When you leave a job, the vested benefits in your retirement plans are an enticing source of money. It may be difficult to resist the urge to take the money as cash, particularly if retirement is many years away. But generally you will have to pay federal income taxes, state income taxes (if applicable) and a 10% penalty if you are under age 55. This can cut into your investment significantly. If your state income tax is 7.5%, for example, someone in the 25% federal tax bracket would loose 42.5% of the amount he or she took.
Retirement Articles
When you leave an employer, you are likely to have several options. You may
- Stay invested in your previous employer’s plan if your balance meets plan’s minimum
- Invest your assets in the new employer’s plan
Jun 23
A Big Idea
One way to insure that your retirement savings last as long as you do, is to consider an immediate annuity that will give you monthly payments for life.* This is a strategy for a portion of your retirement assets. Perhaps taking in a portion of your 401(K) and use an immediate annuity to provide your monthly income need for life. Invest the other portion of your 401(K) to provide growth and income to hedge inflation or provide for any lump sum needs (like a vacation or new car).
Getting a second opinion can help you to confirm that your investments are on track. It can also help you reduce risk and improve your return before it’s too late. A second opinion can determine whether or not your investment portfolio is designed as efficiently as it can be to achieve your goals. Read more…
Nov 11
The 403b Advantage
The 403(b) was established in 1958 by the federal government to encourage employees in certain tax-exempt organizations to establish retirement savings plans. The name 403(b) refers to the relevant section in the Internal Revenue Code.
Social security payments become available to some taxpayers at age 62. Tempted to take those benefits right away? Before jumping in with both feet, discuss the timing with your financial professional.
It’s never too early to start saving. And, its never too late either. Even relatively small savings can grow significantIy over time.
For example, $100 a month in savings at 10% accumulates to almost $76,000 in 20 years. Over 40 years, that same $100 balloons to $632,000.
Starting January 1, Roth IRAs will become a great estate planning tool. Previously, conversion from a regular IRA or 401(k) was simply prohibited for taxpayers with incomes in excess of $100,000. Under new legislation passed by Congress, everyone can convert a regular IRA to a Roth IRA.
In order to best prepare for the financial component of retirement, financial planner Ann Wolfson of Ann Wolfson Associates asks her clients to “actively imagine the possibilities of retirement.”
Wolfson asks clients to view their working years as years where time was sacrificed for work as opposed to retirement years where she asks clients to see time as theirs entirely. “In retirement, time is yours. Late meetings, missed events, and short vacations are things of the past. Imagine yourself with all the time you did not have control over during your working years. That’s what we’re talking about. What do we want to optimize your finances and investments for? Your time.”
Most people think of retirement as something to deal with later. But what happens when you won’t be going to work every day? Although you may be saving money now, your spending habits are likely based on your paycheck.