Retirement Savings Account

Putting away money towards a retirement savings account should become a priority from the moment a young adult lands that first job. While many workers wait just a few years prior to age 65 before thinking about saving for retirement, smart consumers will begin seeking sources of funding well before the golden years. Decades ago, retirees could count on Social Security income and a passbook account to help make ends meet once they got a gold watch. But the twenty-first century senior faces more formidable challenges. Retirees often envision a life of fun in the sun, but because older adults are living longer more productive lives, long-term healthcare is a major concern and that can cost plenty! 24-hour assisted living, even in a moderately priced facility, can run several thousand dollars per month. Housing is also a major expense for those who must rely on continued personal care or reside independently with occasional assistance. With insurance, nursing care can be affordable; but as health needs fluctuate, so will the cost.

After working for an average of twenty-five to thirty years, older adults don't want to have to get a job at a fast food restaurant or bag groceries to pay the bills. Workers who fail to plan for later years will be forced to rely on meager Social Security benefits, which usually don't provide am adequate income by today's standard of living. With proper planning, they can stay off the welfare rolls and remain financially independent for many years. But, the key is to begin early enough in one's working career to accumulate enough cash over a long period of time, hopefully with interest! If younger employees don't open a retirement savings account early enough in their career, chances are that there won't be enough time to accumulate enough money to live comfortably. Youth is not only a time to ponder retirement, but also to seek after God. "Remember now thy Creator in the days of thy youth, while the evil days come not, nor the years draw nigh, when thou shalt say, I have no pleasure in them; While the sun, or the light, or the moon, or the stars, be not darkened, nor the clouds return after the rain" (Ecclesiastes 12:1-2).

An employer-provided retirement savings account is a good place to start planning for a better post-employment lifestyle. Most employers offer programs which match payroll deductions for future retirement. An employer-matching fund ensures that workers can leave the job with a nice nest egg to last a second lifetime. Young workers may also want to invest in a tax-deferred Individual Retirement Account (IRA), which shelters as much as $2,000 to $5,000 in deposits each year. IRA depositors pay no taxes until the age of 59 1/2 when monies can be withdrawn without penalty. Employees also invest part of their salaries in a tax-deferred 401(k) with employer-matched funds for greater savings. The beauty in investing in a 401k is that accumulated monies can be rolled over into another employer-provided retirement savings account when workers leave one job and go to another; and depositors don't pay tax until withdrawal. Other investment vehicles, such as mutual funds, stocks and bonds, money markets, or Certificates of Deposits that pay high-yield long-term returns can also be part of an older adult's retirement savings account.

The most important first step in saving is to consult with a financial planner who can help suggest the easiest, fastest and safest way to accumulate funds. Bank buyouts, housing market slumps, and a lagging economy can make selecting the right vehicle for savings a serious issue. A regular passbook retirement savings account is simply not going to yield enough funds for seniors seeking a life of luxury. IRA and 401(k) accounts are relatively pain-free when it comes to saving enough money for a rainy day or a sunny retirement. Because plans are company-sponsored with employee payroll deductions matched with employer funds, monies accumulate easily. Corporations invest employee deposits into mutual funds and other investment instruments to earn added returns, which are shared by employers. An accounting of annual earnings keeps workers apprised of dividends earned. Annual contribution limits max out around $15,000; but that's a nice piece of change for workers who begin saving when they are in their mid 20s and 30s. Employer-provided retirement accounts also provide a hedge against inflation. In the event of chronic illness or disability, workers can tap into a 401(k) retirement savings account as a source of emergency cash. Like IRAs, there is a 10% penalty for early withdrawal, but paying the penalty may be less expensive than borrowing emergency funds at a higher interest rate through prime, sub-prime or hard money lenders. Other variations on the basic 401(k) are 401(k) rollovers to IRAs or Roth IRAs, and the Safe Harbor 401(k).

