You may be planning very carefully for your retirement, but make sure you are not missing anything. These are 5 common threats to your retirement, which if you are not aware will take a chunk out of your future! Get the information here!
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Saving for our retirement seems to become more challenging by the day. Longer life expectancies, fewer traditional pensions and volatile investment markets are the most obvious challenges. Beyond that, here are seven other threats to your retirement:
1. Even if you have a traditional pension plan, those benefits can change. Your employer can’t take away benefits you’ve already earned, but benefits going forward can be reduced. Traditional pension plans have experienced losses during the market decline, which will require additional contributions from companies. Companies might reduce benefits for newer employees and/or freeze plan benefits for existing workers. In the latter case, you would cease to accrue further pension benefits. Keep an eye on your pension plan so you know if your employer makes changes.
2. Switching jobs can affect your retirement benefits. If you have a traditional pension plan, don’t change jobs without considering the impact on your pension benefits. Many plans have a five-year time frame for vesting into a benefit. The same applies to 401k plans with matching employer contributions. You may find staying at your job a while longer will significantly increase your benefits.
3. Don’t forget about pension benefits from previous employers. Many employees leave a company without realizing they are entitled to pension benefits. Before changing jobs, check with your employer to find out what benefits you are entitled to. Then keep track of the company so you can claim benefits when you retire.
4. Early retirement can significantly reduce your retirement benefits. Sure, it sounds great to retire before age 65 with company pension benefits. But don’t look only at how much you’ll receive when you retire early. Also consider what you would receive if you wait until normal retirement age. Retiring early can dramatically lower your monthly pension benefit for several reasons: You don’t have as many years of service, salary increases you would have earned aren’t considered, and those extra years of benefits cause a large actuarial deduction in benefit calculations.
5. A lump-sum distribution may not be your best option. Some traditional pension plans allow lump-sum distributions instead of monthly pension benefits. Use that option with care. While the amount of money might seem large, are you sure you can invest it and earn more than the monthly pension option?
Get more information at MSN Money!
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