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Ask an Expert – How Can Women Leaving Corporate America Still Save for Retirement?

Jason Conger Financial Advisor

Answered By

Brittany Melville

 

Financial Professional

brittanym@nextgenerationtrust.com

Question

How Can Women Leaving Corporate America Still Save for Retirement?

Answer

We’ve all been hearing about the Great Resignation (or the Big Quit), which was thought to be a result of the COVID-19 pandemic. Throughout 2020 and 2021, many Americans have confronted how they felt about their jobs, many deciding it was time to quit what was no longer satisfying and seek more fulfilling career paths—including self-employment/business ownership.

According to the Bureau of Labor & Statistics, there were nearly four million voluntary separations (quits) in July 2021.

For women specifically, this decision may have been motivated by family or childcare issues and homeschooling when classes were remote. Purse Strings has called this the “she-cession,” and shared that 1.8 million women left the workforce entirely. In September 2021, women who left the workforce outnumbered men by more than five to one (863,000 women compared to 168,000 men).

Further, Market Watch reported that a March 2021 U.S. Census Bureau population survey found that 80% of Americans who left the workforce since the start of the pandemic were women. Plus, a McKinsey study on women in the workplace reported that:

 

  • Women are stepping up as leaders and taking on leadership roles, but their contributions are not recognized or rewarded

  • Women are even more burned out than they were a year ago; burnout is escalating much faster among women than men

  • One in three women say they have considered downshifting their careers or leaving the workforce this year, compared to 1 in 4 at the start of the pandemic

  • Additionally, 4 in 10 women have considered leaving their employer or switching jobs—and high employee turnover in recent months suggests that many of them are following through

Goodbye Corporate America, Hello New Retirement Plan

Leaving behind the “golden handcuffs” of Corporate America can be a daunting decision for many women but when done, it opens the door to an exciting future with many options for taking more control.

Have you left, or considered leaving, a corporate position at a well-paying job with benefits such as a qualified retirement plan? If so, you may be well positioned to take time off and consider a shift that will bring meaningful personal and professional rewards.

If you decide to dabble in entrepreneurship, you will have many things to think about. That also means considering what to do with your workplace retirement plan—and as a self-employed person, thinking about a new retirement savings strategy. Here are a couple of tips we have if you’ve left the workforce or decided to go solo:

1 – Don’t abandon your retirement money! The funds left in your old employer-based 401(k), or other workplace retirement plan, are yours. Contact your former employer to find out about rolling over those funds into a new retirement plan. Depending on your age and financial situation, a rollover IRA can ensure the money in your old employer plan ends up in a new account for continued growth.

2 – Consider opening a self-directed retirement plan. If you’re now self-employed and launching a new business, you’re already a person who is comfortable being in the driver’s seat—making your own decisions about your future. A self-directed retirement plan could be a powerful option for your retirement savings strategy—especially if you know and understand certain alternative assets, which these plans can hold.

What is a self-directed retirement plan?
As the name implies, a self-directed plan is one in which the account owner makes all her own investment decisions. You can open the same types of plans that you could at any other financial institution, such as a Traditional/Roth IRA, SEP, SIMPLE, Solo 401(k), and even HSAs and ESAs.

As a self-directed investor, you are also responsible for conducting full due diligence on any investment, so being comfortable doing that research is important—or having the experience with investing in a certain asset class outside of your existing retirement plan already.

All income and expenses related to the assets flow through the retirement plan (such as management fees for an investment property, or the rental income derived from that asset; the loan amount to a borrower, and the repayment with interest).

What types of assets may I include?
A self-directed IRA or other retirement plan may include a broad array of alternative assets that cannot be held in a typical retirement account, which typically limit you to invest in publicly traded assets such as stocks, bonds, and mutual funds. Self-directed retirement accounts allow you to broaden your options and include things like real estate, precious metals, private equity/partnerships, notes and loans, cryptocurrency, and many more. The only alternative assets you cannot include in a self-directed account are life insurance and collectibles.

Why open a self-directed IRA?
Just as with a new business enterprise, your self-directed IRA and your retirement savings will benefit from your knowledge. Self-directed investors take advantage of what they already know to build a more diverse retirement portfolio and a hedge against stock market volatility. Self-direction also allows for increased control over investment returns, as these assets tend to be non-correlated with the stock market.

Where do I open a self-directed plan?
The account is opened with a self-directed retirement plan custodian/administrator, a firm that specializes in these types of plans. The administrator manages all the paperwork and mandatory filing, executes the transactions on behalf of the account (based on account owner’s instructions), and the custodian holds the assets. In many cases, the custodian/administrator are the same entity. The administrator also reviews transaction documents to ensure there is no risk for a prohibited transaction, which can endanger the account’s tax-advantaged status.

To all the women who’ve bid farewell to Corporate America, we support you! To those who are launching new businesses, we congratulate you. And to those who are shifting their retirement plans to a self-directed version, be sure to work with a custodian/administrator who offers ample client education, stellar customer service, and is available to answer your questions about this exciting strategy.

We will provide you useful and timely information you can use to be #financiallyfearless