The ‘safest’ places to put your money are in low-risk investments and savings vehicles that provide guaranteed growth. These low-risk options include fixed annuities, CDs, Treasury securities, corporate bonds, savings accounts, and money market accounts.
You usually get the highest interest rates with fixed-type annuities of this bunch. There are other fixed-type annuities that can give higher growth potential than guaranteed-rate annuities, if that is something that appeals to you.
Retirement can be an uncertain stage in life. Markets go up and down, inflation rises and falls, and no one knows how long their retirement might last. You can explore options to grow your retirement savings with guaranteed interest earnings and then turn those funds into predictable income streams for retirement.
In this article, we will look at some of the more popular low-risk places to put your retirement money – and what each of those options can involve.
Have you heard that there are over 560 ways to claim Social Security? Some experts peg it at 567 ways to take Social Security, to be specific. With so many options, how can you be sure that you have chosen the right Social Security claiming strategy for your situation?
To be clear, those are just numbers. Paul Simon knew 50 ways to leave your lover. Most sources cite somewhere between 567 ways, nine ways (for a single person), and 81 ways (for a couple).
However many ways there really are, and even the Social Security Administration doesn’t seem to offer a straightforward answer, the important thing is that you claim in the most productive way for you and your spouse if you are married.
Here are a few things to keep in mind as you explore different options for when and how you will collect Social Security. These factors can help you make the most of your benefits, whether claiming early or delaying past your age of full benefit eligibility to let your benefit grow more.
As a small business owner or an entrepreneur, you are used to taking the lead. But there is one frontier you may still need to master… the future of your retirement. That is a matter of doing what you can to ensure all your hard work leads to your ideal retirement lifestyle.
While a 401(k) plan is the dominant retirement bedrock for employed Americans, small business owners are in a different boat. You are your own employer.
So whether you have zero or 100 employees, you must make the choice to act toward building a strong financial future for yourself. Depending on the workplace benefits of your organization, you may also impact those aiding you in your entrepreneurial dream.
And Social Security benefits can help, but only to a point. A motivating factor for building up retirement savings is the fact that, as an entrepreneur, you bring home a certain level of income. Portfolio holdings, personal assets, and savings most likely will play into your needs as a high-income household, as Social Security can only go so far.
Not only that, chances are you make more than the income limit placed by Social Security. For 2024, the maximum amount of taxable earnings is $168,600, up from $160,200 in 2023.
And what is another focal point for small business owners? Over-relying on their business as their retirement safety net. But time and again, historical data has shown this to be true: It’s risky to put all of your eggs – namely, your retirement and financial comfort – into one basket. Read More
Surviving spouses have a lot to deal with when their significant other passes away. There is much emotional grief. Many financial and life issues arise, requiring their attention. All of this can be even more burdensome in times when economic uncertainty is strong.
For many people in retirement, this situation applies now. The cost of living is going up. Healthcare costs are often an ever-growing area of spending for many retirees, as their need for healthcare usually increases in later years. What’s more, surviving spouses are often left in a harder situation, as their expenses may not go down proportionately with their incomes.
Here we will look at some of the issues that surviving spouses can expect to face after their spouse is gone.
The news for the Social Security cost-of-living adjustment (COLA) for 2023 is out. There will be a significant COLA for recipients in 2023, and it will be the largest boost in four decades. This is good news for retirees and others receiving Social Security benefits, as it means that their benefits will increase next year to keep up with the rising cost of living.
The COLA for 2023 will be a historic 8.7%, according to the Social Security Administration. This will be the largest COLA since the 11.2% boost in benefits that took place in 1982. To put things in perspective, last year Social Security had a 5.9% increase in benefit payments.
Keep reading to learn more about how the COLA is calculated and what it means for you, especially in this period of inflation.
For many people approaching retirement or starting a new job, a common question arises: “What happens to your 401(k) when you leave a job?” After years of diligently contributing to your retirement savings, it’s natural to feel unsure about the best way to manage those funds. You have several options, each with pros and cons depending on your circumstances and financial goals.
In this guide, we’ll walk you through each choice, helping you understand the implications so you can make a decision that secures your financial future.
Options for Managing Your 401(k) When Leaving a Job
As you navigate career changes, one of the biggest questions is what happens to your 401(k) when you leave a job. You’ve been diligently saving for retirement, watching that account balance grow. Now what?
Well, you’ve got four main options to consider. You can leave your plan with your previous employer, roll it over into an individual retirement account (IRA), transfer it to your new employer’s plan, or take the cash.
Leave Your 401(k) with Your Old Employer
When you leave a job, it’s easy to leave your 401(k) where it is. This takes no effort and seems appealing if your plan has grown. But, there are some trade-offs to consider.
You’ll likely have limited investment options compared to other choices like an IRA. This can make it harder to diversify your portfolio and tailor it to your risk tolerance and goals. 401(k) plans often have higher fees than IRAs, potentially reducing your overall savings over time.
Before You Decide
Carefully evaluate your old plan’s performance and fees. Ensure your investments align with your current risk tolerance and retirement goals. If you’re unsure, discuss possible changes with the plan sponsor or a financial advisor. Remember, convenience isn’t the only factor in making the best choice for your financial future.
Roll Your 401(k) into Your New Employer’s Plan
If you’ve landed a new job, you might consider rolling your old 401(k) into your new employer’s retirement plan. This could give you access to employer-matching contributions, helping your money grow faster for retirement.
However, this convenience comes with trade-offs. Your new plan might offer fewer investment choices than an IRA. This could limit your ability to diversify and personalize your portfolio. Remember, employer matching usually applies only to new contributions, not the rollover amount.
