Avoid penalties during rollovers. If you roll money over from a 401k to another retirement account this year, make sure you avoid fees and penalties. The best way to do this is to have your former employer transfer the money directly to an IRA or your new employer's retirement plan. If you have the check made out to you, 20% of your account balance will be withheld for income tax. Also, you could be charged taxes and penalties if you don't meet the 60-day deadline for depositing the money in a new account and replacing the withheld 20%.
Rebalance. Volatility in the stock market this year may have caused your current holdings to shift significantly from their target allocations. Rebalance your portfolio by using new contributions to purchase investments in underweighted asset classes, or sell some investments that performed well, until you reach your target allocation.
Take advantage of advice. You may be offered investment advice through your 401k or IRA plan. A new Labor Department rule will allow retirement plan administrators to provide investment advice to account holders in 2012. To prevent conflicts of interest, the rule requires that the advice be given by a financial professional whose compensation does not vary based on the investments selected or a computer model that an independent expert certifies as unbiased.
Remember required distributions. Traditional 401k and IRA account holders who are over age 70½ must take required minimum distributions from their retirement accounts each year. Retirees who fail to withdraw the correct amount must pay a 50% tax penalty on the amount that should have been withdrawn.
Reconsider your retirement age. Retirement at age 65 isn't for everyone. "For those who go through the income and expense review and find that they can't afford to retire comfortably, working a few extra years can really help," says Daniel Goldie, the president of Dan Goldie Financial Services in Menlo Park, Calif., and co-author of "The Investment Answer: Learn to Manage Your Money & Protect Your Financial Future." "This allows them to save more, gives more time for their investments to grow and reduces the number of years they'll need retirement income. It can also allow them to delay taking Social Security, which increases their payment amount."
Save part of windfalls for retirement. Every once in a while, we receive a windfall of extra cash, such as a bonus, tax refund, gift or inheritance. Consider putting a portion of these lump sums aside for retirement.
Talk to people who are retired. Find out what they wish they had done differently in the final years of their career and the early part of retirement. "Resolve to meet up with a few former co-workers who've been retired for at least a year in order to learn from their real-life experiences," says John Nelson, a life-planning coach and co-author of "What Color Is Your Parachute? For Retirement." "What you learn may change the timing of your own retirement and uncover things you'll want to explore -- both before and after you retire."
VIDEO ON MSN MONEY
The 12 essentials of retirement?
1.) stock up on beans and other food items
2.) extra stack of firewood
3.) patch the leaky roof and replace the broken window
4.) a little exercise to keep the doctor away
5.) properly dispose of all the junk mail with the credit card applications
6.) keep out of debt and don't let the bankers con you into a loan.
7.) look over the list of political candidates and pick out the least worst of the bunch .. and don't forget to vote.
8.) remember your age and don't get to thinking your 21 again.
9.) if your married, hug your sweet heart extra tight .. and if your not married kind, a little peace and quiet has its advantages too.
10.) remember gold, money and about everything else is what some other fool thinks it is worth.
11.) keep up on the news because most of the time it is funnier that the comics if the keystone cops of politics have anything to do with it.
12.) and most important .. Every day is a good day, some are just better than others .. as long as your name isn't in the obituary column.
Joe, what you don't understand is that the government killed defined benefit plans. You comment that companies took them away, but that is simply not true. The government has it stacked so that when a company has money that they could put into the defined benefit plan, because the economy is doing well and they are making plenty of money, they are not allowed to contribute. When the economy is in the toilet, as it has been for the last few years, and they have little or nothing in the way of profits, they are required to borrow tons of money to fund their defined benefit plan. Then they have to pay interest payments on the borrowed money which leaves them even worse off than they were before the government forced them to contribute.
The rules surrounding defined benefit pension plans have become so screwed up by congress, that most companies cannot afford it anymore. Specifically the big companies. Smaller companies can do it, but those are going to be the sole proprietorships or the small partnerships with a few owners and very few employees to have to fund for. Doctor's offices, lawyer's offices, etc... Everyone else is basically going to be out of luck because of the messed up funding requirements.
To add insult to injury, the fed dropping rates so low is really reducing the lump sum payout for everyone whose plan allows for the election of a cash payment. Even worse off are the folks whose benefit is small enough that under the current rules their lump sum is so small they are forced out of the plan by the IRS regulations.
The best advice for everyone out there is what Doug said. Stay out of debt and don't spend all of your money thinking that the government will take care of you.
OUR MAIN NEW YEAR'S RESOLUTION TO SAVE MONEY IS TO EAT OUT LESS. IT'S AMAZING HOW JUST PICKING UP A PIZZA OR GOING OUT FOR A QUICK LUNCH 3 OR 4 TIMES A WEEK CAN ADD UP SO QUICKLY. DO THIS OVER A PERIOD OF A MONTH AND YOU'VE SPENT HUNDREDS OF DOLLARS.
A FEW YEARS AGO I WAS STOPPING AT McDONALDS 2-3 TIMES A DAY TO PICK UP A LARGE COFFEE TO HAVE WHILE I WAS AT MY DESK. AND USUALLY WORKED 7 DAYS A WEEK.
ONE DAY I FIGURED OUT I WAS SPENDING OVER $700.00 A YEAR JUST ON COFFEE ????????
IT SEEMS LIKE YOU JUST GET INTO THESE EVERYDAY HABITS WITHOUT MUCH THOUGHT.
SO, FOR 2012 WE'VE DECIDED TO MAKE A CONCERTED EFFORT TO CUT BACK ON OUR EATING OUT AND INVEST THE EXTRA MONEY WE WOULD HAVE SPENT IN A QUALITY, HIGH PAYING DIVIDEND STOCKS.
we've had essentially 0% interest the past 10 years. likelihood of near 0% the next 5 years. assuming you only put away 10% of your salary into the magic 401K plan, that means you stashed 10% of what you NEED for 15 years. where's the other 90% going to come from?
The 401K is very poor.Years ago companies had pensions.Employees didn't contribute.
At retirement time would get A nice pension and social security.Life was good.
Today with the 401K,the company might match ya maybe 2%.Wow thats really huge.
Even maxing out the Roth ever year,you'll have A hard time making it with social security.
Probably will need A part time job to make ends meet.Fantastic way to retire.
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