Taking Your Retirement Benefit With You

First Financial Consultants • January 2, 2021

This article is from: What You Should Know About Your Retirement Plan, U.S. Department of Labor, Employee Benefits Security Administration


If you leave an employer before you reach retirement age, whether or not you can take your benefits out and/or roll them into another tax-qualified plan or account will depend on what type of plan you are in.


If you leave before retirement, can you take your retirement benefit with you?


If you are in a defined benefit plan (other than a cash balance plan ), you most likely will be required to leave the benefits with the retirement plan until you become eligible to receive them. As a result, it is very important that you update your personal information with the plan administrator regularly and keep current on any changes in your former employer’s ownership or address.


If you are in a cash balance plan, you probably will have the option of transferring at least a portion of your account balance to an individual retirement account or to a new employer’s plan.


If you leave your employer before retirement age and you are in a defined contribution plan (such as a 401(k) plan ), in most cases you will be able to transfer your account balance out of your employer’s plan.


What choices do you have for taking your defined contribution benefits?


  • Leave Alone – you can choose to leave the money in your former employer’s plan, if permitted.
    A lump sum – you can choose to receive your benefits as a single payment from your plan, effectively cashing out your account. You may need to pay income taxes on the amount you receive, and possibly a penalty.
  • A rollover to another retirement plan – you can ask your employer to transfer your account balance directly to your new employer’s plan if it accepts such transfers.
  • A rollover to an IRA – you can ask your employer to transfer your account balance directly to an individual retirement account (IRA).


If your account balance is less than $5,000 when you leave the employer, the plan can make an immediate distribution without your consent. If this distribution is more than $1,000, the plan must automatically roll the funds into an IRA it selects, unless you elect to receive a lump sum payment or to roll it over into an IRA you choose. The plan must first send you a notice allowing you to make other arrangements, and it must follow rules regarding what type of IRA can be used (i.e., it cannot combine the distribution with savings you have deposited directly in an IRA). Rollovers must be made to an entity that is qualified to offer individual retirement plans. Also, the rollover IRA must have investments designed to preserve principal. The IRA provider may not charge more in fees and expenses for such plans than it would to its other individual retirement plan customers.


Please note: If you elect a lump sum payment and do not transfer the money to another retirement account (employer plan or IRA other than a Roth IRA), you will owe a tax penalty if you are under age 59½ and do not meet certain exceptions. In addition, you may have less to live on during your retirement. Transferring your retirement plan account balance to another plan or an IRA when you leave your job will protect the tax advantages of your account and preserve the benefits for retirement.

Oh No! I Haven't Saved Enough!

By First Financial Consultants • January 2, 2021
The reality of retiring at the age of 65 seems to be a thing of the past. Millions of Americans are entering retirement age without enough funds to allow them to live the lifestyle they once had. Even though we are all told to start investing early in life, many don’t for one reason or another. Some had a good plan of saving, but something happened and they lost their nest egg. I have talked to many people over the years who wished they saved more or wished they had started earlier. Just know this, IT IS NEVER TOO LATE TO PLAN AND SAVE. Don’t dwell in the past and think “If only I…” This will paralyze you when thinking of the future. I have people contacting me in their 50’s or even 60’s who are concerned they hadn’t saved nearly enough and would never be able to retire. We take a look at their total picture and even though early retirement may not be a reality, we make a plan. Here are a few tips Look at Your Current Situation Be realistic and determine how much money you will need to save to live a comfortable retirement. Once you’ve come up with a number, take action immediately to create your savings plan. Really look at your spending habits. Are you a shopaholic and have a closet full of clothes that still have the price tag attached? Look for ways you can cut back on spending. Look at Your Savings Options It is critical to start saving as fast as you can. If you already have retirements accounts you will want to make sure to max out your yearly contributions. You may also need to open additional accounts in order to save what you need. A diversified portfolio will help a steady return on your contributions. Look into Money Saving Options If you struggle in saving the amount of money you need each month there may be creative options to boost the amount in your account.  Ask yourself: Can I downsize? Look at your current living situation. Have the kids moved out and there is no longer the need for such a large living space? Do you have large ticket items you no longer use or need? For example, assess if you really need that boat that hasn’t even touched water since the summer you bought it. Or, reevaluate the reality of when you’ll actually use the RV that hasn’t logged any miles for years. It isn’t too late to take charge of your financial future. But, only you can make it happen. Instead of thinking, “I coulda”, I shoulda”, or “I woulda”, take control. Get help in your financial journey and plan for a comfortable future.

