Questions To Ask When Setting Up A Retirement Plan


When Do Most People Retire

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You can retire whenever you have the financial resources to stop working, but sometimes thats not a choice. In fact, 40% of people reported being forced into retirement earlier than planned, primarily due to healthcare issues or changes at their job. That statistic comes from the Employee Benefit Research Institute .

The median retirement age is 62, according to EBRI.

Do Annuities Make Sense For Me

Annuities come in a dizzying array of flavors. Some of them can be helpful for retirees, while others can cause problems.

The type of annuity thats most likely to work in your best interest is an immediate income annuity. This is the simplest form of an annuity: It pays you monthly income for the rest of your life. You can also include a spouses lifetime, in many cases.

The primary stumbling block for immediate annuities is that you might not get your money back, and your beneficiaries might not receive anything after your death. You may be able to add death benefits to mitigate that risk. But the more complicated you make things, the less money you get out of an annuity.

Other types of annuities guarantee things like hypothetical account growth, future income, and more. But those products can cause significant problems. Ask a fee-only financial advisor before you buy an annuity for retirement.

The question to ask yourself with all annuities is whether or not you need the guarantees offered by the insurer. Those guarantees might be worth less than you think. Also, if you decide to use an annuity, its critical to buy from a highly-rated insurance company to reduce the risk of losing your money.

Is There Anything I Forgot To Ask You

Ending an interview with this question can be very revealing. Even if you think the answer is no, it can demonstrate a level of engagement with a potential financial advisor. Still, there’s a chance you missed something during your conversation, and this is a good time for the advisor to bring up anything important.

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Question : What Is The Cost Of My Investment Options

One way to help maximize your returns is to keep your investment costs low.

Many investments charge investors an expense ratio to cover the funds operating expenses. And these fees can get pricey.

If you want to know how much of your return is deducted for the investments annual costs, ask your plan provider for an expense ratio for each option.

Does Your Firm Hold My Money And Investments

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Your financial advisors shouldn’t come into contact with your assets . Instead, the advisor should contract with a reputable custodian, which could be a third party or owned by their firm.

The custodian holds your assets and will also process transactions, collect dividend and interest payments, make distributions, and produce monthly statements. Well-known third-part custodians include Charles Schwab, Fidelity Institutional, Pershing/BNY Mellon, TD Ameritrade, and LPL Financial.

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When Can I Withdraw My Funds

There are many rules around 401s, including when you can withdraw funds and how much money you will receive. For instance, if you are retirement age and begin regular withdrawals, and all your contributions were pre-tax, you will have to pay taxes on the funds as they are withdrawn. There are also rules that state that after a certain age, you are required to make withdrawals from your 401. If you take earlier withdrawals prior to retirement age, you may owe income taxes as well as a tax penalty, although there can be circumstances that don’t require the penalty.

How Will I Compensate You

Its important to know upfront how youll compensate a potential retirement advisor. You should ask whether youll pay hourly, per transaction, or annually, based on the value of your assets. Other advisors may be compensated through commissions on the products they provide.

This isn’t to say you should necessarily avoid someone who charges more. A high-priced advisor may well be worth the fee you pay if the results are valuable to you. Be wary of commission-based compensation, however, as it could mean the advisor will steer you into buying products with higher fees.

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Taking Out A Solo 401k Loan

A common question we receive at IRA Financial Group is about the Solo 401 loan. This is an important question to ask your Solo 401k provider, as its a unique feature you wont find in any other retirement plan.

In a solo 401 retirement plan, you can take out a $50,000 loan, or take out 50% of your account value . You can use this loan whenever you like, for any purpose.

Its a tax-free and penalty-free feature, whereas if you tried to take out a loan in an IRA or traditional 401, you will receive an early withdrawal penalty.

You must repay the loan over a five year period or less, with a payment frequency no greater than quarterly. The interest rate is set at prime, which is 5.50% as of August 30, 2022.

When it comes to the loan, a second question to ask your provider is whether their Solo 401 plan documents allow you to use the loan feature.

What Is A Defined Benefit Retirement Plan

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Defined benefit plans provide a fixed amount at retirement. The amount is based on the number of years the participant has been a member of the plan and the amount contributed to the plan. See the Internal Revenue Service website for more information on these plans.

