According to the most recent figures available from the U.S. Department of Labor’s (DOL) Employee Benefits Security Administration, of the 59 million wage-earning and salaried women working in the U.S., only 47% participate in a company retirement plan.

Part of the explanation may be that women’s employment patterns are different. They are more likely to work in part-time jobs that don’t qualify for retirement plan coverage, or to work fewer years in plan-covered employment because of interruptions in their careers to take care of family members.
It’s a bit ironic because, on average, a female retiring at age 55 can expect to live another 27 years, four years longer than a male retiring at the same age, and, therefore, needs to save more to cover those extra years.

The DOL offers a checklist of items for women to think about and act upon with regard to retirement plans and planning. A summary of its main points:

1. Coverage
If your employer offers a retirement plan, join it as soon as you can and contribute as much as the plan allows. Many employers who provide a 401(k) plan will match a percentage of the employee contribution. As a result, when the match is figured in as part of your investment return, it’s very likely that the rate that you earn will be higher than the rate that you might receive from other investments. Don’t procrastinate. By saving early, you have time on your side. Your savings will grow, and your earnings will compound over time, tax deferred. Only upon withdrawal of your money will you owe tax.

2. Vesting
In many companies you may have to work a specified period of time in order to be eligible to receive benefits. Once you have satisfied the time requirement, your benefits will have “vested,” meaning that you will have worked long enough to earn the right to receive them. Too often, says the DOL, employees, especially women, quit work, transfer to another job or interrupt their work lives just short of the time required to become vested. Ask the personnel office or plan administrator about the vesting period and other details of your company plan.

3. Recordkeeping
In addition to asking questions of company or plan officials, you should keep copies of the summary plan description (SPD) and any amendments. The SPD is a document that plan administrators are required to prepare. It outlines your benefits and how they are calculated. The SPD also spells out the financial consequences—usually a reduction in benefits—if you decide to retire early. You probably received a copy of the SPD when you joined the plan. But, if you can’t locate it in your files, you may request another one. Also remember to keep plan-related records from all jobs. They provide valuable information about your benefit rights, even when you no longer work for a company.

4. Change of employment
You may lose benefits that you have earned if you leave your job before you have vested. However, once vested, you have the right to receive benefits even when you leave your job. In such cases the company may allow, or in certain cases insist, that you take your money in a lump sum when you leave. However, some companies may not permit you to receive your money until retirement (some pension plans, for instance). The time when you can receive your benefits is spelled out in the SPD. A word of caution: If you receive your money in a lump sum, you will owe income tax, and if you are not at least age 55 or 59 1/2— depending upon the circumstances of your separation from employment—a 10% penalty. You avoid the tax and penalty by rolling over your payout from the plan to an IRA. The transfer of the money from the plan to the IRA should be direct from plan to IRA in order to avoid a 20% withholding tax.

5. Alternative retirement plans
You don’t have to work for a company that offers a retirement plan to get the benefits of tax-deferred savings. Anyone receiving compensation, or married to someone receiving compensation, can contribute to an IRA. In addition, if you are self-employed, you can start a Keogh plan, a Simplified Employee Pension (SEP) or a Savings Incentive Match Plan for Employees of Small Employers (SIMPLE). As with other retirement savings plans, there may be tax consequences, and possibly penalties, if you withdraw your savings early.

6. Social Security
More women than ever work, pay Social Security taxes, and earn credit toward a monthly income for their retirement. These earnings can mean some income for you and your family in the form of monthly benefits if you become disabled and can no longer work. If you die, your survivors may be eligible for benefits. In addition, you may be eligible for Social Security benefits through your husband’s work and can receive benefits when he retires or if he becomes disabled or dies. Special rules apply if both you and your husband have been employed and both have paid into Social Security. Special rules apply also if you are divorced, or if you have a government pension. Each year the Social Security Administration sends you a document that provides you with information about the benefits to which you may be entitled. You can calculate your estimated benefits by going to www.ssa.gov.

