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Don't make this big mistake with retirement funds when you change jobs

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Don't make this big mistake with retirement funds when you change jobs

When you switch jobs, the basic advice is to roll over your old employer-sponsored retirement account to an individual retirement account, or IRA. Sounds easy, but beware.

I know because I’ve done this a few times. And have learned to keep it simple.

My method: I divvy my rollover up between a handful of low-fee index funds. I have also carved out a portion for a target-date fund, a “set-it-and-forget-it” way to invest based on the date of retirement. (As you age, the fund shifts the account’s investments from stocks to less volatile choices, such as cash and bonds.)

But guess what?

That’s not what many people do, according to recent research from Vanguard Group. Instead, their money is transferred from a former employer’s 401(k) plan to an IRA, usually at another financial services firm, and the balance goes into a market-type cash account that generally pays a marginal rate of interest.

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Nearly a third of those who rolled retirement savings into IRAs at Vanguard in 2015 still had the balance sitting in cash seven years later. Not cool. You lose years of potential gains from being invested in stocks, which compound and boost your wealth for your golden years.

FILE - In this Tuesday, May 20, 2008, file photo, John Bogle, founder of The Vanguard Group, talks during an interview with The Associated Press, in New York. Vanguard announced Wednesday, Jan. 16, 2019, that John C.

John Bogle: the late founder of the Vanguard Group was an index fund evangelist. (AP Photo/Mark Lennihan) (ASSOCIATED PRESS)

We’re not talking about chump change here. For investors under age 55, the estimated long-term benefit of investing in a target-date fund (versus staying in cash) upon rollover is equivalent to, on average, an increase of at least $130,000 in retirement wealth at age 65, according to Vanguard.

“How many people stayed in cash and for how long far exceeded our expectations,” Andy Reed, Vanguard’s head of investor behavior research and co-author of the study, told me.

Most older investors, however — and/or those with balances exceeding $100,000 — moved out of cash within the first few months after the rollover. Compared to men, women, however, were significantly more likely to remain in cash for years after the rollover.

Read more: What is the retirement age for Social Security, 401(k), and IRA withdrawals?

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There are several ways to handle retirement savings when leaving jobs. You can keep your 401(k) balance with your old company, roll the money into a new employer’s 401(k) plan, or move it into an IRA.

The downside to keeping retirement money at a former employer, of course, is that you can’t add any more money to it. And you’re stuck investing only in that specific menu of investments. An IRA will typically offer many more choices.

When you roll your 401(k) account into an IRA, the company that administers the plan typically liquidates your holdings, then moves the cash into your IRA. But, it doesn’t automatically invest it for you. “We often see people assume their IRA cash will be auto-invested, similar to a workplace plan such as a 401(k),” Rita Assaf, vice president of retirement products at Fidelity Investments, told Yahoo Finance.

Put it down to confusion, “not necessarily about investing, but with the mechanics of IRAs,” Reed of Vanguard said. “It’s not that people intentionally want to make this money mistake. This is not deliberate and part of a master plan. It’s out of sight, out of mind.”

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In another survey of over 500 Vanguard IRA clients who completed a rollover in 2023 but were still in cash in June, about two-thirds had no idea how their IRA money was invested.

The remainder said they never got around to investing it, or they didn’t want to risk putting their savings into stocks, or they simply felt overwhelmed by their IRA choices. Reed said: “You can have too much of a good thing when it comes to choice.”

Given all the job changing across all generations in recent years, this mistake is pretty significant, particularly for younger workers. “If you want to have any chance of retiring and living the life you want in retirement, then you’re going to have to have a large portion of your retirement savings allocated to equities to maximize your chance of success,” Reed said.

Have a question about about retirement? Personal finances? Anything career-related? Click here to send Kerry Hannon a note. 

To improve retirement outcomes, you need to stay invested consistently.

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One solution: Make it possible for financial services firms to invest rollovers to IRA accounts automatically into a target-date fund or something akin to how many employers now enroll workers automatically into these diversified accounts when they come on board.

Virtually all 401(k) plan sponsors and the majority of state auto-IRA programs use target-date funds when they automatically enroll workers in a retirement plan. Track record: not bad. Vanguard’s Target Retirement Fund 2050 is up 11.4% to date and 10.1% over the past five years.

Senior couple using laptop while sitting on sofa in living room at homeSenior couple using laptop while sitting on sofa in living room at home

Rolling over an IRA? Your best move is to have a plan, says T. Rowe Price. (Photo: Getty Creative) (PIKSEL via Getty Images)

This way you don’t have to know what an index fund or the other nitty-gritty of investment lingo.

Until the laws are changed, your best move is to have a plan for how you want your savings invested before you initiate a rollover, said Lindsay Theodore, a senior manager in advisory services at T. Rowe Price.

Call the firm where you’re moving your money to and get an idea of what would be an appropriate investment, she added. “Having a good understanding up front as to what that process is going to look like can help you get your money invested right away, so it doesn’t get stuck in a cash limbo.”

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Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in The New World of Work” and “Never Too Old To Get Rich.” Follow her on X @kerryhannon.

Click here for the latest personal finance news to help you with investing, paying off debt, buying a home, retirement, and more

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Finance

State aims to reclaim $850K from campaign finance vendor

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State aims to reclaim 0K from campaign finance vendor

OKLAHOMA CITY (KFOR) — The state is now looking to recoup around $850,000 from a company they said didn’t meet deadlines to create a campaign finance website.

It’s The Guardian and was supposed to be up and running in October, but that didn’t happen. The Guardian is the name of the state’s online campaign finance reporting system.

