Tag: 401(k)

The saying that youth is wasted on the young may be especially true when it comes to saving for retirement. Too many people wait way too long to start thinking about how much they will need to finance their retirement.

In a way, that’s not surprising. Retirement seems so far away when you’re in your 20s and 30s, and it’s easy to think you’ll have plenty of time to worry about saving later.

When it comes to retirement—and to passing on whatever wealth you’ve accumulated to a spouse or the next generation—you may think you’ve thought of everything. However, despite your careful planning it could be that Uncle Sam will be handing you a hefty tax bill while you’re living—or your beneficiaries one when you die.

Even people who have been great about saving for retirement don’t always realize the tax implications of what they’ve done. They may have created a significant tax problem for themselves, and they could be leaving behind a tax time bomb for their beneficiaries.

You can never plan too soon for your later years in life, I tell all my clients, because our later years tend to sneak up on us sooner than we think.

In my ongoing six-part series on financial planning, I am covering almost everything a couple needs to know on the subject, but were too uniformed to ask.

This second part is no exception: What you should expect your financial advisor and/or his/her team of advisors. And, as I cautioned you in my first installment, it is important that after your advisor(s) asks you questions that you continue to ask questions for clarity and a complete understanding of how to plan for your "golden years."

Americans worry a lot about retirement.

Will their savings hold out? Will Social Security still be around? Will healthcare costs gouge a great hole in their finances?

What many of them may not be aware of, though, is that if handled correctly their life insurance policies could play a role in making retirement a little more secure.

One of the big tricks for having a successful retirement is to make sure you have enough cash flow to pay your bills and still be able to enjoy life. Few people have pensions any more. Social Security only helps so much.

Retirement can open up a whole new way of life for Americans ready to bring their working years to an end, but at least one thing doesn’t change. Uncle Sam continues to direct his gave toward you.

The IRS still keeps a watchful eye on your income, including whatever amount you’re pulling from the IRA or 401(k) that you spent decades building into a nice, hefty nest egg.

Is that hissing sound your 401(k) account losing precious dollars from the recent stock market swoon? Years ago, when your balance was small and fluctuated in value, it never bothered you, because even large swings represented little in actual dollars. However, your balance has grown over the years as you and perhaps your employer have made annual contributions, which have benefited from several periods of considerable stock market appreciation. Now, a 15 percent decline is real money and you are not getting any younger. In fact, for many 401(k) participants the U.S. stock market correction that started in late October 2007 has wiped out the past 18 months of profits and possibly some of their contributions.

In years of strong growth, a poor asset allocation may result in earning less than your potential. However, during market corrections or bear markets (stock market decline of over 20 percent) a poorly allocated portfolio can sometimes represent huge losses like those experienced during the last correction that started in March 2000.