An astute financial planner can suggest ways to begin and make regular deposits into a retirement savings account that will enable employees to realize a carefree lifestyle. Company plan administrators may also assist workers in choosing the right investment vehicle for the highest yields. Besides employer-matched money, workers can also purchase stocks, bonds and mutual funds independent of the workplace and hold onto these instruments for even greater returns. The disadvantage to other savings options, however, is that they are not tax-deferred and the more the dividends, the greater the tax burden. Older adults may also consider investing in precious metals or other high-yield commodities, such as silver and platinum, or investigating reverse mortgages, loans based on home equity. Any long-term investment may be a little risky in light of uncertainties in the global financial markets, but a stock analyst or investment banker may give the best tips on how to win in a sluggish economy.

Lump Sum Retirement

The temptation to take a lump sum retirement payout has to be huge for some people who are looking at having a check for more than they have ever seen in their entire lives. A trip around the world or at least to Bermuda, purchasing that business always dreamt of or buying a plane and learning how to fly could all be possibilities. For the retiree that has saved and contributed to a pension plan or 401K, the world could certainly appear to be his oyster with such a grand amount at his disposal. But certainly, having spent all a working life putting money aside for the rest of one's life, few people would spend a lump sum retirement in such a poor manner. But...temptation can never really be erased; rather its danger is in how we respond that becomes the flypaper that traps.

It is true that many companies offer a lump sum retirement payout because it is actually a money savings proposition for the company. It saves them administrative costs over a number of years and eliminating monthly payments to the retiree actually generates accounting figures to fatten the company's overall income. So the question really does become whether to take one big payout or perhaps buy an annuity and have monthly checks arriving for the rest of one's life. But the time to make this very important decision is not on the day one is packing up all the personal items in the office and wiping off the "Happy Retirement" chocolate cake from one's chin. If a note from the benefits department comes down saying, "Please come up and see us before you leave today-we have things to talk about," there may be trouble a brewing. Being asked on that day by a benefits administrator who really wants to get out of the office by five, "Okay, how do you want your retirement money set up?" is NOT a good thing.

If a person does receive a lump sum retirement payout, put the money immediately into a money market account. To save money, this should be done through a brokerage firm that offers true discounts. At that time, a person can then truly sit back and take the time needed to make the big decision. This might be a good time to search out a good financial advisor. This person can give sage advice and recommend perhaps several different avenues for income advancement and safety. The Bible has terrific instruction for husbands on how to truly love one's wife with sacrificial love. The example is from Jesus' own life when the scripture reads, "Husbands, love your wives even as Christ also loved the church and gave himself for it." (Ephesians 5:25) More information on finding a financial advisor is below.

There may be a very seamless way for a person who is given a lump sum retirement payout to invest the money in a new business that perhaps has always been a dream. Those holding a 401k, 403b, Keogh, SEP or other retirement plan can roll their money into a self directed IRA allowing them to invest in real estate, mortgage notes, and other property that can be the gateway to a new entrepreneurial project always dreamt of in years past. This opportunity allows taxes to be deferred until a future date and can open doors to buy rental properties, commercial properties and even foreign real estate opportunities. This option gives rise to the retiree perhaps becoming self-sufficient through the creation of a personal business. One should seek out those who are familiar with this kind of plan and glean the needed advice to be successful.

One should be very careful, however, about those who might try to scam a person who has just received a lump sum retirement payout. For many people who haven't saved enough for retirement, they may be prone to falling for the get rich quick schemes of scammers who can squander or even steal hard earned retirement money. Baby Boomers are beginning to retire by the hoards and have almost two trillion dollars in pension fund assets. This amount of money poses a gigantic temptation for very cunning people to try and take advantage of those who may be fearful and skittish about their futures. The most important advice is for those who are about to trust their lump sum retirement payout to someone who claims to be a financial advisor is to really vet that person with plenty of scrutiny. Check credentials, check the Better Business Bureau and call the associations with whom the broker or money manager is associated.

Of course, maybe the reader is only thirty, changing jobs and wanting to know what to do with the lump sum retirement program payout received on the last day of work. Without much hesitation, the person should take the payout and roll it into the new employer's 401k plan. Try to work it out so there is no personal handling of the money at any time. That's sometimes called trustee to trustee transfer and then there is no question about having to pay any taxes at this time. No matter where a person is in life, holding a large check in one's hand can be a heady experience. This stage of life is time for level-headed thinking and prudent action. Remember that the beautiful red sports car that might be so tempting to buy will one day be just a car, and that world cruise just pictures in an album.





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