Have you ever wondered what happens to your 401(k) when you quit or lose your job? While 401(k) funds may not be a tangible asset, it will still exist after deciding to resign your position or have lost your job.
What happens to your old 401k when you quit a job?
There are various options for you to choose from, including leaving your account where it is. You may roll over the money from the old 401(k) into a new account with your new employer or move it into an individual retirement account (IRA). While all these are possible options, first make sure you can participate in a new type of plan. Lastly, and one we don’t often recommend is taking everything out however, there are severe tax consequences.
Should I take all my 401k funds?
We don’t recommend taking all your 401(k) funds because this is an employer-sponsored retirement account. It allows you to save a percentage of your pre-tax salary to a retirement account. These funds are invested in a range of stocks, bonds, mutual funds, and cash. It is almost like taking money out of your piggy bank for non-emergency situations. Unfortunately, many have lost their jobs with the current pandemic, and the unemployment check may not suffice for all your expenses. Remember you can borrow in certain situations without a tax penalty. If a 401(k) withdrawal is the only way that you can pay your bills without taking on costly credit card debt, do it.
What if your new employer does not offer a 401k plan?
So what happens if your new employer does not offer a 401k plan or if you’re not moving to a new employer? You can roll your 401(k) to an existing IRA or a new IRA account. When you have a 401(k) plan with your employer, you don’t get to decide what companies to invest in, but now you have full reigns to freedom to invest how you want, where you want, and in what you want!
Invest in companies that align with your values
Now that you are free to invest in companies that align with your values, consider impact investing as a choice! Click here to view a more in-depth blog-post about 401(k) rollovers into social responsible investments. Impact investing allows you to invest your money into companies, organizations, and funds with their intention to be beneficial to social or environmental issues. At Invested Interests, we make it easy for you to rollover your old 401K into a new retirement account. We work tirelessly to help our clients express their passions through their investment decisions.
Let’s say you are about ready to retire. You can begin taking qualified distributions from your 401(k) after the age of 59 ½, which means that when you decide to take out some money without paying a 10% tax penalty for early withdrawal. Whatever you decide to do with your 401(k), Invested Interests is here to help you in your strategic financial decisions and support in choosing impact investing portfolios.
Earth to readers! As a global pandemic is in full effect, it is essential not to forget about another worldwide crisis that has been unfolding way before the pandemic: climate change.
Global warming is not something new, human activity started influencing climate change in the 1830s. While the industrial revolution may have had its advantages like creating more job opportunities or inspiring innovation, as we began to industrialize, we also started to change our atmosphere’s chemistry by emitting large amounts of CO2 and other pollutants to our air. It is important to note that industrialization was not the only contributing factor to global warming. The coal industry, for example, on its own, generates 1.7 billion tons of carbon emissions every year. We know for sure (backed up by science) that humans have contributed to climate change.
Where are we now?
During the 2016 Obama administration, the United States joined the Paris Agreement. The Paris Agreement is an agreement in which at least 55 countries representing at least 55 percent of global emissions formally join and aim globally to respond to the threat of climate change. Joined parties are required to report their emissions and their implementation efforts regularly. Unfortunately, as of June 2017, the Trump administration decided that the United States will cease all implementation of the Paris Agreement. As a country, political decision-makers are currently not taking action towards climate change as our current president believes global warming is a hoax. However, the Mercator Research Institute on Global Commons and Climate Change report that around 42 Gt of CO2 is emitted globally every year (1332 tonnes per second), predicting that the CO2 budget will be depleted in just over seven years.
With the recent presidential election, the president elect, Joe Biden, said he would apply to rejoin the Paris Agreement on his first day in office. Following the reapplication, he “would lead an effort to get every major country to ramp up the ambition of their domestic climate targets.” This news brings a new sense of hope for climate change and the future of our earth. But what can YOU actively do to reduce your carbon footprint?
What can we do?
While climate change solutions are necessary globally, you can actively do things to reduce your carbon footprint. You can start by measuring your current carbon footprint through a carbon footprint calculator. Once you have figured out your carbon footprint, you can implement ways to reduce it, including thrifting clothing instead of buying fast-fashion, buying local produce, or even carpooling when possible.
