Dollars & Sense

Emphasis on retirement, 401K variations, & financial planning for current economic times

Chances are you know someone who has personally been affected by the current economic climate. Either the loss of a job and /or a 30%-40% decline in their retirement account. That someone may be you, how have you been handling the stress? Studies show that men have a tougher time handling the pressure mainly because they tend to tie their identity to their position and ability to care for themselves and family. Although we still have some tough times ahead, I encourage you not to let this moment in time to discourage you from investing in your future.

If you have recently left a job, whether by choice or not, please don’t leave your 401k behind. When you leave your job for any reason, you usually have four choices regarding the retirement savings you hold in connection to that job:

Do nothing: Many employers will allow you to maintain your account after you leave, depending on your plan’s rules. Minimum distributions must begin after you reach age 70 ½. You’ll continue to enjoy compounding tax-deferred earnings and receive regular financial account statements and performance reports. Although you will no longer be allowed to contribute to the plan, you will still have control over how your money is invested among the plan’s investment options. You can continue to manage the investments within the account without any change or interruption. You cannot make additional contributions, however.

Transfer to a new plan: If you’re changing jobs and your new employer offers a retirement plan, you may be able to move your assets into the new plan.

Withdraw your assets as cash: You can choose to have your money paid to you in one lump sum, or in installments of a fixed amount or over a set number of years, depending on your plan’s provisions. However, you may have to pay taxes on a cash distribution and, if you’re under age 55 at the time when you leave your job; you may also have to pay a 10% penalty for early withdrawal.

Roll over your assets to a Rollover IRA: A Rollover IRA is a type of retirement account into which you can transfer assets from an employer-sponsored retirement plan after you leave your job. Banks, insurance companies, and financial services firms offer Rollover IRAs. They come in two varieties:

If you have a traditional IRA you can you can convert to a Roth IRA. You will pay taxes on the money now but then your money will grow tax free until you are ready to start withdrawing at 591/2. Would you rather pay taxes on a little bit of money or a large sum of money?

If you are self employed then consider a Solo 401k. Solo 401(k)s are designed to give sole proprietors (and their spouses) and some types of business partnerships the double contribution benefit of traditional 401(k)s. Solo 401(k)s offer higher annual contribution limits (relative to the participant’s income) than other small company plans, such as SEP and SIMPLE IRAs, and also permit after-tax Roth-style contributions.

If you are still not satisfied with the return you are receiving on your investments or just want more control over what you can invest in then consider a self directed IRA. Are you aware that you can use self-directed IRA’s to invest in real estate? This can be a great option for people who want an alternative to the stock market. You can invest in real estate but not be a landlord. If you’d like more information on this alternative check out

www.theentrustgroup.com or www.trustetc.com

If retirement is light years away, there are other costs to consider…student loans, mortgage, insurance (health, disability, life, etc.), credit cards, car loans, and whatever else you have financed. Now is not the time to take on additional debt. How have you adjusted your financial plan to reflect your current lifestyle? Are you planning for success or failure? Write your plan down, review it often and make changes as necessary.

Golda is a single mom of two children. She works with Primerica Financial Services and enjoys helping people get their financial houses in order. She loves saving money and investing in real estate. If you have questions for this mogul mom email her at: [email protected]