Holistic Advisory
Comprehensive advice tailored to your unique needs, ensuring every aspect of your financial life is optimized.
You & Your Goals
Your aspirations are our priority, and we craft personalized strategies to help you achieve them.
Constant Support
Always by your side, we offer unwavering guidance and assistance, ensuring you have the support you need whenever you need it
Starting a new job comes with a long list of tasks, from learning new systems to adjusting to company culture. Amid all the excitement, one key responsibility that often gets overlooked is managing your retirement savings plan, especially your 401(k). Many employees inadvertently reduce their 401(k) contributions when switching jobs, unknowingly losing out on future financial gains. Here’s how to ensure that doesn’t happen to you. The Unintentional Decline in Retirement Savings Switching jobs can be an incredible boost to your career and financial growth, but research from an article in The Wall Street Journal, citing Vanguard, reveals a concerning trend. Most job switchers either forget to sign up for their new employer’s 401(k) plan or get automatically enrolled at a lower contribution rate than in their previous job. This small oversight can snowball into a significant financial loss over time. According to Vanguard’s findings, individuals who switch jobs and lower their contribution rate may lose as much as $300,000 in retirement wealth over a four-decade career. It’s easy to see how this happens. With so many new tasks to focus on, setting up your 401(k) may not feel urgent, especially if you’re automatically enrolled at a default contribution rate. However, that default rate—often 3%—is usually not enough to secure the retirement savings you need. Avoid the Saw-Tooth Pattern of Savings The Wall Street Journal article highlights how many people fall into what Vanguard calls a “saw-tooth pattern” of savings. When you’re settled in one job, your contributions steadily increase, but when you switch jobs, they often drop. Even with a salary increase, many employees unintentionally reduce their contribution rate, which can take years to rebuild. Financial advisors recommend saving between 12% and 15% of your income for retirement, but many employees never reach that ideal range after switching jobs. This drop in savings often happens because new employers automatically enroll workers at lower default contribution rates. Even if your new job offers a raise, a lower 401(k) contribution means you’re missing out on the long-term benefits of compounding interest. For example, a 25-year-old earning $60,000 who increases their contributions from 3% to 10% annually could end up with nearly $800,000 in retirement. In contrast, someone who switches jobs frequently and sticks to the default contribution rate may have less than $500,000 by age 65. How to Take Control of Your 401(k) Contributions To avoid falling into the saw-tooth pattern, take an active role in managing your retirement savings. Here are a few steps to help you stay on track: Review Your New Employer’s 401(k) Plan: Don’t assume you’re automatically enrolled at the same rate as your previous job. Check the default contribution and adjust it to match or exceed what you were contributing before. Maximize Employer Matching: Many employers offer matching contributions, but only if you meet a certain contribution threshold. Make sure you contribute enough to take full advantage of this benefit. Increase Contributions Over Time: Aim to gradually increase your contribution rate, especially when you receive raises. If you were contributing 10% at your last job, don’t settle for 3% at your new one. Aim to reach the recommended 12% to 15% contribution rate as quickly as possible. Avoid Early Withdrawals: If possible, resist the temptation to dip into your old 401(k) when switching jobs. Early withdrawals can set your retirement savings back significantly. The Benefits of Setting Up Your 401(k) with Intention By intentionally managing your 401(k) contributions, you can avoid the pitfalls that many job switchers face. A consistent and proactive approach to retirement savings not only ensures that your money works harder for you but also gives you peace of mind knowing that you’re securing your financial future. Don’t let a job change derail your retirement goals. Take a few extra minutes to review and optimize your 401(k) setup, and you could save hundreds of thousands of dollars in the long run. Follow and Like Lotus Asset Management on Social Media Stay informed about the latest tips on managing your retirement savings and financial planning strategies by following Lotus Asset Management on our social media channels!
The Perks of Credit Cards and Points Using credit cards offers more than just convenience—it's a way to earn points that can be redeemed for rewards like flights, gift cards, or cash back. These points feel like “free money” for cardholders who use their cards regularly. However, the value of these accumulated points is not static, and inflation has started to chip away at their worth. As prices rise, the purchasing power of your points declines. It's crucial to be strategic about how and when you redeem them to maximize their value. How Inflation Impacts Your Points Although inflation has been trending down in recent months, prices remain elevated compared to just a few years ago. This means that while one point may still technically be worth about 1 cent, the purchasing power of that cent has diminished. According to personal finance experts, a cent has lost roughly 20% of its value since 2019. In the same way, credit card points have lost value as well, making it harder to redeem them for the same amount of goods or services as in the past. In 2023, cardholders accumulated an impressive $34 billion worth of points, a 70% increase from 2019, largely due to increased spending during inflationary periods. But despite accumulating more points, cardholders are finding that they need more points to redeem for rewards like flights or hotel stays because of inflation-driven price increases. This “earn more, spend more” cycle can be a frustrating reality for those trying to maximize their points’ value. Be Strategic with Your Points Given that credit card points are losing value over time, it's important to approach spending them thoughtfully. If you’ve been stockpiling points, now may be the time to start spending them. Experts recommend the “earn and burn” approach—use your points relatively soon after you accumulate them to avoid further devaluation. Here are a few strategies to help make the most of your points: Redeem Early: Don’t let your points sit too long. As inflation erodes their value, holding onto points indefinitely can be a losing game. Shop Around: When redeeming points, especially for travel, take the time to compare options. Some airlines or frequent flyer programs might offer better deals than others. Dynamic pricing means that the number of points needed for a flight can vary depending on timing and demand. Consider Transferring Points: Many credit card issuers allow you to transfer points to airline or hotel loyalty programs. Sometimes, transferring points can provide better value than redeeming them directly through your credit card's rewards portal. Points and Dynamic Pricing Another factor to consider is that some airlines have shifted from a flat-fee model to dynamic pricing for points-based redemptions. This means that the points required for a flight may fluctuate based on demand, timing, and other factors—making it harder to predict how far your points will go. For example, a flight you might have booked for 20,000 points last year could cost you 30,000 points today due to higher demand or increased costs for airlines. With the ongoing changes in the way points are valued, staying informed and flexible is key to getting the most out of your credit card rewards. Maximize Your Points Before They Lose More Value Inflation’s impact on your credit card points means you need to be proactive about how you use them. Waiting too long could cost you, as each year those points buy less than they did the year before. By spending wisely and strategically, you can still take advantage of the rewards you've earned without letting inflation eat away at their value. Follow and like our social media accounts to stay updated on financial tips and strategies for managing your wealth in today's economy.