These types of plans are often referred to as pensions. Often, the employee has a choice of taking the retirement payment in a lump sum, or taking annuitized payments over time.

Defined benefit plans were once more common in the United States. As they have grown more expensive for employers to provide, the defined contribution retirement plan has become more prevalent.

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Can I Achieve My Financial Goals

Once you have greater clarity around your retirement lifestyle goals, its time to figure out a plan to get there. Your financial planner can help you shift your thinking from when to how. At Dowling & Yahnke Wealth Advisors, each client has a dedicated financial planning team that consists of both a Financial Planner and a Lead Advisor. Together, your team provides an in-depth analysis of your current financial situation which helps reveal how your progress towards reaching your financial goals and what changes you may make to steer closer towards your desired retirement.

If you do have changes to make, your financial planner can help you develop a plan that is broken down into manageable goals. This is especially important as you get closer to retirement age because you have less time to prepare. With a strong focus on specific short-term goals, youll be better positioned to meet your longer-term goals that youve discussed with your financial planner.

Where Will You Live

For many people, one of the greatest perks of retirement is the freedom to live wherever you want. You can move closer to loved ones, settle someplace new you’ve always wanted to live, or stay right where you are. Some people may even make an international move for their sunset years.

As you think through where you want to live during retirement based on your goals, income and healthask yourself questions like these:

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What Does It Mean To Say 401k Contributions Are Tax

401k contributions are taken from an employees salary before the employees paycheck is issued. By participating in a 401k plan, the employee is opting to defer receiving the funds used for contributions until a later date, and, in turn, the taxes normally applied to the funds are also deferred. According to the IRS, the contributions are generally not taxed until they are distributed to the employee at retirement age or in the event of a loan or hardship withdrawal.

Tax-deferred contributions can be beneficial because you might be in a lower tax bracket as a retiree than when you were employed, which means that less tax will be applied to your 401k distributions.

Do I Need To Reconsider My Retirement And Overall Estate Plans

Retirement Savings

During your 50s is a good time to reevaluate the retirement intentions you set back when you were younger. Have your plans changed at all, and if so, how does that impact your retirement goals? Remember, its important to not prioritize spending on your children like for college over your retirement goals.

At this stage its also very important to have a will and estate plan. Even with beneficiaries on your accounts, an estate plan that is properly executed is really the only way to ensure your assets go where you want them to when you are no longer around.

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What Is Early Retirement

You can apply to receive an early retirement benefit when the combination of your age and yearsof vesting service total 70 or more. For example, you will qualify if you are age 55 and you have15 years of vesting service .

Your early retirement benefit will be less than if you waited until your normal retirement datebecause you will be receiving these payments over a longer period of time.

Your early retirement benefit is calculated by taking your normal retirement benefit and reducingit by:

– Age pre-65 only medical/dental coverage

– participant qualified for normal/early/late retirement and commenced their annuity at separation of service.

Deferred Vested participants are not eligible for retiree benefits. Deferred Vested includes any participant that terminated employment and deferred the commencement of their annuity benefit for a later date.

Questions To Ask Before Signing Up For A 401 Plan

If you have a new employer, and they offer a workplace retirement account, there are important questions to ask before signing up for a 401 plan.

Each 401 plan is unique, which is why its important to find out about the details of your companys plan as well as your options.

Its critical you know WHAT to ask.

After all, its your future were talking about here. And it is vital you know where youre putting your money and why.

Sadly, the 401 industry has systematically disconnected the average investor from his or her retirement savings.

With the rise of automatic enrollment in target date funds, complex language that is difficult to understand, and lack of financial education, its no wonder many investors are left confused and frustrated.

Not to worry. Weve got you covered.

Keep reading for 6 questions to ask before signing up for a 401 plan.

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Questions To Ask About Your Company’s 401 Plan

If you are like many U.S. workers, you have access to a defined contribution plan, such as a 401. Because each plan is unique, it’s important to find out about the details of your company’s plan as well as your options. Here are five questions you should ask about your company’s 401 plan.

Essential Questions To Ask Your Financial Advisor About Retirement

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As you get closer to retirement, it becomes increasingly important to have in-depth conversations with your financial planner about the years ahead. Not only should you talk about different financial scenarios, but you should also speak honestly about your retirement goals and any concerns that may be on your mind.

