Some Tips on How to Tackle Your 401(k)

Very few people are lucky enough to work for one employer over the course of their lifetime, so it becomes vital to know what to do with your old 401(k) plan once you switch jobs. You don’t want those hard-earned retirement savings going to waste, after all.

There are several things you could potentially do with your 401(k). Which you choose is up to you, but below we give you information on each option, so you can make an informed decision when the time comes.

 

You Can Simply Leave It Alone

Check to see if your employer allows you to simply leave your 401(k) alone – many do. With this option you should keep in mind you won’t be allowed to contribute to it any longer, nor will your former employer contribute to it. But it’s perfectly fine to leave it where it’s at, and it will still gain interest.

The perks of taking this route are:

  • There is nothing you really need to do

 

You Can Roll It Over to Your New 401(k)

While it’s definitely fine to simply leave your old 401(k) alone, many financial advisors suggest rolling your funds over to your new employer’s 401(k). This means you take the funds from your old account and either have them automatically transferred over to your new one or manually transfer them yourself.

The perks of deciding to do this are:

  • You won’t need to keep track of more than one 401(k)
  • Most of your retirement assets will be in one place
  • Previous employers won’t need to keep tabs on your address
  • You can keep the funds invested the way you’d like and not simply the way previous employers choose

 

If You Choose to Roll Funds Over, Do it Correctly

Although choosing to have your old 401(k) funds rolled over into your new one ends up being the better option in the long term, there are some things you’ll want to keep in mind. Although it seems easy enough to tackle this, there are a few do’s and don’ts you’ll want ot familiarize yourself with first.

When rolling over your 401(k) DO:

  • Have the old funds sent directly to your new 401(k) financial institution and/or account
  • Keep the old funds for your retirement savings
  • Ensure the correct amount of funds ends up in your new account, without errors
  • Keep in touch with both financial institutions until the transfer is complete

Make sure you DON’T:

  • Have the check sent to you, because this will mean 20% of funds will be withheld for taxes
  • Withdraw the funds for personal use now, despite how tempting it may be

In the end it’s up to you whether to transfer your old 401(k) into your new one or simply leave it alone. While financial advisors recommend rolling the funds over, the most important thing is that those savings continue to be saved for retirement – NOT spent on something now because of how easy and tempting it is.

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Retirement Numbers You Need to Hear

Looking towards ten, twenty, thirty, or even forty years into the future would give you a glance at your future retirement. But what does that retirement look like? Are you planning to capitalize only on social security benefits? Haven’t started saving your nest egg yet, or have just a small amount placed away? To give you a very real look at what your retirement could look like, we’ve accumulated some very scary statistics to help prompt your planning.

 

Social Security Benefits May Be A Thing of the Past

You read that right – social security benefits may very well be a thing of the past by the time you reach retirement. According to current trends, these benefits could be exhausted by 2035. While the government can’t do away with social security entirely (yes, we know that’s what you were thinking) it would result in a steep 20 percent minimum cut. Current funds aren’t enough to live on as it is, so cutting it by a fifth would make it an even less viable retirement resource.

 

Don’t Bank on Working Longer

The average age of retirement is 62 for women and 64 for men. Many people – the youngest generations, in particular – state they simply plan to work longer so their retirement won’t need to last as long. Unfortunately, a whole slew of issues could pop up to stop those plans in their tracks. Poor health, mandatory retirement, injury, etc. could make those plans impossible.

 

Seniors Spend an Ungodly Amount on Health Care

A recent report showed that the average senior will spend about $280K on health care costs throughout their retirement… and that’s IF they are in halfway decent health. Those with preexisting health issues can expect to spend as much as twice that. By the way, this does take into consideration health insurance like Medicaid or Medicare.

 

If You Haven’t Saved Anything, You’re Far from Alone

Roughly a third of all Americans have no retirement savings whatsoever. Hard times have made people essentially live paycheck to paycheck, and when they aren’t they’re paying back high school loan costs, car loans, mortgages.

The exact amount of savings varies slightly based on generation, with millennials having saved the least for retirement (39% with no savings) and baby boomers having saved slightly more (32% with no savings).

 

If You’re A Woman, The Scenario Looks Even Worse

Recent studies and statistics have shown a pretty large gap in retirement savings between men and women. In general, woman have saved 26% less than their male colleagues for retirement. Why? It’s assumed this has a lot to do with some women choosing to be homemakers or full-time mothers during their children’s earliest years. Therefore, women end up with less total working years thus equating to lower overall retirement savings.

Even scarier? Those meager retirement savings need to last women longer. On average, women live ten more years than men do.