Loan and withdrawal policies also vary. Some plans won’t let you borrow or withdraw money while employed. If you might need access before retirement, consider this carefully.
Evaluate Your Options
Before you decide, review your new plan’s investment choices, fees, and rules about loans and withdrawals. Compare this information to your old 401(k) and an IRA to make the best choice for your long-term financial goals. Don’t rush into a decision. Take your time to understand all your options before choosing what’s right for you.
Think Twice Before Cashing Out Your 401(k)
Cashing out your 401(k) when you leave a job might seem tempting, but it’s rarely a good idea. While you get immediate access to your money, the downsides can seriously hurt your financial future.
The Tax Bite
First, you’ll face income taxes on the entire amount. This can bump you into a higher tax bracket, leaving you with less than you expected. If you’re younger than 59 ½, you’ll also owe an early withdrawal penalty, shrinking your payout even further.
Lost Opportunity
Beyond taxes, cashing out means missing out on years of potential investment growth. This can reduce your retirement savings, making it harder to afford your lifestyle later. The money you take now could have grown much larger over time.
A Last Resort
Cashing out your 401(k) should only be considered in extreme emergencies. Before deciding, explore all other options and talk to a financial advisor. They can help you understand the consequences and find choices that better support your retirement goals. Remember, your future self will be grateful for your wise financial choices today.
Try These Additional Strategies for Your Old 401(k)
Besides the four main options, there are a few more things to consider when managing your 401(k) after leaving a job.
Streamline Your Savings with an IRA Rollover
If you have multiple 401(k)s from past employers, you can make your financial life easier by combining them into a single IRA. This makes tracking and managing your retirement savings much easier. It can also give you access to a wider range of investments and potentially lower fees than some 401(k) plans.
Consider a Roth IRA Conversion
If you have pre-tax contributions in your 401(k), converting some or all of them to a Roth IRA could be beneficial. While you’ll pay taxes on the conversion amount, future withdrawals in retirement will be tax-free. This can be a smart move if you expect to be in a higher tax bracket later in life.
Take Advantage of the NUA Rule
If you’ve invested in your employer’s stock through your 401(k), look into the Net Unrealized Appreciation (NUA) rule. This rule could help you save on taxes when selling company stock. Discuss this with your financial advisor to see if it applies to you.
Remember, managing your 401(k) is a personal decision. Research your options, consider your financial goals and risk tolerance, and seek guidance from a financial advisor. By exploring all available options, you can secure your financial future in retirement.
Make the Best Decision for Your Retirement
As you’ve seen, the question of “What happens to your 401k when you leave a job” has multiple answers. The best choice for you depends on your situation, financial goals, and how much risk you’re comfortable with. Whether you leave your 401(k) with your old employer, roll it over to an IRA, move it to a new plan, or cash it out (though we don’t recommend this), each option has pros and cons.
Think about your long-term financial well-being. Talking to a financial professional can help you make an informed choice that aligns with your retirement goals.
Take the Next Step Toward Retirement Security
Your 401(k) is a valuable asset. Take control of it and secure your financial future. SafeMoney.com can help. Connect with an expert for personalized guidance. You can also call us at 877.476.9723. We’re here to help you make the best decision for your retirement.
Annuities provide tax-deferred growth and pay guaranteed income during retirement. If you own an annuity, then it’s good to know how to pay taxes on your withdrawals.
Of course, your annuity carrier will send you a statement at the end of the year showing how much you need to report as taxable income. Nevertheless, knowing what to expect can save you from an unpleasant surprise when you file your tax return. That is especially the case for non-qualified annuities, in which your funds aren’t subject to required minimum distributions. For that reason, tax hits on your non-qualified annuity withdrawals may be a little less familiar territory.
This article on annuities and taxes is a great starting point for understanding the fundamentals of how annuities are treated under different parts of tax law. In this article, we will focus on more on a breakdown of the tax rules for non-qualified annuity withdrawals.
There is one little-known rule that affects you if you own more than one non-qualified annuity, and that is called the “aggregation tax rule.” Let’s get more into that in a little bit.
Many of us consider retiring at 62 for many different reasons. Sometimes, it’s your health or maybe your spouse’s. You may have reached all your retirement savings goals and want to take advantage of the opportunity. You may just no longer enjoy working.
Whatever your reasons for considering retirement at 62, you should consider several different issues before taking any irrevocable steps. This guide will look at some of those issues and help you get to the point where you can retire at age 62 with a comfortable lifestyle. Remember, these are starting points, and it’s not a bad idea to consult with a financial professional before finalizing your plans.
In the end, the biggest problem you will face retiring at 62 is the gap between 62 and 65 when the most significant retirement benefits – like Medicare – kick in. Cover the gap and make sure you won’t run out of funds, and retirement can be fun!
Did you know that you could face a hefty 10% penalty for withdrawing money from your retirement account before you reach age 59.5? It’s true, but there’s a way to avoid this financial setback. The 72t rule is a little-known IRS provision that allows for early withdrawals without penalties, under certain conditions.
If you’re over 50 and want to explore this option, we’ll explain the 72t rule so you can make the best decision for your retirement.
Do you want to retire at age 55? Early retirement isn’t for everyone, but it can be a great fit for those wanting a change of pace. The reality is, the many financial products and services that are now available in the marketplace are allowing more people to do this.
In this article, we will go over steps to take when you are retiring at age 55. Let’s look at how much money you might need for retirement at 55, what some optimal retirement options are, what you should know about your accounts at 55, and much more. Read on for some practical tips on how to retire efficiently at 55 or in that time bracket.
Start a Conversation About Your Retirement What-Ifs
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