Tag Archives: retirement plan

Employer Retirement Plans in Phoenix, Ariz.

Do You Have Insurance on Retirement Plan?

You have insurance on your home, your car, your health.

How about your retirement plan?

“People have homeowners insurance to protect against fires and floods,” notes independent financial planner Stephen Ng, founder and president of Stephen Ng Financial Group. “They buy insurance to replace their car if it gets wrecked and they buy health insurance to protect themselves from medical costs.

“But for many people, their biggest material asset is their retirement portfolio. When I look at a new client’s portfolio and ask, ‘Where’s your insurance?’ they look at me like I’m crazy!”

Insure your retirement fund by taking steps to safeguard at least a portion of it, Ng says. As you get closer to retiring, the amount you safeguard will be what you need to rely on for your retirement income.

“Your retirement income should be derived from guaranteed sources, such as Social Security benefits and your pension plan,” says Ng, a licensed 3(21) fiduciary advisor, certified to advise companies about their 401(k) and other retirement plans. “It’s the amount you need to pay the bills and do the other things you hope to do in retirement, so your retirement income needs to be a guaranteed source of income.

“Then you look for your ‘play checks.’ That’s the money you don’t absolutely have to have, so you can still try to grow it, and take risks with it, in the market.”

Ng offers these tips for insuring your retirement plan:

• Invest a portion of your portfolio in annuities.
Annuities are long-term investment options through insurance companies that guarantee you payments over a certain rate of time, which could be the rest of your life or the life of your spouse or other survivor. Note: The guarantee is subject to the financial strength and claims-paying ability of the issuing insurance company.

• If you leave your job, quickly roll your employer-sponsored 401(k) into an IRA.
While 401(k)s are a great tool for saving, particularly if your employer is providing matching funds, if you were to die, the taxes your survivors would pay on your 401(k) would be much higher than on an IRA. That’s because they would have to inherit the money in a lump sum – that could easily take 35 percent right off the top. The lump-sum rule does not apply to IRAs. While your spouse would have the option to inherit your 401(k) as an IRA, your children would not. So, take advantage of your employer-sponsored 401(k), but if you leave the company, convert to an IRA or ROTH IRA. You can also begin transferring your 401(k) funds to an IRA at age 59½.

• Consider converting your IRA to a ROTH IRA.
For protection from future income tax rate increases, you should consider slowly converting your tax-deferred IRA funds into a ROTH IRA. Yes, you’ll have to pay the taxes now on the money you transfer, but that will guarantee that withdrawals in your retirement are not taxed – even as the money grows. If you plan to leave at least part of your IRA to your children, they’ll benefit from a fund that continues to grow tax-free.

Reaching Requirement Goals

Reaching Your Retirement Goal Requires Commitment

When it comes to investing, retirement planning, or tracking our markets, we rely on the media to get our information. It may be from the newspaper, television, magazines, the Internet, or our cell phones. Either way, we learn a lot about what to do and what not to do about investing from the media. We must remember that the information can work for us or against us depending on how we apply it. Now, how does this relate to reaching our financial goals? Knowing some of the key elements that help reach financial goals is critical. The value of time, the commitment to save, and understanding what you invest in are a few of these critical elements.

Understanding these elements will help the everyday person read through some of the information from the media and apply it to their situation. For example, many investors may spend countless hours researching a product or investment but not consider the value of time in an investment. The future value of an investment, compounding at a given return, is powerful, but factoring in the concept of time can make a huge difference in one’s nest egg. In other words, if one were to start investing the same dollar amount every year at the age of 21 rather than 35, the value of that investment may differ by the hundreds. Most of the media information we see does not account for the value of time for investing — only the investment and what trend is in place NOW!

Saving for the future is dependent on so many factors. Many of us forget that understanding our behaviors is important as it applies to our finances. The commitment of saving is the first step and is usually the hardest. For some of us, taking the actions to execute a commitment is challenging and requires others to help. A great example of this is when employers automatically sign up their employees to participate in their retirement plan. Studies have shown that when the employers take this approach they had much higher participation even when employees were given the options to opt-out. (Source: “Behavioral Economics” by Sendhil Mullainathan, MIT & NBER and Richard Thaler, University of Chicago and NBER).  Planning and committing to saving can be a complex decision, many of us avoid making this decision and committing to it.

Once we have committed to saving, we must consider our investment strategies. It varies among several factors. These factors are risk tolerance, time horizon, and financial needs for retirement. For this reason, I highly suggest using a financial professional to provide recommendations for investments that are appropriate. In addition, it is imperative to consistently review your accounts and objectives. Although we may have a plan in place, our world, economy and financial situations change, so we must be educated and prepared to make adjustments when needed.