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401(k) Rollovers, Emergency Funds & Fed Rate Cuts Explained | Future of Finance Q&A Ep. 21
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In this special Q&A episode of The Future of Finance, host Marissa Wood tackles real questions from real listeners—covering job transitions, forgotten 401(k)s, emergency funds, retirement benchmarks, and how the 2025 Fed rate cut could affect your wallet.
Whether you’re changing jobs, building your first emergency fund, or wondering how to adjust your investments as rates shift, this episode delivers clear, actionable advice.
✅ Got your own question? Book a free call with Marissa at https://union-financial.com and get personalized guidance—Zoom, phone, or in-person.
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Transcript
Introduction and Theme
00:00:09
Speaker
Hi everyone, welcome back to the Future of Finance podcast. I'm your host, Marissa Wood, one of the owners and investment advisors at Union Financial Services. And today we have an episode of answering listeners' top questions. We've done a couple of these in the past. I will have our previous Q&A videos in the description below for you to watch, but I think you're really going to enjoy this one today because you might be thinking of some of these questions yourself or just not even know to ask these questions, but I'm sure you'll learn a thing
Managing Old 401k Plans
00:00:42
Speaker
or two.
00:00:42
Speaker
Now, the first question we received is, i am starting a new job. What should I do with my previous 401k plan? And is there anything else I should know?
00:00:54
Speaker
That's a great question. And that's probably one of the most complicated common questions that we receive from either clients or referrals of clients, and that is the 401k rollover. How do I do it? What should I roll it into?
00:01:11
Speaker
What's the first step even? And we often call the 401ks at previous jobs the forgotten 401ks. It's super common that you work a job for a couple months or a couple years, you start accumulating some assets in your 401k plan, and then you change jobs.
00:01:31
Speaker
And what happens a lot is you leave that 401k behind. Now, I like to think of that as getting to the airport, you know, you pack your suitcase, you bring your suitcase with you, and then you just leave it in the middle of the airport and you continue on to your flight.
00:01:47
Speaker
Well, that's not good. You want to check that suitcase. You want to bring it with you. And so we always recommend that when you leave a position, you want to roll over that 401k into an individual retirement account, an IRA. There's a couple reasons for this. First of all, you're going to have more choices with an IRA. Most 401k plans have a list of mutual funds to choose from, and that's about it.
00:02:13
Speaker
With an IRA, sky's the limit. We can look at annuities, we can look at stocks, dividend paying stocks, bonds, mutual funds, ETFs, some mutual funds that track the prices of precious metals. We can really get creative with your plan when it's your IRA. And we'll also have more control over the fees that you're paying. Usually when you work at a four zero one k company, they, mostly the employer, will cover a good portion of the fees inside of that 401k plan.
00:02:44
Speaker
Once you're no longer working there, you start absorbing most, if not all, of those fees inside the plan. And so we want to have some control over the fees that you truly are paying so your money can grow as much as possible.
00:02:58
Speaker
And the last reason too is just for organization's sake. We don't want to have foura one k's all over the place with all different employers, all different companies where you're not even sure who's managing it. Are you keeping your address up to date? Are you keeping your beneficiaries up to date?
00:03:16
Speaker
Is someone reviewing it with you on an annual basis? If any of those are, I don't know or no, they really need to be rolled over and consolidated into an IRA.
00:03:28
Speaker
And if you're one of the people that might have a couple all over the place and you're not even sure the balances or how they're doing, that's okay. Don't feel embarrassed. We can have a conversation about it and we can help you take ownership of that money and roll it over into an IRA. We do all the paperwork and all of the intricate processes for you.
00:03:49
Speaker
It's really seamless. We recently had a client that... She's an existing client, and she came to me a few months ago and said, i just found a 401k with $50,000 in it.
00:04:01
Speaker
Can we move this into my IRA? And I said, yes, of course. I mean, what a happy surprise that was. Usually it's $1,000 $2,000 there, but a forgotten for a one k That's great. Let's make that a remembered retirement
Reviewing Life Insurance and Job Benefits
00:04:18
Speaker
account. Now, the other really important things to do when you leave a job besides rolling over that 401k is looking at your life insurance policy.
