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Moving to a New Job?

Consider moving your retirement plans from previous employers as well.

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Your big day is here. After months of networking and interviewing, you’ve landed an exciting new job, and you’re about to meet your new team. It’s a time of transition,
learning, and new beginnings. You’re bringing your best self to your new role.

But with all the excitement, have you thought about moving the retirement plan you left behind at your previous company?

And if you’re an LGBTQ woman, moving and combining retirement plans from previous jobs may require additional nuanced planning, depending on the complexities of your earnings and savings. It has been well documented by the Human Rights Campaign and other advocacy groups that LGBTQ women, like all women, have been traditionally underpaid across industries. And as caretakers, women are often focused more on caring for others rather than taking care of themselves. Not only do women make less than men, they also save less. So take this opportunity now to increase your retirement savings.

Rethinking Your Savings Options

In general, you have two ways to combine (or “roll over”) your retirement plans from previous jobs and ideally increase your savings when starting a new job.

• Your new company may offer a 401(k) or a 403(b) plan that accepts rollovers.

  You might choose to roll over your plan into an individual retirement account (IRA) with your new company or with a financial-services firm of your choice.

If you feel you need more time to decide about rolling over your former employer’s plan, you could wait 90 days until you are comfortable in your new role before making a change. If you choose this option, consider enrolling in your new company’s retirement plan as soon as you start your new job in order to begin saving right away.

Why Combining Plans Matters

Reimagine and rebuild your retirement. It’s possible that your former employer’s retirement plan has not been fully meeting your needs, particularly if you were not reviewing your contributions and allocations regularly. Your new job presents an opportunity to reassess your retirement needs based on your situation today. For LGBTQ women, this means taking a close look at your earnings, income gaps, and savings.

Take control. If you keep your retirement plan with your old employer, you might be missing an opportunity to take control of your retirement by consolidating your accounts. If you have two 401(k) or 403(b) accounts, for example, it can be difficult to stay on top of allocations and contributions, and you might be duplicating efforts unnecessarily. When you combine your accounts, a best practice is to contribute the amount that your new employer will match. In addition to combining accounts, you might also want to consider other retirement-income options such as a guaranteed income annuity, which provides income you can count on when you need it. This can be an especially attractive option for employees who have caretaker responsibilities,

Explore catch-up provisions. If you haven’t been able to save as much for retirement as you had hoped to, you might explore the various IRS catch-up provisions. These provisions may apply to 401(k), 403(b), SARSEP (Salary Reduction Simplified Employee Pension), and governmental 457(b) plans, which currently allow people over 50 to save more for retirement by contributing up to $6,500 in 2020 and 2021. The exact amounts differ by plan type. Additionally, you can make catch-up contributions to your traditional or Roth IRA of up to $1,000 in 2020 and 2021. Take care to carefully review IRS requirements for catch-up provisions and deadlines, per the IRS website at irs.gov.

Align values with investing. Combining plans presents an opportunity to align values with investing, which is a priority for many LGBTQ clients. Many 401(k) and 403(b) plans do not have “Environmental, Social, and Governance” (ESG) fund options that may better reflect your values. For example, a fund’s underlying investments might have supply-chain issues that contribute to serious and unacceptable social problems such as systemic racism. You have an opportunity now to reimagine how your retirement
investments can reflect your values. Take the time to look under the hood of your new retirement offerings. If you are not satisfied with your new firm’s 401(k) or 403(b) offerings, consider an IRA account.

Protect your loved ones. Now is the time to review retirement-plan beneficiaries and ensure that you are protecting your loved ones. When you combine plans, make sure that you have named your partner, spouse, or loved one as a beneficiary. (Here is where additional nuances occur for LGBTQ women.)

• If your former spouse is still named as a beneficiary, this should be updated.

• If you’re not married and you leave your retirement to your partner or significant other, your beneficiary would have to empty your retirement account in 10 years (per the SECURE Act of 2019), which may trigger tax penalties. This situation can quickly become complicated, and your partner might not be prepared for the tax expenses. The specific tax implications will depend on your partner’s age and the type of retirement account being divested, e.g., an IRA or a 401(k).

  If you are single, you will want to consider naming loved ones or family members as beneficiaries. You might also want to consider assigning charitable organizations as beneficiaries, if this is important to you.

How to Move Forward

As you take this exciting next step in your career, be proud of what you’ve accomplished, and seize the moment to take control of your retirement-savings plan.

Finding a financial-services professional who can guide you through the process of restructuring your retirement accounts can help you feel more confident about your retirement-planning choices. In addition, working with an advisor who is knowledgeable about LGBTQ issues can provide an added benefit, because various laws regarding same-sex couples should be a consideration in your overall plan.

This article appears in the June 2021 edition of OutSmart magazine.

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Grace S. Yung

Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the September 2017 issue of Texas Monthly.
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