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Wealth preservation through life’s many changes

March 2018

The month of March has got me thinking about green and leprechauns and the Irish. I always enjoyed a little Irish folklore, especially the one about the pot o’ gold at the end of every rainbow. While my mind is dancing with these fun thoughts, it also got me thinking — what is YOUR pot o’ gold? Do you have wealth at the end of your rainbow?

Shamrock Do you have a strategy for wealth preservation?

For example, what happens to your retirement plan when you…

  • Change jobs?
  • Are laid off?
  • Are getting divorced?

Many years from now, your very own pot o’ gold (your wealth) will be guarded by a tricky leprechaun – whom we will call the government for purposes here. And let me tell you, that tricky leprechaun likes to get his hands in everything, seriously. If you’re not careful — especially while you’re younger — you can lose thousands of dollars in taxes and penalties in a variety of situations. You don’t want that for your own investments, do you?

My goal is to steer you towards the path of wealth preservation. I’m going to take you through some of the more common questions, scenarios and solutions so you keep as much of your hard earned “gold” as possible.

Wealth Preservation during Job Changes or Lay-Offs

Job-hopping is now the norm and millennials job-hop more than any other generation. You’re not afraid to change jobs. You are looking for higher wages, development of your career, better work culture and enhanced benefits — as you should be.

Benefits should be part of the consideration when you decide to make a job change. Does your new employer offer benefits? Are they comparable to your past employer’s benefits package? How do you protect those hard-earned retirement plan benefits from your old job? You don’t want to “start-over” every time you change jobs. That defeats the purpose of looking for better jobs, in the long run.

As far as your retirement benefits go, you don’t want to cash out most retirement plans when you leave a job. If you are under 59 ½ years old, you may be stuck with a penalty on top of the taxes. If you are laid off from your job, you might need the money — but you have a few better options under normal circumstances.

Retirement Planning

What to do with your retirement plan when you leave your job

  1. Leave your retirement assets in the current plan, assuming that is allowed by the plan.
  2. If you don’t want to have several different plans, consider rolling your funds into your new employer’s retirement plan if they offer one. This will help you avoid taxes and penalties.
  3. Alternately, rollover the funds into an IRA. (Talk to a financial advisor for help with your retirement plan or IRAs!)

Wealth Preservation during a divorce

Holly Golightly: I’ll tell you one thing, Fred, darling……I’d marry you for your money in a minute. Would you marry me for my money?

Paul Varjek: In a minute.

Holly Golightly: I guess it’s pretty lucky neither of us is rich, huh?

Paul Varjek: Yeah.

Maybe Holly and Paul wouldn’t have to worry about their retirement plans in Breakfast at Tiffany’s but real life is different. If you have a retirement plan and you are getting divorced, you should consult an attorney on how those assets may be divided up.

You and your spouse are free to negotiate your own divorce terms (throat clearing loudly) but typically, the amount in a retirement plan that is accumulated during a marriage — and its appreciation, if any — is considered marital property.

A potential issue (which I’m certain has NEVER happened…) is that funds might be withdrawn by the account holder before or during the divorce. If you are concerned that your spouse may try to take a loan or withdraw funds from his/her retirement plan, you can contact the plan’s sponsor and see if they will flag the account. This can prevent any loans or withdrawals from happening without first notifying you if the plan allows this.

What is a QDRO?

If your divorce settlement states that you will divide retirement funds, a court must order a qualified domestic relations order, commonly abbreviated as QDRO — pronounced as “Quadro.” A QDRO allows the funds in a retirement account (e.g. pension plans, 401Ks) to be separated and withdrawn without penalty and deposited into your respective retirement accounts or rolled-over into an IRA.

Once the funds have been transferred using a QDRO, you own them and can start making additional contributions and invest the proceeds as you see fit. At this point, your ex-spouse has no control over how you handle the account.

Somewhere Over the Rainbow

Ok, we’ve covered how to help preserve your wealth through job changes, a layoff, or a divorce… some major life events to be sure.

So, I think it’s time to go have some of that foamy green beer, or maybe even some green eggs and ham. Wear green and that ridiculous definitely going to be in selfies leprechaun hat. And one more thing! Stop pinching people who aren’t wearing green, it’s not nice ?

March 2018


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Investing involves risk including loss of principal.

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