00:04:27
Speaker
Usually at an employer, you have some type of life insurance plan as one of your benefits. Maybe it's one times your salary, two times your salary. But what sometimes happens is when you leave that job, you also leave that life insurance plan.
00:04:47
Speaker
And so if it's important to your family to still have life insurance in place, which it really should be important to your family if you have a mortgage or children, then let's put a life insurance policy in place that you are the owner of, not a company.
00:05:02
Speaker
And we can explore options with you based on the death benefit that makes sense And if you want a 20-year term, if you want permanent coverage, we can price shop that for you and you could see what it would truly cost you on a monthly basis.
00:05:17
Speaker
We are independent advisors, so we can shop it with many different life insurance carriers to get you the best policy for the best price. And the last thing that we want to do is we want to review the new benefits. If you are starting a new job and a new company, let's review your company benefits with you.
00:05:35
Speaker
Let's make sure you know what your options are with a new retirement plan, if they're going to provide you any kind of match, and what your health insurance options are life insurance options are.
00:05:47
Speaker
That is a service that we provide existing clients. Even though we're not going to be managing that new 401k plan for you, we can help you choose the options that make the most sense, whether it be, you know, I want to invest in in a target date fund or a couple mutual funds, what percent I want to contribute.
00:06:07
Speaker
We can help break that down for our existing clients just as a complimentary service for your overall financial
Emergency Fund Management
00:06:14
Speaker
picture. So if you're leaving a job or starting a new one, let's have that conversation.
00:06:20
Speaker
All right. Question number two, how much should I keep in an emergency fund? Now, the golden standard when it comes to emergency fund is about six months worth of expenses. Now, if your household expenses are $5,000 a month, we want to make sure that we can cover that for six months. So we need to have that emergency fund with $30,000 in it, readily accessible, so that in the event we lose our job, become disabled, have a family emergency,
00:06:54
Speaker
We know our bills are going to be paid. We can pay that mortgage. We can pay our rent. It's very important. And I do usually recommend that an emergency fund be held in something that's going to be bearing some type of interest, a money market account, a high yield savings account.
00:07:11
Speaker
At the time of filming this, you should be able to be earning around 4% in your money market or high yield savings. And so get those idle assets working for you, at least earning a little bit of interest with about six months of of expenses.
00:07:28
Speaker
And then we want to keep one to two months of expenses in our checking account, where we know our bills are going to be auto-paid right from that checking account and keep the other six months in savings.
00:07:41
Speaker
Now, anything over and above that, we really want to have it invested. You don't wanna have $100,000 sitting in savings, earning little to no interest, even even a max of 4%.
00:07:55
Speaker
It could earn so much more if it was truly invested. You know, because you build wealth by investing, not by saving. Saving is the first step, but we don't wanna have all of our assets sitting in a savings account or even worse, a checking account.
00:08:13
Speaker
anything over and above that emergency fund, six month of expenses, let's invest it. We can have a conversation about the breakdown on where it should be invested, maybe some in a brokerage account, maybe some in retirement vehicles.
00:08:29
Speaker
We want to have diversification across different timeframes, money for immediately, money for now, money for the next five years, money for 10 years plus. We can talk about what amount makes sense for each of those buckets.
Maxing Out 401k Contributions
00:08:45
Speaker
Now, the next question is, should I max out my four ah one k And this is a question we receive very often. And what they mean by maxing out is contributing the maximum allowed contribution limit into your 401k plan every year.
00:09:04
Speaker
Now, by doing so, you will receive the maximum tax deduction. So that is a good thing. But it doesn't always make sense to max out that 401k plan.
00:09:17
Speaker
Couple reasons behind that. Number one, Everything in that 401k in the future is going to be taxable to you upon withdrawal. And it's going to be taxable at an unknown future tax rate. But the other reason is that you don't want to have all of your money classified as retirement because you cannot get to it without penalty before the age of 59 and a half years old.
00:09:44
Speaker
And so let's say you're saving for a house and you're going to need some money for a down payment within the next five to 10 years. Well, you don't want all of your money in a four ah one k We want to have some in a non-retirement account that you can get to sooner than retirement date.
