Reading through the Wall Street Journal I found an article that helps keep things in perspective during this time of economic turmoil, career stress and job loss.  I believe a lot of misery poker is happening in these key areas. Check it out and see if you play misery poker. It will help your cultural knowledge as well, turns out it is a common term on college campuses.  (Who knew? I’m behind on these things, just happy I can navigate my iPod and iTunes)

http://online.wsj.com/article/SB124511445043317379.html

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Maybe it will and maybe it won’t. Let’s consider why organizations eliminated or reduced 401(k) matching contributions.

A poor economic climate reduced revenues, which led to a reduction in expenses. To your company the 401(k) match is an expense. As companies learn to run leaner it will be difficult to bring back an expense. Until employers are competing for employees again, I do not believe this will be an area of focus for most organizations.

I truly believe that companies will have all intended to bring back the 401(k) match. In reality, my prediction is many will bring it back when the economy has full recovered, but it will be smaller than before. While the match may seem small, how your company deals with employee retirement plans has a huge impact on your overall financial plan.

Here is how one Fortune 50 company has evolved it’s employee retirement options over the last decade. Imagine that 10 years ago your employer had a defined benefit pension plan when you joined. You knew then it was a great retirement benefit. Then they switched to a cash balance plan with a full 6% match on the 401(k). You are disappointed, but the full 6% match is one of the best out there, so you are still feeling pretty good. Tough times this year and the company has gone to a variable match up to 4%, dependent on company performance. Bad year, you get 0%. The challenge a number of people within 15 years of retirement face is that the pension they thought they would have is gone and if you knew that 10 years ago you might have saved differently.

You could be in a place where retirement savings need to be ramped up to hit your goals. Action Item: Sit and figure out how the changes in your employer sponsored retirement plans impact your financial plan and retirement goals. Make savings adjustments now so you get there faster.

New rule moving forward – Save more and expect less from your company.

Advisory Services offered through Axiom Advisors, LLC. A registered Investment Advisor Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer member FINRA/SIPC Axiom Advisors, LLC and Cambridge Investment Research, Inc. are not affiliated

Your 401k match is gone. Now What?
 
Did you receive a company wide email lately that went something like this:
 
In these tough economic we are looking to remain as efficient and lean an organization as possible, without elimination of additional positions. The company’s 401(k) matching contribution will be suspended until business improves…
 
As an employee what are you going to say? Of course you’ll be thankful to have your job vs. 401(k)match.
 
It is no secret companies are cutting expenses drastically to stay open and keep employees. The 401(k) match is a big target. The wave of reductions and eliminations in matching contributions started as a domino effect. Small companies it has happened more quickly. Once one large company took a swipe at the matching contribution, it was easier for other’s to follow. Shareholders like the message that everyone in the company is making a sacrifice in order to save talented employees and reduce expenses.
 
While this may seem like a minor change, it should be addressed as part of your financial plan. Questions to ask yourself:
  • Do you need your 401(k) to be your automatic savings mechanism? (Are you a disciplined saver or would you spend it?)
  • If your putting less than $6,000 into your 401(k) is it your best option?
  • What is your tax benefit? Do you need the income tax savings?
  • How close are you to reaching retirement/financial independence?
 First, if you are not a disciplined saver keep the 401(k) so you keep up the automatic saving. To slowly increasing your savings put a reminder on your calendar to increase your contribution 1% on your birthday. (Stop reading now if you are not a good saver.)
 
If you are putting away less than $6,000 and don’t see this amount increasing much, then a regular IRA may be a better option for several reasons.
  • More investment options. Most 401(k) programs have a set number of funds to which you are limited. An IRA significantly expands your pool of available investments and mutual funds. This provides better access to great money managers, potentially giving you a significant advantage over your 401(k).
  • IRA contributors have 15 1/2 months to make a contribution for the calendar year. For example in 2009, you can make contributions to an IRA from January 1, 2009 – April 15, 2010.
  • You will have the same income tax benefit in your IRA as your 401(k) if you contribute less than $6,000, as your contribution is not taxable income. (Your withdrawals will be taxable.)
Let’s not forget about the Roth IRA. If you are not a fan of taxes and believe that when you retire either your tax bracket will be higher and/or in general taxes will be higher this may be another option. The Roth IRA is paid with after-tax dollars today and all withdrawals are tax free, as you will not be taxed on the growth of the account upon withdrawal.
 
First check if you qualify for a Roth IRA account in 2009.
 
Married combined modified adjusted gross income (MAGI) must be below $166,000. This phases out between $166,000 and $176,000. $176,000 or more and you are ineligible.
 
Individual MAGI must be below $105,000. This phases out between $105,000 and $120,000. More than $120,000 is ineligible.
 
If your eligible for the Roth IRA you have a few options.
  • Save in your 401(k) or IRA to receive a tax benefit today and fully fund a Roth IRA account for $5,000 (50+ $6,000) for tax free withdrawals later. Win today and in the future with taxes.
  • If you only save $5,000 or less you can decide to save taxes today via your 401(k) or IRA, or pay the taxes today and have not tax worries when it comes time for withdrawing in retirement.
 
This is a lot to think about. You must take the time to understanding how your 401(k) match being gone can impact your savings mechanisms for retirement and your overall financial plan. One small email from the big boss can change a lot.
 
Advisory Services offered through Axiom Advisors, LLC. A registered Investment Advisor Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer member FINRA/SIPC Axiom Advisors, LLC and Cambridge Investment Research, Inc. are not affiliated
 

It is hard to attend any function whether a school play or cocktail party without running into someone who has lost their job or worried about losing their job. Reducing financial and emotional stress will assist your family in getting through the situation.

Financial Preparation

  • Assess spending
  • Develop monthly cash flow and budget for a potential layoff situation.
  • Increase emergency reserves
  • Determine where to rollover your 401(k)

Professional Preparation

Gather your data

  • Ensure you have examples of your major accomplishments.
  • Have the numbers behind your accomplishments for resume, such as years of growth, revenue and growth percentages.
  • Understand your company and unemployment benefits.

Arm yourself for the search

  • Start your resume now!
  • Contact a resume writer or use online service (www.resumeedge.com)
  • Take advantage of every outplacement service you are offered.
  • Line up references.
  • Network, network, network
  • Call former managers; let them know you are looking.
  • Find your cheerleaders!

Networking 101

  • Get comfortable speaking about your job situation. Being able to easily discuss your situation and briefly tell someone what you are looking for will be a key to success.
  • Be as positive as possible in all social situations so contacts will want to help you.
  • Utilize networking tools such as Linked.com In to keep track of contacts.
  • Print business cards for job search (Available free at vistaprint.com, you just pay shipping )

New job – Financial Recovery & Success

  • Maximize 401(k) contribution to boost savings and reduce taxes.
  • Establish/re-establish emergency fund
  • Utilize new budget and cost-cutting skills to determine sustainable lifestyle expense.
  • New savings can be invested.

Advisory Services offered through Axiom Advisors, LLC. A registered Investment Advisor Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer member FINRA/SIPC Axiom Advisors, LLC and Cambridge Investment Research, Inc. are not affiliated.