 

Conclusion

Yes, these facts are frightening – but everyone needs to hear them. They should prove that beginning to save for retirement now – as early as possible – is vital to your financial stability in the post-working years.

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How One Man Retired the Right Way

 

Orville Rogers was a pilot whose company forced him to retire at the age of sixty. After his mandatory retirement, however, he continued flying planes for himself until nearly eighty years old. Now he’s over 100 years old and in his fourth decade of retirement. But that’s not the craziest part.

Many years after the average person would need their retirement funds to last them, Rogers still lives pretty comfortably. Not only has he successfully managed to keep his finances afloat all these years, but he’s actually thriving.

Today we take a look at Orville Rogers’ keys to success. Take notes, because this man has successfully accomplished what most people would only dream of in his retirement years.

 

Secret #1: Save As Early as Possible

Before 401(k)s were even a thing, Rogers began saving for his retirement. That was back in 1952, and as a man born in 1917 (yes, really!) his life expectancy was only between 48 and 49 years. So why open up a savings account when your life expectancy was basically only long enough to work until you died? Well, why not?

“The key to success in any investment is periodic investments over a long time,” says Orville Rogers. His own savings account is now worth about $5 million – and he didn’t pinch a lot of pennies to get there. With accumulating interest, even a very small nest egg has the potential to become a substantial sum when left to grow for a few decades.

 

Secret #2: Start Exercising – Now!

Rogers swears that exercising is one of the keys to his good health at the age of 101, and science backs him up. There’s no point in saving for retirement when you don’t take care of your body, after all.

But what if it’s too late? It’s never too late. Rogers himself didn’t even begin exercising until he turned an incredible half a century and when he did, he began running. His own estimate is that he’s ran around 43K miles since then, and he still gets up and moving today at 101.

 

Secret #3: Don’t Let Life Get You Down

As a centenarian, Rogers has suffered a lot of loss in his life. He’s outlived the vast majority of his friends and loved ones. This includes his wife, who passed away in 2008, and one of his sons, who died while serving in the Vietnam War.

Instead of allowing this to get him down, Rogers continues to look on the bright side of things. He has moved into a retirement community and begun to make new friends. He also travels the world with his surviving family members, which includes three children, fourteen grandchildren, and eleven great-grandchildren.

What is even more incredible for a man over the age of 100 is that he still makes long term plans. He recently put a deposit down on next summer’s extended family vacation. Whether age 101 or age 50, tomorrow is never promised but can always be looked forward to.

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Are Millennials in Trouble When it Comes to Retirement?

 

With two, three, or even four decades left before retirement you can retire it can be difficult to focus on financially planning for it. In fact, long term goals are always more difficult to focus on because the reward reaped from them isn’t truly within reach – yet.

For those far from retirement this isn’t the only road block, however. Younger workers neglect their retirement savings in favor of much more pressing goals. Loaded down with student debt and simultaneously striving towards a home down payment, young workers don’t have a lot of room left in their budgets to focus on retirement.

 

The Big Issue

The problem with putting nothing away for retirement in your twenties and early thirties, however, is that you lose out on years or decades of compounding interest. That’s a mistake that many millennials may not ever recover from – nor will they get the opportunity to, because it’s now or never with compounding interest.

In fact, it’s over half of all millennials who aren’t contributing to a retirement account. The exact number is just about 52%. This staggering statistic is even scarier when you think about how this could mean nearly half a generation will never be able to retire.

There is Hope

There is good news, however, and that is that time is still (for now) on your side. The longer you allow your savings to accumulate interest, the better. For an example, let’s take a look at how much money you’d have if you were to save $400 a month when it comes time to retire.

If you begin saving at age 22, $400 a month with an assumed annual 7% ROI (return on investment) would place you at $1.37 million at age 67 – the age you can begin receiving your full social security benefits.

If you begin saving at age 32, you still have an okay amount of savings at $663K, while at 42 it amounts to only $303K. If you wait until age 52 to begin saving, you only end up with $120K.

As you can see, every year and every penny really adds up – especially if you begin early on.

Doesn’t Have to be All or Nothing

But what about if you can’t save $400 a month, which amounts to roughly $100 per week? This isn’t a reasonable amount for many cash-strapped millennials, but that shouldn’t stop young workers from putting away something.

Even without interest, saving $5 a week from the age of 22 until the age of 67 will amount to $11.7K, while $10 a week during that same timeframe can guarantee $22.4K. Remember – this is without interest. With a solid few decades on interest you could double or even triple that number.

The key takeaway here is that young workers should begin saving something towards their retirement, even if that something doesn’t seem to make a big difference. Whether you can stash away $100 a week or only $5, every penny counts when presented with the opportunity to get 35 to 45 years of compounded interest.

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