Episode 43

Women & Retirement Savings

Hello everyone. This week, I’m talking about women and retirement savings. Planning and saving for retirement may seem like goals far off in the future, yet saving should start early and continue throughout your lifetime, especially for retirement. And I want to start by talking about four reasons why saving matters so much to us women and especially to you. Women are more likely to work. Part-time jobs that don’t qualify for a retirement plan and working women are more likely than men to interrupt their careers to take care of family members. Therefore, they work fewer years and contribute less toward their retirement, resulting in lower retirement savings. If you work, and if you qualify, join a retirement plan. Regardless of how old you are now, approximately 46% of working women participated in a retirement plan. We need to increase that number. Remember, even small amounts can earn added interest over time.


It’s the magic of compound interest, and it’s on your side. The sooner the younger you are, on average, a female retiring at age 65 can expect to live another 21 years, nearly three years longer than a man. The same age savings and saving properly can increase a woman’s chances of having enough money to last during her retirement. So because of our longevity, retirement savings is even more important for us. However, we often take breaks from those savings plans. By and large, women invest more conservatively than men also. So you really want to choose carefully where you, your money, and you need to learn how to improve your retirement and investment returns. And that’s one of the primary goals of Her Retirement – help you get educated about how all this stuff works and how it will impact your future. So I like to say, start here, start n; I’m going to go over eight questions to help you think about retirement and help you take charge of your financial future.


Number one, do you work for an employer that offers a retirement plan? If your employer offers a plan, join as soon as possible and contribute as much as the plan allows most employers with a 401k plan to match a fixed percentage of your contribution. The most common match I’ve seen is 50% of the employee’s contributions up to 6% of wages and salary. Most employers provide games of 50% or more. So that’s good news for us working folk. That’s like getting free money. Okay? So again, when your employer has a match, it is free money. It is a benefit of working for that employer. Take advantage of it. You don’t get the match. If you don’t put in, you have to put in to get the match. So you’ll always hear, contribute up to your 401k to at least get the match, and then anything over and above that is gravy.

I think Fidelity recommends that you should try to contribute 15% of your salary annually to your retirement savings. At the same time, all job categories may not be included in your employer’s plan, like maybe part-time or temporary workers. Your job may undoubtedly be included. You need to make sure you find that information out and prioritize it. Okay? Once it comes out of your paycheck, it will come out. You know, pre-tax. And so it’s going to go in there, not taxed, which is another huge benefit. And you don’t even see the money, so that’s why it’s essential to set up that automatic deposit into your retirement savings plan. You never even see the money. You’re not tempted by it to use it for anything else. Include it in your budget to make it happen. Remember, by saving early, you have time on your side, your savings will grow, and your earnings will compound over time.


Number two, have you worked at the job long enough to earn retirement benefits under some plans, such as 401ks or traditional pension plans? You have to work for a certain number of years. Let’s say like three before you become quote vested and can receive benefits. So that matching…it may take a while for that to kick in. Investing simply means that you’ve worked long enough to earn the right to benefit from a savings or pension plan. Too often, employees, especially women, quit work, transfer to another job, or interrupt their work lives just short of the time required to become vested. So make sure you ask your personnel office, plan administrator, or union representative about the vesting period at your employer and other plan details. Following number three, do you keep copies of the documents that define the provisions of your retirement plan?

Necessary, in addition to asking questions of company or retirement plan representatives, you should keep copies of the summary plan description, or S P D, and any amendments that are, um, distributed. The SPD is a document that retirement plan administrators must prepare and provide to you. It outlines your benefits and how they’re calculated. So it also spells out any financial consequences, usually a reduction in benefits. Suppose you decide to retire earlier, like earlier than age 65 and many plans, and you probably received a copy of the SPD when you joined the pension or savings plan. In that case, you can request copies of it from your employer or plan administrator. Also, remember to keep relying on, also remember to keep retirement-related records from all your jobs. They provide valuable information about your benefit rights. Even when you no longer work for the company.


Next, what happens to your retirement plan benefits? If you change jobs, this is a big one – people ask this a lot. You may lose the retirement benefits you have earned if you leave your employment before investing. However, once you’re invested, you have the right to receive your benefits. Even when you leave your job in such cases, the company may allow, or in some instances, they may insist that you take your retirement benefits and a lump sum. When you leave. However, other companies may not permit you to receive your money until retirement. The rules for your plan are spelled out in the SPD. And I wanna give you a word of caution. If you receive your retirement benefits in a lump sum, you take the money personally, like a check made out to you. You will owe income taxes and a penalty on that money.


