Change of Mission Could Mean a Change in Retirement Options

By Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy

After more than 17 years of service to our country, you’re embarking on a change of mission — a new career. That is incredibly exciting! Along with your change of mission, you may find a change in your retirement options. It’s mission critical to evaluate these new options and adjust your retirement plans to keep you on track to achieving your financial goals.

Reset the budget

First things first. Updating your monthly budget and savings plan is a great place to start.

If you’re getting a higher salary in your new job, good for you! Consider making adjustments to your monthly budget and savings plan with the extra money. You may choose to put the additional money toward some of your current expenses, like paying down debt or a new car. Or, you could look at the extra salary as found money, continue to live within your previously set budget, and put all of the “found money” into saving and investing. Remember, any additional money you put toward saving and investing today will enhance your financial security for tomorrow.

Evaluate your new retirement options

With a new job, you may have an opportunity to participate in a new retirement plan. Whether it’s a 401(k), 403(b), 457(b) or other employer-sponsored retirement plan, you should consider how the new plan will stack up against the Thrift Savings Plan.

One option is to keep all of your money in the TSP. As you already know, the TSP is one of the best options for retirement investing, since it provides tax advantages and offers fees that are lower than even the average index fund.

You can also decide to roll over some or all of your TSP money into your employer’s retirement plan or an Individual Retirement Account. Keep in mind the tax implications when deciding between a traditional or Roth IRA. While cashing out of the TSP is technically an option, unless you’re 59 ½ years old, this may not be the best choice due to tax implications.

Most importantly, if your new employer offers a match to your contributions, take full advantage of it. It’s free money!

Fees impact your investment portfolio

Always consider fees as you weigh your investment options. Fees may seem small at first, but over time they can cost you big time.

Ask about fees associated with the retirement accounts, such as administrative fees, investment advisory fees, if any, and transaction costs such as commissions, sales loads or other trading fees. For further details, check out our Investor Bulletin on “How Fees and Expenses Affect Your Investment Portfolio.”

Update or create a retirement plan based on your new career

Check to see if any new retirement accounts have a variety of investment options. By owning a mix of different investments like stocks, bonds and mutual funds, you spread the risk of losing money in the event that one of the investments loses its value.

After conducting your own independent research, assess whether your current retirement plan still achieves your financial goals or if you need to make some changes. Consider any significant life changes — marriage, divorce, children, homes, caretaking — that may impact your journey toward retirement. Take note of how much you have saved so far and whether you need to make any changes to your savings rate.

Review your current asset allocation — your investment portfolio’s mix of stocks, bonds and cash — and check to see if you need to make adjustments. There are several factors to consider, such as your savings thus far, what you will earn with your new job or any other recent changes to your current financial picture or future financial needs.

Need help making changes?

If you need help making changes to your investment portfolio or reassessing your retirement needs, consider hiring an investment professional. You can get information about your investment professional’s background, registration status and more by going to Investor.gov and typing the name of the professional in the search box. It’s a great first step toward protecting your money.

Take charge of your financial future as you change your mission and make changes to your retirement plan. Know that Investor.gov and our military page can provide you with all kinds of useful saving and investing tools and information to help you with these important life changes.

The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This article expresses the author’s views and does not necessarily reflect those of the Commission, the Commissioners or other members of the staff