Money Power: 4 tips to help plan retirement strategy
BY JANE BENNETT CLARK Money Power
Sunday, January 27, 2013
1/27/13 at 4:19 AM
Preparing for retirement means saying goodbye not only to your co-workers and a steady paycheck, but also to employer-provided benefits such as health insurance and a 401(k) match.
Before you head out the door, it pays to squeeze a few extra pennies from your boss.
Time it right. Companies use various timetables to match employee 401(k) contributions and dole out profit-sharing. Don't leave before the last check has been written. Your summary plan description, provided by your employer once a year, will clue you in to the key dates.
Line up insurance. Fewer than 10 percent of private employers offer retiree health coverage, which coordinates with Medicare after you turn 65. If yours offers this insurance, grab it. If you retire before age 65 and can extend your regular employer health coverage through COBRA (you'll pay the full premium), it might be your best bet. But you may be able to find cheaper individual coverage on your own if you're in good health (go to tulsaworld.com/ehi for quotes). You may have purchased group-sponsored voluntary life insurance in addition to the life insurance provided to you by your employer. Such voluntary coverage is probably worth taking only if you still have a mortgage or kids in college.
Apply for your pension. Five months before you retire, ask your human resources office for an application and a statement that shows your benefit calculation and payout options. Your employer may give you a choice between a lump-sum payout and an annuity. With the annuity, you get lifetime income. With the lump sum, you can invest the money as you choose, but you also have the challenge of making it last as long as you do. If you choose the lump sum, be sure to have the plan transfer your money directly to an IRA.
Position your retirement stash. To preserve the pretax status of your savings, you can generally leave the money in your 401(k) or roll it into an IRA. The IRA gives you more investment freedom, but "the investment options inside your employer 401(k) are often cheaper than what you could buy on your own," says Marina Edwards, a senior retirement consultant with Towers Watson, a benefits-consulting firm.
Original Print Headline: Tips in planning your exit strategy
Jane Bennett Clark is a senior editor at Kiplinger's Personal Finance magazine. To send her a question or comment, go to tulsaworld.com/kiplingerfeedback.