out the necessary paperwork — now you can get back to investing.
- Roll it over: Another version of the rollover tactic involves taking things into your own hands and rolling your 401(k) to an IRA. If you're retiring, taking a career break, or simply not moving to a company with similar plan benefits, this might make sense for you. Keep in mind, Roth accounts can't be rolled into traditional accounts, and if you decide to move a traditional 401(k) to a Roth IRA, that will be a taxable event.
- Take distributions: If you're over 59.5 and retiring, you may decide to begin taking qualified distributions from your 401(k) instead of making any moves. Remember, this option will also be taxed at your ordinary income tax rate.
- Cash it out: Cashing out a 401(k) is rarely the go-to recommendation, but there are scenarios where it makes sense. If your balance is under $5,000, you really need the cash, or you have a secondary retirement account that's slap full too, cashing out might be okay. Keep in mind — if you're doing so under age 59.5 you'll be hit with the ordinary income tax + a 10% penalty, and your plan manager is required to withhold 20% of the funds to send to the IRS.
Take this related lesson on this topic and earn Dibs 🟡 while you're at it: | | | |
MONEY TIPS Financial Moves to Make If You Lose Your Job | | | | As of right now, the labor market is still tight and in the hands of the employee for the most part. Sitting at 3.4%, the U.S. unemployment rate hasn't fallen this low since 1969. And the jobless rate in six of the G7 countries hovers near the lowest in a century. Nevertheless, that doesn't mean layoffs aren't happening, because they are happening, and in a big way within some sectors. Losing your job is not a pleasant thing to come to grips with, but it is something we may have to be prepared for regardless. So, here are 3 things to do first if this happens to you - Apply for unemployment: Even though it probably won't make up for your lost income, unemployment benefits can be a vital bridge to your next destination when hardship strikes. If you've just been laid off and previously been employed for the last 15 weeks, chances are you'll likely qualify for up to 26 weeks, and payments can range from $200-$800 per week depending on your state and situation.
- Protect your retirement: One of the most important things having an income allows you to do is secure your future, which we do through saving and investing for retirement. When you lose a job, you'll oftentimes be losing your retirement benefits as well, so it's important to get the details from HR on what your company's policies are asap. From there, you can decide what the right move is for you, whether you roll it over, keep your account as is, or something else.
- Plan for insurance: Because of the way the insurance system is set up in the U.S., one of the main appeals of gainful employment is obtaining a good benefits package that pays for some or all of your health insurance coverage. Losing this can be a big hit to your budget if the burden is suddenly on you, so planning for contingencies in the event of a layoff is important. Generally though, you'll have three options to choose from—the ACA market, COBRA, or Medicaid.
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SPONSORED BY FINMASTERS Understanding The Power of Compounding Interest | | | | One of the best things you can do in investing is to invest consistently — put some money into the stock market every day or every month. Many have struggled to understand this concept, so that's why the team at FinMasters came up with an illustrative calculator called a Dollar-a-Day. This calculator allows you to visualize the return you'd be generating had you consistently invested a dollar each day since your birth date. Dollar-a-Day illustrates the power of compounding interest—a key rule in investing. Some people call it math magic. You can use this calculator to show your family and friends that investing a small chunk of money every day can help you build fortune over time. In fact, that's how many people get rich. Check out Dollar-a-Day by FinMasters. | | | |
HOUSING Busting Homebuying Myths | | | | There are a lot of urban legends that shroud the elusive art of home buying. Whether you're a seasoned real estate veteran or a wide-eyed first-time buyer, the tangled web of myths and half-truths surrounding this daunting task can leave even the most sagacious of individuals feeling dazed. With so much information available, it's close to impossible to discern which anecdotes about the process are accurate, so we took it upon ourselves to dispel some of the most common legends out there. Our top homebuying myths - You need a great credit score: The idea that you need a good credit score or even credit at all to buy a home is a myth. While good credit is desired to get the best rates, conventional loans will allow as low as 620 for applicants, and there are multiple lending programs out there like FHA loans that allow homebuyers to qualify with lower scores. And if you have no credit? You can go the manual underwriting route.
- You need 20% down: Conventional wisdom tells us we need 20% down, but that's not reality. The truth is that 20% down just saves you from having to pay for private mortgage insurance (PMI) every month, and of course, is desirable for equity purposes in the event of a downturn. Nevertheless, it's not a requirement, and there are a lot of mortgage programs out there that will gladly take you in with less than 20% down.
- You don't need an agent: While it is true that a real estate agent isn't required to buy a home, the reality is there's a reason it's recommended. Having an agent is like having a shortcut to any kind of property, bank, or professional in the industry you might need access to, as well as a real estate dictionary and someone who can handle all of the administrative work on your behalf. Buying a home is not the same as buying eggs.
- Spring is the time to buy: It's often purported that spring is the best time to buy a home, and that's just not true. In terms of the transaction volume, yes, spring is the most popular time to buy a home, but perhaps not the best. A more active housing market also equals more competition on the buyer side, increasing the odds of getting into a bidding war or driving up the prices of your local market even more.
- A fixed rate is the only way: Adjustable rate mortgages (ARMs) are often frowned upon for their uncertainty and the fact that you might lose your rate, but sometimes that flexibility can be a blessing. In fact, ARMs often start out with a lower rate than your typical fixed-rate mortgage, and they're often locked in for 5-7 years. With rates likely to recede in the future, an ARM might make more sense right now, especially if you plan to refinance.
- Inspections aren't necessary: Home inspections cost a few hundred dollars and often add a layer of bureaucracy to the process, but they're worth it. Having your potential home inspected by a professional can sometimes uncover some major red flags that no one else would've caught, and end up saving you either a bad purchase or thousands off the property as a result of their findings. But, if all is well, you've simply paid a few hundred dollars for peace of mind, and that's entirely worth it.
Take this related lesson on this topic and earn Dibs 🟡 while you're at it: | | | |
🌊 BY THE WAY | - 🌏 Answer: Singapore it is with an expected 2.1% jobless rate in 2023. The U.S. is expected to come in at 4.6%, and France at 7.6%. See the full list (Visual Capitalist)
- 📦 Amazon will let employees pledge stock for home loans (Insider)
- 🪜 ICYMI. The 10-Year Treasury is climbing again — what it means for you (Finny)
- ✨ Women's history month: The 2023 theme, why we celebrate and everything else you need to know (Fox)
- 🛶 A Finny member's story: "My journey to managing my own money" by Maria McDaniel (Finny Member Perspective). If you have a personal money-related story you'd like to share with Finny's member base, please email us.
- 🚗 Nissan recalls more than 700,000 Rogues over car key defect that can shut off the engine while driving (NBC)
- 🍎 Finny lesson of the day: We haven't covered this in The Gist this year, and given the story on Amazon allowing employees to pledge their stock for home loans, let's review the basics of equity grants:
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| Finny is a financial wellness platform. The Gist is Finny's twice-a-week (Tues & Thurs) newsletter covering personal finance, market trends and investing insights. The content team: Austin Payne, Carla Olson. Finny does not offer investment and stock advice. Please support our corporate sponsor — FinMasters — as they make rewards on our platform possible. If you're is interested in sponsoring The Gist, please reach out to us. And if you have any feedback about this edition or anything else, please email us. | | | | | | | |
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