Don’t be in the back-seat when it comes to your retirement: Part 1
Know the myths and facts surrounding retirement.
If you were asked what an ideal retirement looked like, chances are your response would include descriptive words such as: stress-free, relaxing, comfortable, etc. For many, retirement is something that we know is important however it gets placed on the “back burner” when it comes to our priorities. To complicate things, consumers often have incorrect information regarding retirement and this can contribute to the lack of planning.
If you want to sit in the drivers-seat of your retirement, be aware of the following myths:
- Myth: Social Security benefits will provide enough income for my retirement.
Fact: Social Security will only pay benefits that are approximately 40 percent of what you earned before retirement.
- Myth: Most American’s know how much they will need for their retirement.
Fact: Per the U.S. Department of Labor, less than half of Americans have calculated how much they need to save for retirement.
(Tip: A comfortable retirement is a combination of: Social Security, employer-based retirement plans, personal savings and investments.)
- Myth: I can roll-over my retirement benefits from one employer to the next.
Fact: This depends upon the employer and the plan. Some plans require that you are vested before you leave your job and if you leave beforehand, you may lose your retirement benefits. Other plans may require that you take your retirement benefits in a lump sum when you leave, or prohibit you from taking them until you retire. The rules for your employer sponsored retirement plan are detailed in the Summary Plan Description (SPD).
(Tip: If you do change jobs and are required to receive your retirement benefits in a lump sum, to avoid additional income taxes and potential penalty taxes, it is recommended that you reinvest your benefits into another qualified retirement plan or an Individual Retirement Account (IRA), and have the check sent directly to the plan you choose. The new plan will provide the required forms for this transfer and often have representatives available should you need assistance. To learn more about this process visit the United States Department of Labor.)
- Myth: Mutual Funds are guaranteed by the Federal Deposit Insurance Corporation (FDIC).
Fact: Per the U.S. Securities and Exchange Commission, Mutual Funds are not guaranteed or insured by the FDIC, even if the fund is offered through a bank.
The second article in this series will identify additional retirement myths to be aware of. For more information on investing, including investment products, calculators and worksheets visit investor.gov. For tips on how to find a reputable financial advisor visit the Consumer Financial Protection Bureau.
Michigan State University Extension has released a new toolkit for homeowners who are experiencing or have previously experienced foreclosure. This toolkit will equip these individuals and families with tools to help them recover their financial stability, in the case that a recovery of their home is not possible. The toolkit is available to download free at MIMoneyHealth.org.
For a variety of financial resources, including how to assess your financial health visit Michigan State University Extension. In addition, Michigan State University Extension offers money management and homeownership classes. For more information about classes offered in your area visit MI Money Health.