What is Your New Year Resolution?

By First Financial Consultants • January 2, 2021
Every year, I set aside time between Christmas and New Year’s to evaluate last year and plan for the next year, personally, professionally and financially. The New Year sparks a new beginning and in turn sparks a whole slew of resolutions. The top seem to be: Lose Weight, Get Fit, Get Organized, and Spend More Time with Friends and Family. When you are considering your resolutions, I challenge you to think of them in a different light. Lose Weight Immediately we seem to draw our focus on trimming our waistline, but what about the weight of debt? Debt can weigh heavily on your mind and be an obstacle of reaching some of your goals. Resolve to eliminate debt. Create an action plan to pay off your credit card debt as soon as possible and defer any major purchases until you can pay for them with cash. Work to develop the habit to track monthly expenses and develop a budget. Pay off your highest interest rate cards first. Use any available discretionary cash flow to whittle the debt away. Already been doing this? Then it’s a perfect time to review what you’ve accomplished. Look at the numbers and see where you were last year at this time and where you have come. Evaluate to see if any adjustments need to be made. Get Fit Don’t just think about getting on that treadmill or taking that Yoga class to get physically fit, also think about getting financially fit. In order to reap the benefits of exercise, you’ll need to create a plan and stick to it. Becoming financially fit is the same way. Create an easy plan with attainable goals to keep you motivated. Get Organized Dealing with stacks and clutter that may be in your garage or home may be a priority, but don’t forget about organizing your financial affairs. With tax time just around the corner, don’t just pile up your year-end investment and bank statements. Instead take a look at them and make sure your allocations line up with your goals. When it comes to estate planning, are your papers in order? Review your wills, living wills, health care proxies, power of attorney, and trust documents. Make any needed changes to beneficiaries on your life insurance and retirement plans. Spend More Time with Family and Friends Time with the people that matter the most to you is priceless. A little bit of time spent on financial planning and reviewing will help you stick to your goals and, in turn, free you up to spend time on the things that matter the most to you. So remember, as the year draws to a close, it is the perfect time to reflect back on the last year and look forward to the next and evaluate what changes one needs to make. 

Stay Healthy With Annual Exams

By First Financial Consultants • January 2, 2021
Keeping up with your health and scheduling your annual wellness exam is crucial, but what about you keeping up with your financial health? It is just as crucial to have your annual review to make sure you are evaluating and adjusting your goals and your strategies align with those goals. Five things your financial check-up appointment evaluates: 1. Have your goals or investments changed? The only thing constant in life is change. If your situation has changed, you may need to make adjustments in your portfolio. Your annual financial review would re-evaluate each of your priorities. 2. Is your estate plan out of date? The biggest threat to an estate plan is neglect. Your annual review is a perfect time to make sure your plan continues to reflect your current family status and financial situation. You are able to ask questions and ensure that you are tapping into the best use of the latest estate and tax laws. You also ensure that key individuals know where to find relevant documents and information. 3. Are you paying more taxes than necessary? Your annual review is the perfect time to ask about tax-efficient strategies you might be missing. You will review the types of accounts you invest in, and when to sell or hold your investments. 4. Do your insurance or beneficiaries need updating? When major life event like change in marital status, the birth of a child or a death occur, most people remember to adjust their will. However, many overlook other important contracts and accounts, such as life insurance, 401(k) plans, and IRAs. Remember, assets in your retirement accounts pass directly to the beneficiaries you designate and your beneficiary designations could supersede any accommodation you have made in your will for your retirement account. 5. Does your retirement plan reflect your latest priorities? Priorities change. Last year you may have planned on selling everything you have and roam around the country in an RV, until you had your first grandchild. As your perspective changes in life, so should your strategies. Keeping your annual review appointment will help you assess your retirement plan both from a lifestyle and financial perspective. Life is busy, but making the time on an annual basis will help keep you up-to-date on your financial health and staying on course to meet your goals.