10/11/2022
In today’s highly mobile job market, it is not uncommon for employees to move every 2-5 years. However, when you change employers you may be tempted to cash out your 401k to avoid the process of rolling it over to your new employer (What if your retirement plan was auto-portable? More on this in a moment).
Here are 3 reasons you don’t want to do that:
* Taxes will be withheld. The IRS generally requires automatic withholding of 20% of a 401(k) early withdrawal for taxes. So if you withdraw $10,000 from your 401(k) at age 40, you may get only about $8,000.
* The IRS will penalize you. If you withdraw money from your 401(k) before you’re 59½, the IRS usually assesses a 10% penalty when you file your tax return.
* It may mean less money for your future. Paying your self first and consistently is key to your financial success. The power of compound interest works when your money stays invested in your retirement account. This is true for all Americans, but especially Black Americans, who cash out at about 63% versus 30% to 40% of white Americans.
So back to this idea of the auto portability of your retirement account
BET founder and business mogul, Robert Johnson has started his newest venture, Portability Services Network (PSN) by teaming up with some of the nations largest retirement investment firms to offer an auto portability plan. The plan makes it simpler for American workers to shift 401(k), 401(a), 403(b), and 457 account balances from plan to plan, lowering premature cash-outs and preserving retirement savings. Auto portability protects retirement savings for employees most vulnerable to cashing out, a setback for many Black Americans,and may help to close the wealth gap between white and Black Americans.
According to the EBRI auto portability will help:
* 67 million Black and minority workers save $619 billion
* 42 million women workers of all ethnicities save $365 billion
Check out this article for more on this effort.
https://www.blackenterprise.com/bet-founder-rolls-out-new-consortium-to-help-black-americans-save-619-billion-over-a-generation/
