If you have an employer sponsored retirement plan, then you’re probably familiar with the terms “vested” or “vesting.” These terms mean that the amount that falls into that category is yours and cannot be taken away. Many employer plans have vesting rules and eventually allows the money put into that retirement account to become vested. Complete vesting usually does not happen right away, but rather is gradual as most employer plans have some form of vesting schedule. Often times you have to work a certain number of years at one business or company to become fully vested. Other times, you may become partially vested after a certain number of years of service and then fully vested a few years later if you remain at the company. Each company is different, so it’s important that you understand the vesting schedule for your employer. If you don’t know the schedule, you may want to reach out to the benefits manager or human resources where you work. When it comes to vesting, that money is yours regardless of whether you stay at the company as well. For example, if you work at a company for 20 years and were fully vested for the final 15 years of your employment, you can take that money with you when you leave. You will also become “fully vested” in a company plan if you reach age 65, as that is considered to be the “normal retirement age.” It should be noted that IRAs are not subject to vesting as they are for individuals and you can therefore receive the full value of your IRA regardless of where you work. As I mentioned earlier in this post, if you have questions about vesting, you should speak with the benefits manager at your employer or with your employer plan custodian.
No, this is not a blog post about dating games, but it is about matches–employer contribution matching, that is. In case you are unfamiliar, employer contribution matching is a retirement benefit in which a company will match contributions you make to your employer-sponsored retirement account (usually a 401(k)). Such benefits usually have certain limitations or rules for eligibility. For example, you may have to work at the company for a certain length of time before being eligible or you have to contribute a certain amount of your annual income to take advantage of it. While matching contributions are offered by many large companies, it is not as widespread as other retirement benefits–such as employer-sponsored retirement plans–and it also tends to be among the first benefits cut or rolled back when companies hit hard financial times. However, if you find yourself with such an opportunity, you should take advantage of it as it can be an efficient and easy way to build up your nest egg. After all, who wouldn’t want free money added to their retirement savings? Before diving in, take some time to read up on such retirement benefits to ensure that you are taking full advantage of it if you do decide to pursue it. Keep in mind that many of these benefits require that you contribute a certain amount to your retirement plan to be eligible for the match. Also, be sure to remind your children or grandchildren of such benefits when they go out into the working world and encourage them to contribute enough to their employer-sponsored plans to effectively use it. If you want to learn more about whether your employer offers retirement contribution matching, you should speak with the benefits manager or director at your employer.
Over the course of a career, you will probably have multiple retirement accounts. You’ll probably open a 401(k) plan with each employer along with a personal IRA. It can be easy to lose track of those accounts over a career that lasts decades, especially for early-career jobs that may not last that long. While it is suggested that you be diligent with tracking your retirement accounts after you leave a job, it’s not uncommon for accounts to be forgotten about. If you do lose track of your retirement accounts, there are tools available to try to track them down. The Department of Labor’s Employee Benefit Security Administration can provide help over the phone as well as online (they have a searchable database of abandoned plans). Depending on the state you worked in, you may also want to see if that state has an unclaimed property division with a database similar to the federal government’s. Finally–as a last resort–you may want to reach out to your past employer where you set up your forgotten plan and see if they may have information regarding the custodian of your forgotten account. If you can reach the custodian, you should be able to get an idea regarding the location of the account. As stated earlier in this post, the best way to avoid all this is to keep track of your retirement accounts from the start. If you leave a job, be sure to either rollover your employer plan money into an IRA or you find a way to not forget the plan if you decide to keep it (this is a common option if you have worked for an employer for a long period and have a substantial amount saved in your employer plan). So, do you have any forgotten retirement accounts?