Climate Change Investing
To ensure that our financial investments are not funding an unsustainable future. It is critical to divest from companies using fossil fuels, creating nuclear waste, and destroying natural resources. Invested Interests, helps you identify those environmental funds. Invested Interests environment portfolio invests in green companies, alternative and renewable energy companies, and companies promoting sustainability.
Climate change includes global warming driven by human emissions of greenhouse gases causing large scale shifts in our weather patterns. The impacts of climate change are detrimental to the planet, to us, and our economy. Learn how to invest in climate change.
Investing isn’t the only way to show your support for the environment. Check out How to Vote with Your Wallet for the Environment for eco-friendly financial tips. If you’re new to investing, check out our glossary to get comfortable with financial terminology.
What is climate change investing?
Impact investing aims to generate specific beneficial social or environmental effects. People impact invest because they want to utilize their money and investment capital to bring change to social issues. Climate change investing is one way of impact investing in climate change. People who want to invest in climate change wish to create a sustainable future for coming generations.
Examples of climate change investing?
The two most common ways individuals invest in climate change are investing in renewable energy investing or investing in corporations with green initiatives. Investing in renewable energy companies focuses on manufacturing products that are sustainable and creating solutions that will limit the amount of emissions used in their products.
Investing in corporations with green initiatives allows individuals to invest in companies committed to the conservation of natural resources and implementing new alternative ways to reduce their carbon footprint.
How can you get involved in climate change investing?
At Invested Interests, we make it easy for anyone (beginner proof) to invest in climate change. Our clients invest in green companies, alternative and renewable energy companies, and companies promoting sustainability through our environmental portfolio’s wide range. We avoid oil and fossil fuel companies, companies that aren’t eco-friendly, and nuclear power companies. Companies like Microsoft or Nike are included in our company environment impact investing portfolio.
You don’t need to be overflowing with money to start investing for your future and the future of this world. The biggest misconception about investing is that you can only start investing when you have X amount of money. Many people refrain from learning about investing because they believe it is not within their budget/can’t afford investing but in fact, this is all a myth!
I’m not rich enough to invest?!
You don’t need to be the wealthiest person in the world or be a wolf of Wall Street to start investing. Long term investing will grow your wealth. Long term investing is not only less risky especially for those who have just started investing, it will allow you to diversify your portfolio, and once the dividends pile up, you can do whatever you want with them (hopefully reinvest).
So how much money do you need to start investing? Seriously…
Well it all highly depends on what you are investing in. Investing in mutual funds lets you purchase small pieces of many different stocks in a single transaction. Mutual funds allow you to diversify your investment portfolio to avoid the risk of “putting all your eggs into one basket”. With an individual stock, you can buy a single share or a few shares of the company of your choice. Stock prices fluctuate day to day (check out Yahoo Finance, to keep track of stock prices). It also depends on your personal investment goal, whether that is investing for retirement, for example. Regardless of your goal, it’s never too late or too early to invest as long as you start!
I only have $100 dollars to invest per month
At Invested Interests there is no minimum to start investing! While some companies may require a minimum investment to start that is not the story with Invested Interests. So if you only have 100 dollars to invest per month it is better to start investing something rather than nothing. It is not so much about how much you invest but a time game for long term investing.
Can I make world impact by investing (Impact Investing)
Simple answer: Yes, you can! Check out our previous articles about how you can start impact investing and vote your wallet for causes like human rights & diversity, environment and peace. Here at Invested Interests, we have portfolios that support causes through conscious investing you can make a world impact!
Learn how to start impact investing with Invested Interests
If you have been keeping up with our weekly post in Invested Interests social media accounts, you would have noticed us posting weekly during Hispanic Heritage Month. Throughout the month, we focused each week on a new topic related to Hispanic culture. From Hispanic recipes to well-known Hispanic artists, all to give our audience a better understanding of the Hispanic culture and the importance of celebrating Hispanic heritage month.
