401(k) Retirement Plan: The Best Way to Maximize Your Post-Retirement Income

Have you ever thought about your post-retirement life? Does it make you feel nervous? Certainly, pension contributions are rising, but what if you don’t have a pension? Where does that leave you in your retirement years? Well, it’s better late than never! Don’t lose hope: remember that you can make larger, catch-up contributions to your Individual Retirement Account (IRA) even after 50. So, let’s explore your options for retirement saving so that you can get started as soon as possible.

With more and more retirement plans coming up, it has become extremely difficult to find a suitable plan that will work best for you. There was a time when workers were covered by generous defined benefit (or DB) pension plans that were funded by their employers. These plans guaranteed employees a certain amount of income after their retirement, which would last for the rest of their lives. They were based on a formula that takes into account employees’ salary and their years of contribution.

Defined Benefit Plan (DB) Vs. Defined Contribution Plan (DC)

Today, defined benefit (DB) plans are mostly replaced by defined contribution (or DC) plans,like the ubiquitous 401(k), which is funded largely by employees. DC pension plans are those plans in which both employer and employee contribute funds to an employee’s retirement plan. Over the past several years, the drastic shift from defined benefit (DB) to defined contribution (DC) pension plans has elevated significantly, which led to the cessation of many large DB plans, especially in the United States of America. This has shifted the main responsibility of planning and saving for retirement from employers directly onto the shoulders of employees themselves. This gave employees a certain level of confidence of being in total control of their money and possibly earn more after retirement than what their company could provide.

With the decline of company pension plans, 401(k) rollover options are the best way to safeguard the financial future of employees. Many companies offer 401(k) plans with the purpose of benefiting both employer and employee from building the nest egg and receiving tax breaks. This type of 401 (k) plan enables employees to take advantage of an employer match when saving money into their 401 (k), while the company gets tax breaks and other benefits, helping them increase the morale of their employees.

How to Rollover your 401k?

Whenever you change jobs, find yourself being laid off from your work, or get retired, possibilities are that you might wonder about the fate of your 401 (k) plan. Well, the good news is that you can rollover your existing 401 (k) account into new employer’s 401 (k) or into an individual retirement account (IRA). Rolling over your 401 (k) funds into a new one will prevent you from paying punishing taxes and early 401 (k) withdrawal fees, which can take a shockingly big bite out of the money in the fund. The best part of 401 (k) rollover is that it enables you to utilize your retirement funds whenever you want, either while working or after you have retired.

When you retire or change a job, you have three possible options for your old 401 (k) plan that can provide persistent potential tax-advantaged growth opportunities. You can roll over to a fidelity IRA, roll over to a new workplace plan, or stay in the old workplace plan. Depending on your plan and your financial condition, you can also cash out your 401(k) account, which will help you gain immediate access to your money. Each of these options have different benefits and drawbacks. So, it’s important to compare all these plans based on your individual needs and business goals, and then choose the one that suits you best.

To learn more about 401 (k) rollover options in Chino Hills, CA, visit http://nikkikardarinsurance.com/

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