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Planning for Retirement
Your retirement should be seen as a reward for all the years you spend at work but don’t sit back and expect it to be a breeze because it won’t be if you haven’t managed your pension throughout your working life. Taking advice from experts on pensions and making the right decisions on where to put the money you’re accruing is part of the process, but you should also take care when deciding on the type of pension you pay into as there are advantages and disadvantages with each. You’re probably already aware that you can opt for a 401k or an IRA pension but have you taken the time to look into each?
Everything Changes
Things change with time. Our families grow up. We decide to move home. We change jobs or cut back on our hours at work and with every change that you make or that’s made for you, your pension needs to be adjusted to remain in line with the lifestyle you’ll expect to enjoy in your old age. A new home could be more expensive to maintain. A growing family could mean that you need access to more of your income leaving less for your pension. A change at work could see you with more or less disposable money so don’t keep blindly paying into your pension without considering whether your new circumstances require a different type of pension.
401k Pension
The 401k pension remains the most popular type of employer-sponsored retirement plan in America. It’s only been available since 1978 so today there will still be workers who were not able to take advantage of it when they first entered employment. The relative flexibility of this type of pension is its main selling point but it’s also popular because it’s offered so widely by employers. This pension is paid into on a monthly basis and in most cases the contributions are taken straight from the worker’s paycheck before tax, but you can opt for a Roth 401k pension which accrues the funds after tax is taken.
IRA Pension
When you’re told that IRA stands for individual retirement account you won’t necessarily get a great understanding of what this type of pension is all about. An IRA is a basically a saving account where employees can deposit 15 percent of their annual wage per year up to a maximum of $1,500. A traditional IRA doesn’t tax the deposits as tax is paid when the money is taken out during retirement but a Roth IRA does the opposite so that you’ll have more money in hand during your golden years. You don’t need to choose between a 401k pension and an IRA because you can have both but most people choose one or the other knowing that they have the option of rolling their pension over.
How to Rollover a 401k to an IRA
As with any financial product there are a host of rules and regulations to adhere to when you rollover your 401k pension into an IRA. You’ll need to contact a financial specialist in order to move the assets from your employer-sponsored retirement plan to an IRA, which normally takes two to three weeks to complete. Having opened an IRA first, request a direct rollover distribution from your current pension provider. When the asset has rolled into the IRA, decide where to invest it.
What’s a Gold IRA?
Do you like the idea of your pension assets being gold rather than cash, stocks, and bonds? If so, you could opt for a Gold IRA. Since the Great Recession, gold has been seen as a more reliable way of securing your pension savings. This type of pension is worth taking out in addition to a traditional IRA as the price of gold generally moves in the opposite direction to paper assets so you’ll be hedging your bets as long as you have both types of pension.
What’s Best?
The average guy won’t be able to live very well if he relies on Social Security benefit so a pension is essential. The choice of 401k or IRA pensions in traditional or Roth options seems a little bit challenging to begin with but don’t forget that you can opt for more than one pension. You can also help secure your future by putting your money into assets such as properties that can be sold to release capital when you need it in your old age. If you organize your pensions well, you might be able to leave work a little earlier than you initially thought.
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Questions About My Retirement Plan ®
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Here are some frequently asked questions about My Retirement Plan from Wells Fargo.
What is My Retirement Plan ?
My Retirement Plan is an easy-to-use, online retirement tool. Answer a few questions about yourself, your income, and your current retirement savings, and My Retirement Plan will calculate how much you may need in retirement, recommend a monthly amount to save, and provide you manageable steps to take to get you closer to your goals.
How is this retirement calculator different from others?
My Retirement Plan acknowledges that your ability to save for retirement changes as your financial situation changes. Unlike other retirement calculators, My Retirement Plan provides you with a saving plan based on a percentage of your income rather than a flat dollar amount — allowing you to save more as your income rises.
How does My Retirement Plan estimate how much money I’ll need in retirement?
My Retirement Plan begins by estimating your income at retirement and then uses government data and information you provide (e.g., education level, current income, retirement age) to project your annual income year over year.
To estimate your income needs in retirement, My Retirement Plan multiplies your estimated income at retirement by your income replacement rate and increases this amount annually by the rate of inflation.
For more complete information about our calculations and assumptions, visit How We Calculate Your Plan .
Why does my income in retirement need to be so much higher than it is now?
My Retirement Plan uses an estimate of what your income will be in the year before you retire to estimate what you may need in retirement. This preretirement income is adjusted based on the income replacement rate, which is defaulted on 80% and can be changed on the Calculator Assumptions tab. We use government demographic income data to estimate how your current income may grow between now and retirement. The further from retirement you are, the more likely this number will grow.
Why does the calculator ask about my highest level of education?
All questions in the calculator help us make more informed predictions about your future. Knowing your level of education lets us determine a more realistic estimate of how much you’ll earn in the future and in turn provide an estimate of what you may need in retirement. And although this information helps us provide you with a more personalized calculation, it is optional.
I will have to pay taxes in retirement. How does My Retirement Plan account for taxes?
The amount of taxes you owe in retirement is based on many things, including where you live, marital status, and future Federal and state tax rates. It’s even affected by how much of your retirement income is in tax-advantaged accounts like 401(k)s, Traditional IRAs, and Roth IRAs.
My Retirement Plan uses the income replacement rate to estimate how much money you will need in retirement, including taxes. Based on studies of retirees’ actual retirement budgets, the tool’s replacement rate is initially set to 80%. If you feel your tax rate or other expenses will be higher or lower than what the average retiree needs today, you can adjust the income replacement rate found on the Calculator Assumptions tab.
What happens after I select and save a retirement savings plan?
- Review the monthly amount to save toward retirement, as well as next steps and action items that will help you reach your retirement saving goal.
- Download a PDF of your plan to print or save to your computer.
- Access your plan online at any time by signing on at My Retirement Plan . (Note: If you create a plan using the public version of My Retirement Plan , you cannot save or access your plan online.)
- Visit My Retirement Plan Tips to learn how to make the most of your selected retirement savings plan.
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Sign up now or use the public version of My Retirement Plan . With the public version, you cannot save your plan online, but you can access the tool’s other features.
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Note: Your plan will not be saved to your online account.
The information generated by the My Retirement Plan Savings Calculator and any information provided by employees and representatives of Wells Fargo and its affiliates is for educational purposes only and does not constitute investment, financial, tax, or legal advice. In making the My Retirement Plan Savings Calculator available for your use, Wells Fargo is not acting as your fiduciary or advisor. The results generated by the calculator are believed to be reliable but are not guaranteed. Please contact your investment, financial, tax, or legal advisor regarding your specific needs and situation.
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- Not a Deposit or Other Obligation of, or Guaranteed by, the Bank or Any Bank Affiliate
- Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested
Investment products and services are offered through Wells Fargo Advisors . Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services , LLC (WFCS) and Wells Fargo Advisors Financial Network , LLC, Members SIPC , separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company .
Deposit products offered by Wells Fargo Bank, N.A. Member FDIC.
Information published by Wells Fargo Bank, N.A., Wells Fargo Advisors, or one of its affiliates as part of this website is published in the United States and is intended only for persons in the United States.
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