“They were unable to deliver a compliant system,” said Ethics Commission Executive Director Leeanne Bruce Boone during their meeting on Friday.

The company at the center of it all is RFD and Associates, based in Austin, Texas. They were hired in December 2024 to begin the project of creating The Guardian 2.0.

The previous company, according to the commission, was with Civix. However, problems arose between the state and that company, so they had to shift and find a new vendor.

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The commission appropriated around $2.2 million for the endeavor.

Months went by, and according to the commission’s timeline, deadlines were missed altogether.

Dates in June were missed, and in August, the company received a warning from the Ethics Commission. The Office of Management and Enterprise Services (OMES) had to get involved in October and conduct an independent technical assessment.

The October date was proposed by the company, but it wasn’t met. In November, a formal notice of system failures and vendor non-compliance was noted.

“None of the milestones were met,” said Bruce Boone during the meeting. “Extensive corrective steps over many months. Written warnings were sent.”

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At the Friday meeting, the commission voted to cut the contract with the company, and a contract with the previous one was then sent out.

“Terminate the contract and proceed with legal action,” said Bruce Boone.

Bruce Boone said that in total $850,000 was actually spent throughout this process on RFD. The new contract with Civix, she said, is estimated to cost over $230,000 and should last for three years. The effort is needed ahead of the 2026 election.

Now the commission has decided to bring in the Attorney General’s Office to see if they can get the money back.

“I take very seriously my role to ensure that taxpayer dollars are spent fairly and appropriately,” AG Drummond said in a statement. “My office stands ready to take legal action to recover damages, hold those responsible accountable, and work with the Ethics Commission to ensure the public has a reliable means to access campaign finance reports.”

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News 4 attempted to get a statement out of the Chief Operating Officer of RFD and Associates, who had been in the meeting but quickly left after the commission voted.

“No comment,” said COO Scott Glover.

What would you say to taxpayers about that?

In response, he said, “I don’t agree with the ethics commission’s decision. That’s all I have to say.”

The Guardian had been delayed by several months, but the commission did respond appropriately and timely manner to requests made for documents.

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The Guardian was back online Friday afternoon.

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Finance

One.funding and MV Commercial launch MV Asset Finance

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One.funding and MV Commercial launch MV Asset Finance

One.funding has partnered with UK-based MV Commercial to introduce MV Asset Finance, which offers an alternative method for MV Commercial’s customers to secure finance, according to a LinkedIn post.

In developing MV Asset Finance, representatives from One.funding worked closely with MV Commercial’s team to better understand business priorities and the requirements of their customer base.

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According to the post, the service aims to remove friction, ensure complete transparency, and enable a seamless process from initial engagement to completion by integrating support within MV Commercial’s operations and presenting it under their brand.

MV Commercial supplies fleet solutions for vehicles within the UK.

The company’s offerings include trucks, trailers, and light commercial vehicles that are available for sale, rental, or contract hire.

Its current rental and Ready to Go fleets consist of 2,000 specialist trucks, vans, and trailers across various depots in Airdrie, Grantham, Livingston, Oxford, Haydock, and London Luton.

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One.funding CEO Lee Schofield said: “At One.funding, we’ve 20 years of experience in building point-of-sale finance that fits naturally into how businesses sell. MV Asset Finance shows what’s possible when that experience is embedded into the MV Commercial journey, making it easier for their customers to keep moving and keep growing.”

A recent example involved AMK Plant & Tipper Hire, which added a DAF FAD XD450 Construction eight-by-four tipper truck to its fleet, the company’s first DAF tipper purchase.

The transaction was finalised in three weeks; MV Commercial supplied the vehicle while financing was arranged through the newly launched MV Asset Finance framework.

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RFSD board approves financial assurances, reviews annual audit

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RFSD board approves financial assurances, reviews annual audit

The Roaring Fork School District Board of Education approved its annual financial accreditation assurances and reviewed the district’s 2024-25 audited financial statements during its meeting on Wednesday, according to a district news release.

The audit, presented by McMahan and Associates, found the district’s overall financial position to be stable and identified areas for continued improvement in internal controls and financial processes. The district’s General Fund balance remains above minimum levels required by board policy.

Chief Financial Officer Christy Chicoine said the audit reflects progress following prior concerns identified in earlier reviews.



“We have made significant improvements compared to the prior year’s audit as a Finance Department, and I am grateful for the finance team’s commitment towards those improvements as demonstrated in this audit,” Chicoine said. “While we still have work to do to continue to sustain and enhance the district’s fiscal management, the audit report indicates we are clearly headed in the right direction.”

Superintendent Anna Cole said the findings validate work undertaken over the past two years to rebuild internal systems and improve transparency.

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“Over the past two years, our teams have worked diligently and transparently to rebuild internal financial systems that left the district at risk,” Cole said. “The outcomes of this audit are evidence that we are on track.”

Cole said the timing of the audit is significant as the district begins developing its budget for the 2026-27 school year and faces mounting external pressures.

“We couldn’t have stabilized internal systems at a better time,” she said. “As we begin the budgeting process for the 26/27 school year, we face external challenges like declining enrollment, instability of state and federal funding, and a rising cost of living that is outpacing staff and teacher salaries. This audit is an important confirmation that our finances are in order as we prepare to navigate oncoming challenges.”

Board President Lindsay DeFrates said the board is better positioned to plan ahead following the audit’s conclusions.

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“We are grateful for the leadership of Chief Chicoine and the hard work of the district finance and human resources teams,” DeFrates said. “We are now in a much better place financially and will move forward with clarity, transparency and accountability, able to better navigate the challenges to come.”

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