A better option is to reinvest your retirement savings in another qualified retirement plan or an individual retirement account, also known as an IRA. This must be done within 60 days. Doing this will avoid heavy penalties and taxes, and you’ll keep your long-term retirement goals on track. Remember, changing jobs doesn’t mean you’re allowed to let your plan and savings contribute. Stop, start a new plan with your new employer. Keep your plan with your old employer, roll it over to your new employer. Lots of options. If you do wanna reinvest the money, you mustn’t receive the money directly. If you receive it directly, you’ll have to pay a 20% withholding tax on the amount you received and then file for a refund next year, proving that you’ve transferred the funds to an IRA.


So again, if you don’t do it within the timeline, you’re gonna have to go back and prove that you did. In fact, eventually, roll it over to a qualified plan. Instead, a better option is to take care of this before the 60 day EAPs. And you need to instruct the retirement plan to transfer your money directly to your new employer’s plan or an IRA you’ve established. Okay, very important. This is easy to do. You simply fill out some forms supplied by the new plan, whether it’s the IRA provider or the new employer, and they’ll communicate with your, your old employer, the old plan, they’ll get those monies transferred over. And if you want help with those things, you can talk to a representative of the plan or your new company, or perhaps you have an outside financial advisor who can help you.


So speaking of changing jobs, uh, queuing off of an article I saw on money dot coms week. I wanted to talk about what is going on out there in the world with retirement savings plans. In this great resignation that we’ve all heard about, people leave jobs in droves. Americans have left more than 1 trillion sitting in old 401ks. And this is, uh, based on a new study. Talk about forgetting something important. Now some of that money obviously might be there on purpose. People decide to leave their money with their old employers. Saving for retirement is a challenge these days. So as lifetime employment and pensions have largely disappeared from the workplace, we’re relying on these 401k plans. The average person changes jobs 12 times throughout their life. And if you’re lucky, some of these jobs have had an employer-sponsored retirement plan.


And if you’ve struggled to keep tabs on all those plans, guess what? You’re not alone. By the end of this year, like I said, Americans will have nearly 1.3 trillion left behind in retirement accounts that are connected to previous employers. And this is according to a new study by capitalizing, a FinTech company that authored this study. And it uncovered that almost a fifth of all the money American workers have in retirement accounts is tied up in old plans. And the estimated average size of those accounts is $55,000. So nothing that you should shake a stick at. And you know, this could have significant implications. If those monies are just kind of left to their own devices, they might not be invested appropriately. They could be subject to really high fees. And all of that is within your control. You control where your money goes when you leave your employer.


So what should you do with those old four OHK S if you’re lucky enough to have some? Okay, remember they don’t go with you when you leave the company. Okay. You…it’s on you. Um, and I know it can be overwhelming and confusing, but make sure you pay attention to that. And if you’ve already left and you have some old employers, you can go back, and you can kind of regroup and come up with a new plan and get those plans reviewed and decide to consolidate them. If you have at least 5,000 in your 401k, you’ll generally be allowed to leave your money where it is even after you move to a new job. So you can certainly leave your money with your previous employer. If you have less, sometimes planned administrators will force you to withdraw it.


If you’re comfortable with your old plans, fund selections, and fees, it might make sense to leave it there. Just leave it alone, as long as you don’t forget about it. And you know, that’s easier said than done as time passes, and you collect more accounts from different employers, but you have a few options. If you’ve lost track of your old accounts. There’s no federally, um, managed national database where you can go look up and see your retirement accounts. Um, the national registry of unclaimed retirement benefits might be able to help, and it’s run by the retirement benefit processor, pen checks. Um, they have an extensive catalog of retirement accounts. That’s updated weekly, and you can also contact your old employer and, you know, see what’s going on with your accounts. Once you’ve gotten a hold of your accounts, you’ll wanna check how much money they have in them, obviously, and how your investments are.


That’s so important. And if you’re paying low fees and getting the returns that match what’s happening in the market, and you know, if you’re happy with that, there might be no reason for you to move the account, at least not, you know, right away. And for ease of record-keeping, though, some people suggest that it’s best to roll over. That’s what it’s called. Rolling over your old 401k into an individual retirement account. Your money’s all in one place as you approach retirement, and it will be easier for you to manage. When I left corporate America, I think I had three or four um, different 401ks, and I rolled them into my own personal IRA. I have one account now; it is definitely easier. I don’t have to look at all these statements, and I don’t have to track fees and different retirement options.


