Something big is happening in Central FL, and it's going to send permanent ripple effects through our entire community here in Orlando. Universal Studios Orlando already did it, and now we are dealing with Walt Disney World's announcement that they are laying off 28,000 employees, with 6,700 of those being here in our local community. Let me tell you a little story, and be forewarned this is not going to be like any of my previous blog posts. I want to share the REAL story of how I became a financial advisor, and specifically a retirement specialist.
Before becoming a retirement specialist, I was a full-time Actor's Equity Union performer for Walt Disney Entertainment. That photo up top is me - as Captain Jack Sparrow circa 2008 in Adventureland at Walt Disney World's Magic Kingdom performing "Captain Jack Sparrow's Pirate Tutorial". I was a full-time Disney performer under an Actor's Equity contract from 2007-2010. It was a very fun time in my life, but like the old saying goes, "All good things must come to an end," and they did very abruptly in 2010. I was laid off, or more specifically, my contract was not renewed. It was a big blow - I was living the dream, I got to work with some AMAZING individuals, and make children's dreams come true all day both as Captain Jack and on a more full-time basis, a Jedi Master at the "Star Wars Jedi Training Academy". That was somewhat of a dark time for me. I had no "real" work experience other than retail and waiting tables, and little did I know we were still struggling with one of the biggest recessions of our time. What I did know is that I had JUST closed on my first home with a mortgage due, and needed to find the next path sooner than later. Fast forward through some fumbling and struggling, I ended up getting my first insurance license in April 2010, met a mentor shortly after, got networked with some truly top level professionals, and before I knew it I was learning how to be a financial advisor w/ an emphasis in retirement planning...and I loved it!
After all of that, here we are in 2020, TEN YEARS LATER with a successful and fully built-out independent retirement planning practice.
Here's the point I want to make - If you or someone who you care for is a part of those Disney and Universal layoffs here in Central FL, I have been in those shoes. Hang in there - things are going to be alright. I also know some specific things that need to happen as you transition out of those companies and into the next phase of your life. One thing I want to especially highlight is your options for your old retirement plan such as the company 401(k). Here are a few options available with your old 401(k) for those who are having to deal with the Disney and Universal layoffs locally here in the Orlando area.
What Are My 401(k) Options if I've Been Laid Off at Disney or Universal?
1.Leave The Account Alone
When employment is terminated, usually there in an option to leave the old retirement plan right where it is, with some exceptions called "force-outs" if the account is relatively small. It will stay invested exactly the same as before, and generally there will be very little change. You will still have the selection of investments offered by the 401(k) plan, but those are your only choices.
Also, just because your money is in the old plan doesn't mean you're paying any less in fees. You absolutely will still be responsible for any fees associated with that plan. A TD Ameritrade survey found that just 27% of investors knew how much they paid in 401(k) fees, and 37% didn't realize they paid fees at all. Unfortunately, many never think to ask how much a 401(k) provider makes off the money you hand over to invest. Your provider takes a fee every month, and over time these fees can impact your returns. Some 95% of 401(k) plan participants pay fees1. Many alternatives exist, which offer more choice and less fees/expenses.
Earlier this year, the CARES Act was enacted in response to COVID-19. This set of measures gives an unusual amount of flexibility and exceptions to the normal tax rules in the year 2020. One of these exceptions was the waiver of the 10% early withdrawal penalty associated with pulling funds out of retirement account prior to reaching Age 591/2.
Traditionally, there has been a 10 percent penalty for withdrawing funds from a 401(k) or IRA account before reaching the age of 59 ½. But through changes passed in the CARES Act, this penalty will be waived for individuals who choose to tap into their retirement savings accounts and withdraw up to $100,000 to cover financial burdens caused by the COVID-19 pandemic2. This is a big decision and has long-term implications. I would highly HIGHLY encourage reaching out to a professional for advice to discuss the impact of this decision. there is a reason retirement funds are earmarked for retirement.
3. Roll The Account Over Into An IRA
This option lets you move your entire balance from the company plan and transfer it into an IRA (Individual Retirement Arrangement) Account that you own and control individually. Many tax rules are the same as the 401(k) in that you will be penalized for early withdrawals pre-age 591/2, keeping in mind above that there's an exception this year.
Here's the thing with moving it into an IRA though - you can actually have direct control over the account, you are not subject to the fees associated w/ a 401(k), AND you're even able to work with a professional of your choosing to help you invest and manage your new IRA, if desired. I've personally helped clients take control of over $10,000,000 in old IRA plan money and put those dollars into accounts and investments chosen together by us. There are fees associated w/ using an advisor, so please be aware of that. We provide a fee schedule up front to our prospective clients.
It's All Going to Work Out - I've Been Exactly Where You Are!
I know this is a difficult time for many. Job loss, on top of the already stressful year that is 2020, and the list goes on. You are not alone though, and there are many people out there who want you to be ok and want you to succeed. It's all going to work out. If you are reading this and you're in this boat, I have been right there with you. Keep your head held high, and know that better times are right around the corner. Lean on your family, friends, and your network and keep moving forward!