Open the conversation with your personal financial advisor about retirement by asking the questions below. Start with a few big picture questions, then move onto more details about your goals, cash flow, taxes, and more.

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How Will You Fund Retirement

Financial advisors should help their clients get their arms around all financial resources available to them to fund their retirement. This could include things such as:

There certainly could be other financial assets available for retirement as well. The key here is to help a client to determine what type of ongoing retirement cash flow their various financial assets will translate into. This is also a good time to run financial planning projections to help determine how much income can be supported and for how long. Projections out to at least age 100 are certainly wise given increases in life expectancy.

Ideally, these questions should begin to be addressed at least 10 years prior to retirement and then revisited periodically as retirement gets closer. If retirement cash cannot support the desired lifestyle, then choices have to be made. These might include working a bit longer, working part-time in retirement, reducing anticipated expenses, and saving more in the remaining years until retirement. The longer the time until retirement, the more time clients and their financial advisors will have to make any required adjustments to the clients financial plan.

What Is A 401

A 401 is a retirement investment fund that many employers offer as a benefit for employees. There are many governmental rules about how you can invest in a 401, as the funds are deducted from your paycheck pre-tax. Additionally, there are rules about when you can withdraw the money and if you owe any taxes or penalties on the money when you do so. Investing in a 401 can be a big help when planning for retirement, especially as pensions become less common.

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How Will We Handle Household Finances And Personal Money

If you’ve been together a while, chances are you already have a method for handling everyday expenses. I always favor a “yours, mine and ours” approach, so that each partner has a certain amount of independence. Retirement shouldn’t change that.

The real challenge for many retirees is to go from saving to spending what you’ve already accumulated. So now’s the time to revisit your budget and income sources to make sure you’ll have enough to cover essentials. Once retired, you should strive to keep at least one to two years’ living expenses in an easily accessible account.

Do You Conduct Periodic Reviews

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For a small fee, some estate-planning attorneys will semi-annually or annually review your affairs. This can be important, as adjustments to your plan may be necessary if you experience a life change or a change in your finances. New legislative amendments also could potentially change aspects of your estate planning.

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Can I Retire During A Recession

This question is on the minds of many individuals as we experience unprecedented uncertainty in both the economy and our daily lives due to the COVID-19 pandemic. No matter whats happening in the current economy as you approach your retirement, its always smart to discuss a contingency plan with your financial planner.

As you discuss these concerns with your financial planning team, the outcome should always be a financial plan based on conservative assumptions. Your financial planner should also help you create a withdrawal plan that applies to multiple scenarios, both good and bad. Be wary of anyone who overpromises stock returns or timing the market. No financial professional can predict the future.

In addition to preparing for a potential recession in the future, a reputable financial advisor also helps you explore options in the midst of a downturn. You may consider tactics like using accumulating and accessing excess cash, claiming Social Security early, or using tax loss harvesting strategies. Responses such as these may illustrate that your financial planner has experience with and incorporates recession strategies as part of their retirement planning process.

Can My Employer Commingle Employee Deferrals With The Employer’s Business Accounts

The Department of Labor has made significant modifications to the Form 5500 and inquires as to whether the employer has deposited the employee’s elective deferrals within the regulatory period. If the employer has not made these deposits in a timely manner, the late deposits are reported on the Form 5500 and the employer is assessed a penalty.

Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC.

Infinex and First Commonwealth Bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.

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What Does It Mean To Say A 401k Cannot Discriminate

According to the IRS, federal regulations ensure that 401k plan contributions made by and for ordinary employees are comparable to those made for highly compensated employees, such as managers or officers. Some differences in plan rules can exist from employer to employer, but once the rules are set, any exceptions or changes must apply to all full-time employees.

A 401k is set up for the sole benefit of the participants of the plan, Nickles said. Therefore, if you are a full-time employee, you are eligible to participate and benefit from any company 401k. As with medical benefits, there may be a short time three months for example before you can participate, but all full-time employees are eligible. The company cannot pick and choose who participates, he said.

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Top Retirement Prep Questions To Ask Clients

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Many Americans have not saved a sufficient amount to retire comfortably. Financial advisors can help their clients determine not only when to retire, but also if they should consider working at least part-time in their early years of retirement.

Here are a few questions financial advisors should ask to jumpstart the retirement planning process with their clients.

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