7. Divorce
As part of a divorce or legal separation, you may be able to obtain rights to a portion of your spouse’s retirement benefits (or the spouse may be able to obtain a portion of yours). In most private-sector plans, this is accomplished with a qualified domestic relations order (QDRO) issued by a court. You or your attorney should consult your spouse’s plan administrator to determine what requirements the QDRO must meet.

8. Death
Are you aware of the rules that govern your plan and the plan of your spouse if either of you dies? The rules are different based upon the type of employer plan. If you or your spouse belong to a defined benefit (pension) plan, the survivor may be entitled to receive a survivor benefit when the enrolled employee dies. This survivor benefit is automatic unless both spouses agree, in writing, to forfeit the benefit. You will need to check the SPD or consult with the plan administrator regarding survivor annuities or other death benefits. The rules may be different if you or your spouse participate in a defined contribution plan [a 401(k) plan, for example]. Again, consult the plan administrator for details about your rights.
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Interested in finding out more? The Employee Benefits Security Administration has issued a 32-page brochure “Savings Fitness: A Guide to Your Money and Your Financial Future.” A copy is available at www.dol.gov/ebsa/pdf/savingsfitness.pdf.

© 2014 M.A. Co. All rights reserved.
Any developments occurring after January 1, 2014, are not reflected in this article.

During a campaign flight in May 2012, reported the New York Times, President Obama read to his aides “the best letter of the day” from a constituent. It was from a 90-year-old Florida man, who wrote that he was looking for work in sales and marketing. “I’m rounding third but not ready to slide into home,” the gentleman concluded.

One would hope that most 90-year-olds have been long retired, but the economy and the financial markets have not been cooperating lately. In a recent survey of middle-class Americans reported by CNN Money, the median stated savings goal for retirement was $350,000. Unfortunately, the same survey reported that 30% of those in their 60s had saved less than $25,000 for their retirement. They don’t have much time left to make up the shortfall.

To bridge the difference, fully three-quarters of the respondents said that they expect to work during their retirement. Some will work because they enjoy it, but for most it will be a financial necessity. And 25% said that they will need to work until at least age 80 before they can retire with financial security.

The affluent are expecting to delay retirement as well, according to another recent survey, this one reported by Financial Planning magazine. Some 57% of consumers with investable household assets of $50,000 to $250,000 expect to push back their retirement date, up sharply from the 42% who reported this concern in January 2011. Some 34% report that they’ve already had to tap their long-term savings to cover short-term financing needs. Key concerns:
• rising cost of health care (89%);
• retirement assets will run out (83%); and
• desired retirement lifestyle will be unaffordable (80%).

There are no easy answers for these concerns. No question, this is a challenging time, both for current retirees and those who hope to retire in the next few years. If you are worried about the sufficiency of your retirement capital, and how best to manage it, we are available for a consultation.

© 2014 M.A. Co. All rights reserved.
Any developments occurring after January 1, 2014, are not reflected in this article.

As you near the end of the final lap of your working years, and begin scanning the retirement horizon, you are likely to be seeking the information that you need to ensure a secure financial future. Here, we touch on three of the most important questions that you should be asking yourself as you transition to retirement.

1. Do I understand all of my Social Security benefits options?
When do you want to begin receiving Social Security benefits? Apply at least three months ahead of the time that you wish to begin. You can receive a reduced benefit once you reach age 62. The full benefit shown on the Social Security estimate statement that you receive each year can be yours when you reach “normal retirement age” (no longer automatically age 65, but dependent upon your date of birth). Or do you want to wait until later, to increase the amount of your benefit? You may want to run the numbers. If you plan a “working retirement,” find out if your benefits will be reduced, and by how much. You can make estimates of what benefits you can receive by using the benefits calculator at: www.socialsecurity.gov/OACT/ANYPIA.