00:10:02
Speaker
Recently, I had a client that he was maxing out his 401k. He was contributing 15% of his paycheck to his four ah one k That's great. He's in his mid-30s.
00:10:15
Speaker
And we had a conversation about, does it really make sense to continue to do that? Well, the first thing I asked him was, what is the company matching?
00:10:27
Speaker
We found out the company would match up to 5%. And so we had a conversation about maybe reducing your contributions from 15 down to So that we're taking advantage of the match.
00:10:42
Speaker
You know, we're automatically doubling our money by taking advantage of that match. But then with that other 10% that we can afford to be saving, we know we can afford it because he's been doing it for the last couple years. With that other 10% that came out to be about $1,000 month, Let's look at different avenues on where to invest that.
00:11:04
Speaker
Maybe we want to put a portion of that $1,000 into a brokerage account that he can have immediate access to prior to retirement. Maybe we want to put a portion into a Roth IRA that's going to be tax-free in the future.
00:11:20
Speaker
Or maybe we wanna look at a cash value life insurance plan to protect some of his assets and once again, have that available tax-free in the future. We can really get creative with money that he was already saving on a monthly basis, but now we're just diversifying it, giving him sooner access, and hopefully making some of it
Retirement Savings by Age 30
00:11:43
Speaker
tax-free.
00:11:43
Speaker
All right. Now, the next question is, i am 30 years old. How much should I have saved for retirement at this point? Now, of course, everyone's situation is different, but the standard on a guideline on how much you should have saved is by age 30, you should have one year's salary invested.
00:12:10
Speaker
and so if you're 30 years old making $85,000 year, you should have about all of your investment accounts. I know this might be staggering and you might be thinking, uh-oh, I am nowhere near that.
00:12:28
Speaker
But it's okay. It's never too late to get started unless you're 65 and retired, then it's too late. But if you're in your 30s, let's just get started. Because if that number is way off from what you truly have, we need to start doubling down and get disciplined.
00:12:47
Speaker
because by age 45, you should have two years of salary saved. Now, I will say that the first 100,000 the hardest. Getting to that first 100,000 is going to take the longest amount of time and feel like the most work because once you have six figures saved and invested, it really does start snowballing.
00:13:10
Speaker
I mean, think about it this way. If you have $10,000 in an investment account and you're earning 10% interest, All right, you're earning $1,000 that year.
00:13:21
Speaker
Not bad, but it's not going to really, really build that account. It's going to take some time. Now, if you had that same investment account, but it $100,000 and you earned that same 10%, now $10,000 in interest that year.
00:13:36
Speaker
now you made ten thousand dollars in interest that year And that's why once you get to that nice amount of money, it just starts compounding and snowballing. And you don't even have to do much and you're making a lot of money and interest behind the scenes.
00:13:53
Speaker
And so I would encourage you, get to that $100,000 mark at the youngest age possible. And then really put it on cruise control. Just continue doing your monthly contributions, but it is working for you while you sleep.
Impact of Fed Rate Cuts
00:14:08
Speaker
All right, now our last question, and this is pretty relevant at the time of filming this. It is October of 2025. And this question is, how will the recent Fed rate cut affect me?
00:14:22
Speaker
You might have been reading about this online. it seems like all anyone's been talking about this last even two years is, will the feds cut rates? Will the feds cut rates? And time and time again, they would meet and no rate cut happened. Well, in September, it finally happened. They cut rates by a quarter of a percent and they are anticipating another two rate cuts before the year end.
00:14:48
Speaker
That's not guaranteed, but that's what the experts are predicting. So how will that affect the regular American person? Well, your CD, money market, and high yield saving accounts rates will start coming down slowly.
00:15:07
Speaker
Fixed index annuity rates will also start coming down slowly. So if you've been sitting on the sidelines waiting to get involved and invested into an annuity or a CD or finally taking advantage of a high yield savings account, I would say take action now.
00:15:27
Speaker
For instance, with the annuity, you might be able to lock in some really high rates now that you can benefit from for the next three, five, even 10 years. high yield savings accounts and money markets, they're not going to be locked in.
