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401(k) BASICS - TA-Retirement - what to do with 401k at retirement


401(k) BASICS - TA-Retirement-what to do with 401k at retirement

SIMPLE Solutions
for your retirement
401(k) BASICS
Learn about the benefits
of a 401(k) Plan.
YOUR 401(k) CAN HELP YOU PLAN
FOR YOUR RETIREMENT.
Just how much money are you going to need
to maintain your current lifestyle throughout
retirement?
Experts suggest that in order to maintain your
lifestyle in retirement, you will likely need 77%
to 94% of your final year's wages for each year
you are retired.1
THE POWER OF STARTING EARLY
Retirement income from your 401(k) account,
if contributions begin at age 25 or age 45
v
Monthly Monthly Pre-Retirement* Post-Retirement** Monthly
Income Contributions Accumulation at age 65 Income beginning at age 65
Beginning Beginning Based on Based on
at age 25 at age 45 age 25 age 45
$1,000 $ 60 $124,255 $28,281 $ 771 $175
$1,733 $100 $207,091 $47,134 $1,285 $292
$2,083 $125 $258,864 $58,918 $1,606 $365
$3,333 $200 $414,183 $94,269 $2,569 $585
*Pre-Retirement example assumes a 6.3% rate of average
annual return. **Post-Retirement example calculations assume
a constant 5.75% rate of annual return on unused account
balances during retirement, and an exhausted account balance
at the end of retirement. It is unlikely that any investments
would have such consistent returns. The example does not
reflect the return of any specific investment and is not intended
to imply or guarantee future results. Retirement income based
on 25 years certain, age 65 through age 90.
SAVING FOR RETIREMENT
How can I ever afford to retire? The answer may
be simpler than you think. Participating in your
employer-sponsored 401(k) plan may give you
key tax advantages and the power of compound
interest to help you reach your retirement goal.2
How a 401(k) Plan Works for You
401(k) plans let employees save for retirement on
a tax-deferred basis by having contributions to their
employer-sponsored 401(k) plan deducted directly
from their pay before taxes. Although you don't
typically pay taxes up front on the contributions
you make to your 401(k) plan, the taxes are
generally due when you withdraw your savings.
As a 401(k) plan participant, your contributions are
deducted from every paycheck before taxes. This
means you typically only pay federal income taxes
on the amount of your income remaining after your
401(k) contributions have been deducted by your
employer. This reduces your overall taxable income,
which may reduce your federal income taxes.2
REDUCTION IN PAID INCOME TAXES 2, 3
v
EMPLOYEE 1 EMPLOYEE 2
NOT CONTRIBUTING CONTRIBUTING
Annual Salary (Gross Income) $35,000 $35,000
401(k) Plan Contributions (3% deferral) $0 $1,050
Gross Income Less 401(k) $35,000 $33,950
Plan Contributions
Federal Income Tax4 -$4,124 -$3,966
($437.50 plus 15% of amount over $10,425)
Summary
Total Retirement Savings $0 $1,050
Total Reduction in Paid Income Tax $0 $158
This chart is for illustrative purposes only, and your
circumstances may differ from this example.
With a 401(k) plan you may pay less in taxes
and may have more to spend each year!
Your 401(k) contributions are placed into
the investment choices5 that you select and
accumulate on a tax-deferred basis until they
are withdrawn.
For 2011 employees may be able to defer up to
$16,500 per year in a 401(k) plan.

Should I move my 401k After retirement? What to Do With Your 401 (k) When You Retire Review your 401 (k)’s payout policy. One key question in retirement is how you’ll create an income stream — that is, a retirement paycheck — from your savings. Take note of 401 (k) fees. There are additional reasons to consider a rollover to an IRA. ... Compare your 401 (k) to an IRA. ... Assess income strategies. ...

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