It’s just one platform, much more straightforward. Uh, keep in mind that you can roll different types of retirement plans into one another. So let’s say you worked for a nonprofit job where you were in a 403B, which is the retirement savings, um, an acronym for four nonprofits. You can roll that money into a 401k. If you’re now working for a for-profit organization and the same rules, apply to go 401k to 403B. If you have left an employer at the end of the day. You’re not really sure where all your money is in those accounts. It definitely takes some time to gather them together, get some outside, help to decide on consolidating them or rolling them into your new employer’s plans. The next question is, do you know how you can save for retirement? Even if you don’t belong to an employer-sponsored retirement plan, anyone receiving comp or married to someone receiving compensation can contribute to a personal IRA.


In addition, if you were self-employed, you can start a SEP plan, a simplified employee pension plan, or a simple plan, a savings incentive match plan for employees of small employers. Say that 10 times faster than other retirement savings plans, there may be tax consequences and possible penalties. If you withdraw your savings early, the next question is, are you tracking your social security earnings very important because it’s all part of your retirement savings. More women than ever work. These days, they pay social security taxes and earn credit toward a monthly income at retirement. These earnings can mean some income in, in most cases, about 30 to 40% of your income may come from social security, but it will mean income for you and your family in the form of those monthly benefits. And if you become disabled and can no longer work, your survivors may be eligible for benefits if and when you pass.


Also, in addition, you may be eligible for social security benefits through your husband’s work and can receive benefits when he retires. If he becomes disabled or he precedes you, special rules apply. Suppose you and your husband have been employed and have paid into social security. In that case, special rules also apply if you are divorced or have a government retirement plan. To calculate your benefit estimate for social security, you can go to the social security administration’s website. Next question. Are you entitled to a portion of your spouse’s retirement benefit? Suppose you and your husband divorce as part of the, as part of a divorce or legal separation. In that case, you may obtain rights to a portion of your spouse’s retirement benefit, or he may be able to obtain a portion of your yours and most private-sector plans. This is done using a qualified domestic relations order issued by the court.


You or your attorney should consult your spouse’s planned administrator to determine what requirements this Q D R O must meet. And as a side note, we have certified financial divorce consultants that can assist women in the divorce process. And it’s really on the financial side lawyers deal mainly with the legal side, they do get involved in the financial aspects of it, but they are not qualified to provide that financial advice. So having that certified financial divorce consultant is another team member you should consider in your divorce proceedings. If you end up in a divorce situation, the final question is, are you aware of the rules that govern your retirement plan and your spouse’s retirement plan? When either of you dies, the rules differ between defined con and defined benefit plans. If you or your spouse belong to a defined benefit plan, or what is known as a traditional pension plan, the surviving spouse may be entitled to receive a survivor benefit when the enrolled employee dies.


This survivor benefit is automatic, and unless both spouses agree in writing to forfeit the benefit, you’ll definitely need to check the SPD or consult with the planned administrator regarding survivor annuities or other death benefits. Suppose you are a beneficiary under your spouse’s find benefit pension plan. In that case, you may request a copy of the S P D and other planning documents that describe your spouse’s vested interests or that describe your spouse’s vested benefits. You probably wanna make this request in writing, and you may be charged a fee for the information. Still, it’s essential to understand those benefits you may have access to. The rules may differ if you or your spouse participates in a defined contribution plan, such as a 401k, a. Againonsult, the plan administrator for details about spousal rights. And as I always say, in all my podcasts, a lot of this financial wellness stuff really starts with you.


It’s really up to you. It’s up to you to know more, get the facts, and understand what’s going on in your financial life. Once you’ve answered the questions that I reviewed in this podcast, you’re on the road to learning more about financial freedom as a source for women and men. The employee benefits security administration has issued a guide called savings, fitness, a guide to your money and your financial future, and taking the mystery out of retirement planning. Really cool little booklets. Um, obviously her retirement, the website, we have lots of information. I think I’m on the episode. We have our masterclass my podcast with. I don’t know, 43, 43 weeks going strong here. Um, but tons of resources on her retirement website. Some are free. Some there’s a fee for, but again, if you are committed to your retirement savings and securing yourself a more financially free future, you need to commit some time now to understand how to accumulate your retirement savings and make it last in retirement.


So many things, but you have resources. I can connect you to a network of experts who can give you financial, legal, and lifestyle advice. We are also here to provide education and coaching with our software, which will help you track your retirement savings plans, which is really important. So one way to not lose track of them is to keep track of them within her retirement software. Again, as I always say, if you have any questions, you can reach out to me at Lin, her retirement.com. It’s all about knowing more, having more, and getting her done. Thanks for listening. We’ll talk to you next week.


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