00:15:42
Speaker
So you can invest in them now and six months from now, the rates might come down, but that's okay because at least you made a little bit of extra money for six months. So I would say do not sit on the sidelines when it comes to those investment vehicles. Take action now because they probably aren't going to look this good again for many years.
00:16:04
Speaker
this is This is pretty much at their peak in my personal opinion. Another impact is that borrowing money will become cheaper. So if you're thinking about buying a car or taking out a personal loan,
00:16:17
Speaker
Maybe hold off a couple weeks to a couple months if you can, and you can really lock in a lower borrowing interest rate. When it comes to mortgages, they don't work as immediately as car loans and personal loans when it comes to fed rate cuts.
00:16:36
Speaker
They will start coming down a little at a time, but it's not going to have as immediate of an impact as it would with car loans and personal loans. And when it comes to buying a property, that's such a large investment, such a big decision that if you're eyeing your dream home, don't wait for rates to come down. Go ahead, take that leap of faith, make that purchase, and then you always can refinance in the future. And in that same topic, I would say start cleaning up your credit now for when the rates do come down and you want to be borrowing money.
00:17:14
Speaker
You want to be able to lock in the lowest interest rate possible when borrowing money. And so... The way you do that without even involving the Fed is by having a high credit score. You will get the best borrowing interest rate. So start cleaning up that credit. Maybe look into credit repair services or just look and see what your credit score even is right now and if there's some room for improvement. And then the last way that it could impact you is the stock market could go up.
00:17:44
Speaker
It's impossible to predict exactly what's going to happen in the market over the next year, but it very well could skyrocket. And if that happens, you want to be able to make money in the market and benefit from that.
00:17:57
Speaker
And so once again, if you're sitting on the sidelines and you've been thinking about starting to invest for your future and getting in the stock market, now's the perfect time.
00:18:08
Speaker
Let's get an account open. Let's open that brokerage account, fill it with some stocks, bonds, mutual funds, ETFs. And then when the market does grow, your assets will also grow.
00:18:20
Speaker
You'll be benefiting from it. But overall, you know, there's going to be a couple different impacts. I always say when rates are high, that's when you're going to be making the most in annuities, savings accounts, CDs.
00:18:36
Speaker
And when rates are low, that's when it's the most beneficial to be borrowing money. We always want to have some leverage there. We want to be making more in our assets than we are spending to borrow money. Overall, there's always some benefits to be had, whether you're borrowing or whether you're investing. Stay consistent with it and get involved in investing. Because remember, by 30 years old, you should have one times your salary. So let's get started now.
Consulting Financial Advisors
00:19:05
Speaker
All right, so that was pretty much just a few questions that we received over the last few weeks. Of course, there is many other questions that we can answer, and many of them are going to be on an individual basis.
00:19:18
Speaker
And so if you have a specific question about your finances, whether you just left a job, you're starting a new one, you want to start investing, or you have a couple investment accounts that you think,
00:19:31
Speaker
maybe you can improve upon with the help of an advisor, feel free to go to our website, union-financial.com. You can click schedule a meeting. It'll take you right to my personal calendar, or you can book a Zoom in-person meeting or a phone call.
00:19:49
Speaker
Always complimentary, and we can talk about your personal situation and get your questions answered. I'm Marissa Wood with Union Financial Services.
Conclusion and Disclaimer
00:19:58
Speaker
We look forward to seeing you on the next episode of the Future of Finance podcast and helping you live a better financial future.
00:20:08
Speaker
Investment advisory services offered through Brookstone Capital Management, LLC, a registered investment advisor. BCM and Union Financial Services are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. The opinions expressed by Marissa Wood and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. Investments involve risk and otherwise stated are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. This program is designed to provide accurate and authoritative information with regard to subject covered. Indexed or fixed index annuities are not designed for short-term investments and may be subject to caps, restrictions, fees, and surrender charge as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the insurer. Please refer to our firm brochure, the ADV 2A, item 4, for additional information. Any comments regarding safe and secure products and guaranteed income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company and are not offered by Brookstone.