Throughout your life, you will go through many stages which can affect your benefit plans including your retirement plan. At least on an annual basis, you should do a thorough review to make sure no changes need to be made.
You got married. Don’t forget to change your beneficiary for your retirement plan as well as any life insurance that you might have. In most cases, your beneficiary will be your spouse unless you elect otherwise for your retirement plan. For a retirement plan, if you do elect to have a different person as your 100% primary beneficiary, those elections must be authorized by your spouse and notarized. You also have a limited window to add a spouse or new dependents to any health insurance you may have through your employer or conversely to be added to your spouse’s plan. Lastly, this is also a great opportunity to do some long-range planning to incorporate your new spouse into your budgeting and saving for retirement plans.
You got a divorce or suffered the death of your spouse. As stated above, make sure to change your beneficiary for your retirement plan and any life insurance that you may have. For your retirement plan, your beneficiary will not change unless you elect otherwise. If you were covering your spouse on your health insurance, make sure you do not need to fill out anything to drop your former spouse from your policy. If your spouse was covering you or your children, make sure that you opt into your employer’s coverage during the allotted timeframe or secure other health care coverage. If you are divorcing, you may have a domestic relations order where your children or your former spouse are entitled to a portion of your benefits or vice versa. Your retirement plan provider will be able to review that order to help you determine the next steps in processing.
You became a parent. You may wish to change your beneficiary for your retirement plan and any life insurance that you have purchased to add your child as a contingent beneficiary to the plan/policy. Evaluate the life insurance options to see if any increase in coverage for your growing family might be necessary. You also have a limited window to add a child to any health insurance you may have through you or your spouse’s employer. This is also a great opportunity to investigate 529 plans and plan for their future.
You got a raise. Increase your contribution to your 401(k) plan especially if you are not maximizing your deferrals or receiving your full match. The maximums each year are set by the IRS. For 2021, the maximum deferral for those under age 50 is $19,500 and for those over 50 is $26,000. If your plan provides a match for a percentage of your compensation, make sure you are contributing AT LEAST enough to receive your full match. Otherwise, you are leaving free money on the table. If you are using a Roth option, you should determine if the new raise will take you into a higher tax bracket. If so, consider changing to the traditional, pre-tax contribution if it could bump you into a lower tax bracket. Also, take time to review your emergency savings. It is recommended to have at least six months of emergency savings readily available. Lastly, take time to review your budget and determine if you can increase payments on any outstanding debts such as credit cards or student loans.
You have been temporarily or permanently disabled. If you are receiving disability from the Social Security Administration, check with your retirement plan provider. You may also be 100% vested in all of your employer money, and you may be eligible for distributions from the plan.
You are ready to retire. For many retirees, the best option is to consolidate all your retirement plans into one IRA (or two IRAs if you have both Roth and pre-tax dollars). Then you have one pool of assets to manage. If you have not engaged a financial advisor, this is a great time to investigate that option. Most IRAs will allow you to set up a linked banking account to pull money to when you need to withdraw funds. Make sure that the IRA or retirement plan provider does not charge a per withdrawal fee. If they do, estimate your annual needs, and set up an annual withdrawal. For traditional IRAs, when you withdraw the funds, you will be subject to taxation for that tax year. So, if you don’t need the funds, you can choose to leave them in your IRA or your retirement plan in many cases. Once you are age 72, the IRS requires that you begin making minimum withdrawals. The IRA provider or your retirement plan should let you know the amount, but it is your responsibility to ensure you begin receiving timely withdrawals once you attain age 72. Lastly, even if you retire, but perhaps take on a retirement side job, the IRS does allow you to make contributions to an IRA if you have earned income.
ML&R Wealth Management is here to serve you as an individual throughout your career. Should you find you have questions, please contact an advisor today. ML&R Wealth Management also serves as the investment advisor and third-party administrator on company retirement plans in Austin. If you are a participant in one of our plans or you wish to engage our services for your company retirement plan, please contact firstname.lastname@example.org.