Retirement Planning Part 1

Retirement Planning
Deciding how much money you need for retirement is a highly personal calculation. It depends on any number of factors, from your current lifestyle to your general state of health to whether you plan to retire early. That’s why we’ve designed this set of five interactive worksheets to let you tailor your estimate to your own circumstances. Be forewarned: These worksheets will take some time to complete. But when you’re done, you’ll have a dependable estimate of

  • How much annual retirement income you’ll need.
  • How much you can count on from your pension and Social Security benefits.
  • What your total nest egg must be, and
  • How much you need to put away this year to begin to reach that goal.

Seven Savings Strategies
Need help getting started saving for retirement or other goals?

  • Don’t splurge with your tax refund. About 40 million American taxpayers receive a federal tax refund, with the average around $2,400. The temptation is everywhere — witness the instant loans being advertised by tax preparers — to grab the money now and spend it. Instead, take it as an opportunity to use it wisely — to save it or pay down debt.
  • Take full advantage of your employer’s retirement contributions. Many of us work for companies that offer a free match to our contributions — in most cases about 50 cents to every dollar we put in, up to a certain percentage. This is free money. That’s worth repeating. It’s free money. It’s a good idea to take it.
  • Start small and stay steady. The most important word there is “start” — as young as you can, with whatever you can. Simply starting a savings plan enables time to work for you rather than against you. Many of our customers’ success stories began their first chapters just by turning spending into saving — setting aside the coins that used to buy that daily jelly doughnut.
  • Pay yourself first. Few among us have the sustained determination to month-in, month-out choose the important over the urgent. That’s why the best plans start with “taking money off the table” — that is, automatically depositing funds into our savings accounts right from our paychecks, before we can touch it.
  • Create separate pots of savings for upcoming life-stages. For all the people who jeopardize their retirement by focusing only on the next big financial challenge, there are more who put too much emphasis on retirement at the expense of other needs that require just as much preparation, if not more. Don’t forget to set aside savings for other big expenses, like buying a home, paying for college, unexpected emergencies, your daughter’s wedding, etc.
  • Find the right education plan, for those with children. There are lots of different savings options and college savings plans differ, depending on which state you live in. None of them are “one size fits all.” You need to determine what makes sense for you and your situation. Which brings us to the seventh, final, and in our view most important point…
  • …Work with someone you know and trust. Successful savings plans can’t be mass-produced, and they can’t be put on autopilot. Financial issues are complicated and risky — It pays to work with a professional who knows what they’re talking about, and who also knows you and will stay with you over the long haul and through the ups and downs of your household.

What is a Rollover?
A rollover occurs when you move your money from a qualified retirement plan, such as an employer-sponsored 401(k) plan, into a Traditional IRA or another qualified retirement plan. Typically, you are eligible for a rollover only under the following circumstances:

  • Retiring. You’ve been saving for years and years…and now it’s finally time to enjoy your hard-earned savings. Many people find that consolidating their retirement assets into a Traditional IRA makes it easier to manage and monitor their money.
  • Changing jobs. When people change jobs, they often have money in a qualified retirement plan sponsored by their employer. A rollover lets them move this money into a Traditional IRA of their own choosing.
  • Between jobs or switching careers. Perhaps you’re taking advantage of opportunities to explore a new profession. Or maybe you’re simply spending time away from the work force to raise a family or go back to school. Whatever your situation, you may wish to simplify your finances by transferring the money from a previous employer’s plan to a Traditional IRA.

Why should you consider a Rollover?

  • Compare your options
  • Expand your investment selection. The wide range of choices for a Traditional IRA, for example, provides investment flexibility to diversify your financial approach.
  • Adapt to new circumstances. A rollover is one way to adjust your investment mix to reflect changes in your investment goals, time frame, or performance expectations. And there is no limit to the amount of money that may be rolled into a qualified retirement account.
  • Stay open to future possibilities. With a rollover, you may retain the option of moving your money into a future employer’s qualified retirement plan.
  • One provider for multiple financial solutions. A rollover lets you consolidate your savings with your agent, so you can continue working with someone who’s already familiar with your needs.
  • Consolidate and manage your retirement assets. The more accounts you have, the more difficult it is to keep track of your money. Consolidating your assets into a single traditional IRA can make it simpler to track balances and monitor your withdrawals.

Potential Tax Benefits

  • No current income tax. With a rollover, you don’t have to immediately pay federal income tax on the amount you’ve rolled over.
  • No tax on earnings. Your money can potentially grow tax-deferred until you begin to make withdrawals from your account. No tax withholding. You’ll avoid the 20% federal withholding for federal income taxes, so the entire balance of your account continues to work for you.*
  • No penalty tax. Your rollover isn’t considered a taxable distribution, so it doesn’t trigger the 10% penalty tax for early withdrawals made prior to age 59 1/2.