We live in a highly technological world where much of what we do–from ordering food to running a business–can be done online. It’s therefore highly likely that if you have a retirement plan with your employer that you can access your plan through a website. Those websites often provide a wealth of information and ways to make changes to your plan. You can change beneficiaries or investments with a few mouse clicks and by filling out a few text boxes. While you may not spend much time on such websites, you should at least explore them when you visit and see what information is contained on them. If your retirement plan offers documents regarding your plan and investments (i.e. tax documents or filings), then it most likely has information regarding contribution deposit rates. This information is important because it tells you when exactly your employer is depositing your contributions and whether it is doing so in a timely manner. Remember, there are two types of contributions to 401(k) plans: employer contributions and employee contributions. Employer contributions must be deposited before the tax filing date following the year that the contribution is made. However, employee contributions–those taken out of your paycheck each pay period–are held to a stricter standard because they are fully vested when made. Those must be kept separate by the employer from other types of contributions and must be deposited by the 15th business day of the month following the month in which the contributions were taken out of the paycheck (i.e. August 15th for July contributions). Thus, you will want to make sure your employer is following those rules. If they are not following those rules, they not only have to make your actual contribution but also a make-up contribution each month as well. This is not intended to create distrust of your employer, but rather so that you understanding how 401(k) deposits work. Such knowledge is important as it allows you to can track when money arrives in your account as well as when things may be wrong. If you have questions about your employer retirement plan you should speak with human resources or the benefits manager at your company or contact the provider of the plan.
Required minimum distributions (RMDs) are a heavily talked about topic when it comes to retirement plans. If you have a traditional IRA or an employer plan, you’ve probably read a lot (hopefully some of that was on this blog) about RMDs and the ages in which you must start taking them. As a commonly thrown around topic, it can be easy to mistakenly associate RMDs with all IRAs. However, RMDs are not required to be taken from Roth IRAs, which is something people sometimes overlook. This means that if you are the owner of a Roth IRA, you are not subject to RMDs while you are alive and you can to choose to take–or not take–distributions. The rules are different for the beneficiaries of your Roth IRA, though. They will have to take RMDs from the inherited Roth IRA. Hopefully, though, if they have done their research and spoken with a knowledgeable financial planner, this will not come as a surprise. If you have questions regarding your retirement plans and whether they require you to take an RMD, you should speak with a certified financial planner to help understand what your options.
It can be easy to forget about saving for retirement or to avoid it altogether. For many young people just starting out in the work force, the thought of putting aside money for something that is decades away when living, most likely, on a shoestring budget, can be daunting. Older adults are not immune to procrastination when it comes to retirement either. Once expenses related to having children (i.e. college tuition, etc.) and owning a home (mortgage payments) are mixed in, the desire to save for the future can be less than appetizing when there are so many current expenses. Then how does one overcome that desire to put off retirement savings? One way is the give yourself a goal for retirement. Is there a place you want to live? Maybe a hobby you want to pursue? Or a luxury item you plan to purchase? Having such a goal can help you to maintain focus on reaching it and not on the mundane task of saving for retirement. Another way to beat retirement saving procrastination is to have a saving plan in place that is automatic. If your company offers retirement plans, consider using one of those as contributions to such are often taken automatically out of your paycheck. Another possibility it to set up an IRA with automatic contributions that are taken out of your paycheck each pay period. Such systems can allow you to save without having to think about it. Finally, speak with certified financial planner to determine what is the best way for you to save for retirement. Having a personalized retirement plan that fits your needs and desires can alleviate the stress of saving and make you feel more confident and motivated in saving for post-work life.
Are you nearing the age where you have to begin taking required minimum distributions (RMDs), but are planning on working well past that age and want to put off taking those RMDs? You can do so by taking advantage of a “still working” exception. However, it’s important that you understand a few key aspects of the exception. First off, the still working exception only applies to company plans and not to any personal IRAs or retirement plans. This means that if you are still working, you can’t delay RMDs from non-employer plans. Also, the still working exception only applies to company for which you are still working. If you have retirement monies in plans with other companies for which you don’t work, you cannot use the still working exception for those plans. You should also check to make sure your company plan has a still working exception, as not all employer plans do. If you have questions related to the still working exception and how it ties into your retirement plans, you should speak with either the plan administrator or a certified financial planner.
Are you planning on working as long as you can? Do you believe you can work well into your 70s (and possibly 80s)? If that is the case, you most likely will be able to delay taking your required minimum distributions (RMDs) that begin when you turn 70 1/2, which means your retirement savings may go further. Planning to work into beyond the age in which RMDs begin is something that should be taken into account when planning for retirement. It’s also important that you understand the rules and requirements of the retirement plans that you may have, especially if you have multiple retirement accounts. If you have questions about working well into retirement age or what constitutes “still working” in regards to retirement accounts, you will want to speak with a certified financial planner.