Each month we provide our plan sponsor clients with a participant ready communication piece. All participant corner documents are saved to your Fiduciary Briefcase. Once logged into your account, click on Briefcase > Participant Services > Employee Memos.
To download a copy of this Participant Corner Memo, click here to login to your fiduciary briefcase, or contact info@definedplanadvisors.com to get a pdf version that you can distribute to your employees.
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For many Americans, working to or through “traditional” retirement age may be the right choice based on their goals, personality, passions, and priorities. But for others, early retirement may be the preferred path.
Whatever your timeline, retirement requires thoughtful planning. If you're hoping to retire early or just preparing for the possibility that retirement may come sooner than expected, asking yourself questions like these can help you make more informed decisions:
- Can your savings support a longer retirement? Retiring early means your savings may need to provide income for more years. Estimating how much you'll need can help you determine if your savings could support your desired lifestyle and weather the potential impacts of market downturns and changing inflation rates.
- Are you aware of the penalties that may apply to early withdrawals from your retirement account? In general, withdrawals from an employer-sponsored retirement plan before age 59½ are considered early distributions and are subject to an additional 10% tax unless specific exceptions apply. Planning how to manage or avoid these taxes can be an important part of your retirement strategy. The IRS provides information on early withdrawal exceptions on its website.
- How will you bridge the gap until Social Security, Medicare, and other benefits kick in? If you retire before becoming eligible for these benefits, does your savings plan account for how you’ll generate enough income to pay for healthcare and cover other living expenses in the meantime?
- Are you prepared for unexpected expenses? Even the best retirement plans can veer off track when unplanned costs arise. Maintaining an emergency reserve can help you cover unexpected expenses without throwing off your long-term retirement budgeting strategy.
- Have you communicated and coordinated your goals with your loved ones? Aligning around retirement timing, income needs, healthcare coverage, and financial goals can help ensure everyone feels aware of, and confident in, the plan. These important conversations can help you determine the best time for each partner to claim Social Security benefits, plan for private health insurance if one person becomes eligible for Medicare before the other, and develop a tax-efficient withdrawal strategy.
If retiring early is your goal but you're not quite there yet, make the most of the resources available through your employer-sponsored retirement plan. Your workplace retirement account website or mobile app may offer tools to help you model different retirement scenarios.Depending on your age and plan features, you may also have access to employer matching contributions, automatic annual contribution increases, and catch-up contributions.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. This material is provided for general and educational purposes only. It is not intended to provide legal, tax, fiduciary, or investment advice. If you are seeking legal, tax, or fiduciary advice, consult an appropriate professional.