Benefits aren’t automatic. You can apply for benefits by: filling out an application online (www.socialsecurity.gov); calling 1-800-772-1213; or visiting your local Social Security office.

2. Do I have all my health insurance coverage in place?
There are three avenues to explore here:
First, Medicare. If you’re already receiving Social Security benefits at age 65, your Medicare (Part A) starts automatically.

If you’re not receiving Social Security, you should sign up for Medicare close to your 65th birthday, even if you have not reached your full retirement age, or you aren’t yet ready to retire. Part A is called hospital insurance and covers most hospital stay costs, as well as some follow-up costs. Part B, for which you must enroll, pays some doctor and outpatient medical care costs. The rules for prescription drug coverage are complicated, so you will want to familiarize yourself with them before you need to make any decisions. Plan providers, AARP and the Medicare Web site (www.medicare.gov) can offer guidance.

Second, Medigap (and other) policies. About two-thirds of all Medicare recipients aged 65 or over buy this kind of supplemental private health insurance, designed to deal with some of the holes in Medicare coverage. Before buying Medigap, HMO or other managed care insurance, you’ll need to do a thorough review of the kinds of policies available and their costs.

Third, retiree health insurance. Find out if you can obtain retiree health insurance from your or your spouse’s company or union. You may find that the cost is less than that for a Medigap policy and provides more benefits. Make sure that you read the policy’s fine print. Especially important: Will premiums rise with inflation? If you are a veteran, find out if you are entitled to medical or prescription drug coverage from the government.

3. Do I know how I want to manage my company retirement plan payout?
Your 401(k) or other qualified retirement plan may offer several kinds of distribution choices. One option may be to receive your benefits as periodic payments (an annuity). For pension plans there are choices within choices: Your payments might be fixed or variable, paid out over your lifetime or that of you and your spouse.
Or you may be entitled to receive a lump sum payout of your account balance. In that case you will need to make a decision as to whether you should: (1) take the money in hand, pay tax on it and invest what’s left; or (2) arrange to roll over all or part of your payout into an IRA, avoiding all tax as long as the money remains there. At age 70 1/2 you are required to begin making withdrawals.

If you are planning an IRA rollover, tread carefully, for there may be tax traps. For example, arrange for a direct rollover of your account from the company plan to a Rollover IRA. If you don’t, your employer is required by law to withhold 20% for income taxes.

© 2014 M.A. Co. All rights reserved.
Any developments occurring after January 1, 2014, are not reflected in this article.

Growing old isn’t always easy. There’s the financial uncertainty of living on a fixed income; health problems may become more acute; hearing and vision tend to weaken; stamina falls off.

Despite the obstacles, it turns out that the oldest Americans may be the happiest Americans. The Gallup organization surveyed 340,847 people, ranging in age from 18 to 85. The study was prepared by professors at Stony Brook University, Columbia and Princeton.

In the survey people were asked to rank their life satisfaction on a scale of one to ten. They were also asked whether, on the day before the survey, they had experienced enjoyment, happiness, stress, worry, anger or sadness. Analysis of the data revealed some surprising patterns in life satisfaction as people age.
• Stress and anger decline steeply through the 20s.
• Worry is elevated through middle age.
• Happiness and enjoyment decline gradually until age 50, then increase.
• Sadness is essentially flat through the life cycle.
• Men and women have substantially the same well-being through the life cycle.

Overall, well-being seems to decline from age 18 to age 50. At that point, life satisfaction begins improving, and it keeps on improving into and through retirement. According to the study, 85-year-olds are happier than 18-year-olds.

The study did not try to determine what factors contributed to the happiness during aging. It might have been related to whether the person had a partner, to employment status, to financial security, or it could be an inherent element of aging. Exploring those questions was left for future researchers.

© 2014 M.A. Co. All rights reserved.
Any developments occurring after January 1, 2014, are not reflected in this article.