7 Simple Steps to Retirement
1. Know what retirement means to you.
Most women when asked about retirement are unsure of the true definition of retirement.
Retirement, re*tire*ment, [ri-tahyuh r-muh nt] removal or withdrawal from service, office, or business. Now if we were to ask most women if they would like to be removed from service we are sure they would say no. With that being said, no dictionary, Google search, or Financial Advisor can tell any one person what retirement is to him or her. Only that person can tell you what retirement means to them. For some woman, retirement means sleeping in every day until noon. (that would be my definition) For some other woman taking a daily walk down by the beach holding hands with their significant other would be a great retirement. No matter what retirement may look like to someone else, your retirement is just that yours. Your first step will be for you to write down in a journal what retirement will look, smell, and feel like for you. We suggest this first step several years before you actually retire. The reason why we suggest this is that after sitting down and accessing what retirement is to you, you may find out that you do not really want to retire or be removed from service totally. Before you ask, we will just let you in on something. We are not telling you to be selfish and not include your spouse/partner in your retirement plans. Nevertheless, for this first step we are telling you to know what retirement means to you first, and then share with your significant other.
2. Where are you today?
Sounds like a typical question right, well its more important than you might think. We conducted a small survey of over 100 woman (small sample, but very concentrated questions) about 2 years ago about if women knew where they were at that time when it came to retirement. Knowing where you are is very important on the retirement road map. How do you know where you are going if you Don’t know where you are at. Let us talk about how to find out where you are on the retirement road map. Get a napkin, paper towel, blank sheet of paper, or a computer spreadsheet and write down every single asset you have. ASSET: anything that you OWN that can be converted into cash we recommend within 1- 12 months. Now why did we capitalize OWN, well if you still have a mortgage on your home then frankly you do not own it. We do not want to mis lead anyone into thinking they own something and they Don’t, because when you need access to cash it should not be life changing. Nevertheless, if you are so fortunate to own your home then put down that current value within your calculation. List everything down on the right side of the paper one right underneath the other. While listing the items list the value just to the right of them. Now draw a line (can be imaginary) down the center of the page. Now list all of your LIABILITIES: people or companies that you owe obligations too. Also just as you did with the left side list right underneath each one after the previous. Total both sides and then subtract the Assets (Left side) from the Liabilities (right side). This difference will tell you were you are at.
3. Don’t get lost upon arrival.
5. Get your assets in order.
If you are like most women then you have worked for more than one company in your adult lifetime. Well that means a couple of things. One, you have been contributing to your social security that you may or may not see. (that’s another story for another day) Two, you have quite possibly done a good job of accumulating retirement savings over the time. Now let’s get your assets in order. This step is started by collecting all of your 401k statements that come to your home on a quarterly (every 3 months). Even the statements that seem like they show up but only once a year. By law even if you no longer contribute to your 401k, the fund company must send you a statement at least once every three months. Ok now that you have collected all of your statements, here comes the fun part. Make a decision! We have surveyed many woman at our workshops in the past and discovered that this step is hardly done, because they Don’t know what decision to make. The movement was created to help you make decisions. If you no longer work for a company or have separated from service then you are obligated to take your money with you. That is good news. How to take your money is the bad news or shall we say, big decision news. You can either roll your money over or transfer your money over. (there is a big difference which the movement will cover at a later date) If you roll your money over to your new company’s 401k it has its pros and cons. Of course if you transfer your money to a new self directed IRA it has its pros and cons as well. Regardless of which choice you make, you must get your assets in order. What if you suddenly took ill, and needed access to those funds to pay for an operation? Oh, you are a healthy person, that can’t happen to you. What happens when you need money for an unexpected emergency, like you really needing your money, you have to go to multiple places with multiple rules. Take it from us its only when you really your money when you discover 30 day notices and such. We recommend you get with your advisor to make the best decision for you. We will have an upcoming webcast on this topic so stay tuned.
6. What do they call that retirement thing again?
It is either a Defined contribution plan or a defined benefit plan. Well how do you know which one you have? that’s simple if the plan is defined for you for example your plan tells you that you will get a certain amount of money, once you reach a certain amount of time in service times the number years. Then frankly, someone has defined your benefit for you. Get it DEFINED BENEFIT plan. These types of plans are mostly found in Government organizations or state agencies. Companies and even the local government as of this writing are doing away with such plans. Nevertheless, if you contribute to a plan in most cases a 401k plan. These are mostly found in newer type companies or starups. These types of plans are more popular and it is greater chance that your company or organization will have this plan. They ask you how much do you want to contribute to your own retirement plan on a monthly bases? Once you have answered the question about your contribution with your monthly pretax or in some cases after tax (some plans give you the option to contribute to a Roth IRA) then you have basically defined your contribution. Now what do they call that retirement thing again? Both are considered Individual Retirement Accounts or best known as an IRAs. You can if you are so fortune to have both plans at the same company at the same time. I commend you, because you are in a very select group of American workers. Good for You!
7. Who shall benefit?
If you are single, this last step can be a challenge. If you are divorced, this last step can be a difficult. If you are single, divorced, and have small kids, then this last step can be overwhelming. Did we mention that this is the last step, but the most important one of them all? Let me make this clear some rules are different in some states, but if you just so happen to live in one of the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) then you really need to listen up. You may notice that every time you do a beneficiary statement in one of the aforementioned states then your spouse must sign if they are not the beneficiary. that’s because in most cases they will end up with the benefit God forbid something happens to you by default. It’s a community property state, what did you think would happen? (sorry for the sarcasum here, but we only did it so you would remember that this is very important, besides we know on more than one occasion that people forget to change this). With that being said, the reason you need to get your assets in order is, let us say you have had a divorce and may even remarried. Something happens to you and you left your 401k at your old employer and guess who is still on the beneficiary form from 7-8 years ago? That is correct, your ex husband, well guess who just might be entitled by law (because you did not have your assets in order) to that payout. John, James, David, Sam, Peter, Steve, Steven, or whatever his name is. That would be your ex-husband. Needless to say that would not be good.