Build your Cultural Intelligence
While the Hispanic heritage month is coming to an end on October 15, I don’t want everything that you have learned throughout these various weeks to come to a halt. Instead, I encourage every one of you currently reading this blog to continue learning about other cultures, including the Hispanic culture. Being culturally intelligent is an essential skill to have as it could help you build meaningful relationships with people from different cultures. You start by building meaningful relationships when you actively learn about individuals’ customs, cultures, and views with an open-mind free from ethnocentrism (applying one’s culture or ethnicity as a frame of reference to judge other cultures). By not assuming or clouding your mind with your biases of certain cultures.
Cultural Diversity in the Workplace
Throughout the weeks, we celebrate the Hispanic culture, however, there are still things in this world that need to change. For starters, let’s start with cultural diversity in the workplace. Cultural diversity in the workplace has been shown to improve workplaces by increasing employees’ productivity in the workplace. Having a diverse workplace allows companies to get a broader perspective of ideas or processes. People from different cultures have different past experiences that can be beneficial by providing an overarching knowledge of possible solutions. Laboratory studies have found that diversity in the workplace has shown a positive correlation with diverse groups with their effectiveness. According to author Mazur, creativity thrives on diversity. Meaning, multicultural organizations are known to be better at problem-solving, possess a better ability to extract expanded meanings, and are more likely to display multiple perspectives and interpretation when dealing with complex issues. 35% more likely to perform at a higher level. Overall, increasing the groups’ functionality and ability to problem solve by looking at a problem with different angle points.
Our current society is filled with many individuals from various walks of life, just encompassing any cultural background you can imagine. However, this is not the circumstances in the modern age business workplace. Cultural diversity and inclusion in this day and age are essential, and it is an issue that should be resolved within the business industry.
How to make an impact!
First, you have to realize that it is easier to change the business environment from a business concerned about diversity. At Invested Interest, we identify those companies that promote fair and equitable working conditions and companies with diverse boards and workforces. Diversity in all its aspects, from cultural diversity, LGBTQA+, to women in high-level management. Companies like Accenture, Fisher & Paykel, and other companies in our diverse portfolio.
COVID-19 pandemic has impacted us in many different ways. Many individuals have lost their jobs because of it, while others had their hours cut. Around 205,000 individuals have passed away from this virus. Eight months of this on-going pandemic has also negatively affected the U.S. economy.
The outcome of the pandemic
In July, 31.3 million people reported that they were unable to work at some point in the last 4-weeks. As of July, 16.9 million (57%) people were unable to work. Even though these statistics are in some way outdated as of September, there are still people who are unemployed while others have returned to their work. The pandemic has people less willing to spend money on unnecessary things/trips. Causing many sectors in the economy like the traveling industry, airline industries, and other leisure industries to be highly impacted by the pandemic.
Federal Reserve’s response to the economy
On September 16, 2020, Jerome Powell from the federal reserve announced that they are strongly committed to achieving the monetary goals that our congress has given them. These goals are price stability and higher employment rates. The pandemic has not made raising the employment rate as easy as the goal may seem and instead challenged this goal. However, they have offered relief like unemployment and President Trump signing the H.R., 748 Cares Act (a $2 trillion coronavirus relief bill) on March 27, 2020, hoping the recovery is as easy as possible. With the pandemic in mind, which does not seem to be ending any time soon, the federal reserve has changed the policy statement to alleviate potentially severe damages of this pandemic and achieve the congress’s goals. The federal reserve has announced to keep interest rates near zero and plans to stay for three years (until 2023).
What do lower interest rates mean?
When the Federal Reserve lowers the interest rate, it is a tactic to stimulate economic growth. One reason why the Federal Reserve decided to reduce the interest rate may be because they want consumers to spend more money. With lower interest rates, it makes it easier for someone to finance assets like houses or cars. When interest rates are lower, financing becomes cheaper for individuals to borrow or invest. It can also be helpful for someone who has a 401(k) account or an investor. The lowering of interest rates will affect your investment portfolio. One thing to be aware of, while the lower rates will increase your stocks, your bond prices will be the ones that will be lower.
The bottom line is that depending on if you are a borrower or saver, the lowering of interest rate may or may not benefit you.
If you have any questions about the lowering of interest rates or your investments, please reach out to us! Email us at email@example.com