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Most Americans today
are ill-prepared for retirement tomorrow. While we dream
of and look forward to an active, independent and
carefree retirement, the reality is that far too many
Americans have saved little or nothing for their “golden
years.”
The Internet is filled
with retirement calculators that will provide worksheets
to help you know how much money you are going to need
after you retire. Take some time to determine how you
are going to pay for your retirement lifestyle.
Before you set a
retirement date:
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Decide what you want your annual income to be after you
retire.
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Determine the average rate of return on your investments
before and after you retire.
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Determine the market value of all your investments.
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Obtain an estimate of your company’s pension plan.
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Obtain an estimate of your Social Security benefits.
You should already
receive an annual “Personal Earnings and Benefit
Statement” from the Social Security Administration. Be
sure to review this statement for errors that might
prevent you from receiving your full share of benefits.
One easy way to make sure that you will have some money
to enjoy retirement is to participate in your employer’s
401k program. Employers are now allowed to enroll their
workers in a 401k program and workers need to
specifically opt-out of the retirement plan. But why
would you? This is your future! The 401k is another tool
to help you diversify your investments so that you can
lessen the financial burden when you do retire.
Try to contribute all
you can to your workplace 401k program. Earnings are
tax-deferred and many employers will add money to the
plan as an extra incentive. Be sure to monitor your
account and “rebalance” at least once a year due to
market fluctuations.
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Be sure to read your employer’s 401k
Summary Plan and review:
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When are you eligible for the program?
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What are the types of available investment options?
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How often can you switch between options?
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Are early withdrawals permitted for hardship or personal
loans?
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What are the available distribution options when you
leave the company or retire?
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How much will your employer contribute to your 401k?
A few months before you retire, it might
be a good idea to sit down with a reputable financial
advisor in retirement plan distributions and tax
implications.
An expert may suggest you transfer your
retirement funds to an Individual Retirement Account
(IRA). By taking this route, you will maintain your
tax-deferred status of that sum and reduce your current
tax burden. Keep in mind that IRAs are governed by a
different set of rules than a 401k. If you’re older than
59-1/2, you can withdraw as much money as you want at
any time and still be subject to ordinary taxes on that
income. But if you retire before that time, you may be
facing penalties for early withdrawal of those funds.
This is why it is advisable to consult a professional.
You’re just about ready to set sail.
Next month, we’ll explore additional ways to make the
most of your retirement.
CONSUMER TIPS is provided as a public
service by the Missouri Independent Bankers Association
AND
Community Bank of the Ozarks
P.O. Box 43
Sunrise Beach, MO 65079
(573) 374-5245
1-800-927-4314
www.cbobanker.com
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