A good retirement plan can make the difference between enjoying life to its fullest and struggling to maintain an acceptable lifestyle. Here are eight things to look for in a good retirement plan.
When it comes time for you or your financial advisor to invest, what matters most is how much money you'll end up with at the end of your career after fees and other charges have been paid. If your investments don't produce solid gains, you could come up well short of your goal. On the other hand, significant returns can more than make up for the lack of other advantages.
What good is a retirement plan if it locks you into one option forever? There are so many things that come up in life – getting married or divorced, having children, moving to another country – and your investment strategy should reflect this. A good plan will allow you the flexibility to invest, but makes sense to your current circumstances. You don't want to end up like some people who put all their money into real estate in the 80s because they thought it would be a good idea, only to watch the market tank.
Two main costs can eat up your retirement savings: investment fees and administrative/account maintenance fees. Investment fees can slow down growth, so you're essentially losing money if you pay them! Administrative/account maintenance fees might seem small at first, but over time they add up. Check how much these will cost before signing on the dotted line.
Penalties can cause significant problems for people who make mistakes early in their professional careers – like borrowing money from their retirement plan to buy a house and then coming up short financially later on in life. Most programs will let you withdraw funds free of penalty after age 59 ½ but take a look at your plan's rules to determine what fees are associated with withdrawing earlier.
The hours it takes to manage your retirement account can add up over the years, especially if you have more than one account. If possible, ask about ways that you can access your money without having to spend hours in line at the bank or making appointments with customer service representatives!
· Intuitive. The program that offers your plan, for instance, CalSavers retirement plans, should strive for simplicity in all areas! It would help if you didn't have to be an investment professional to understand where your money is being stored and who has access to it. Make sure the plan is transparent and straightforward so that you'll have a better idea of what's going on with your money!
If you're concerned about running out of money in your old age, make sure to look at any minimum withdrawal requirements when you take your assets from your initial account. Many plans require beneficiaries to withdraw an amount equal to 100% of the balance within five years, or else pay taxes and penalties on it!
A good retirement plan should also help fill in the gap left behind by Social Security. Look for a program that offers an automated way to supplement your Social Security. If you can't do this, make sure to fill out the paperwork (and report any income) when the time comes!
A good plan should include all of these things and commit to helping its employees find financial success in retirement. Ensure that there is plenty of flexibility regarding withdrawals and rollovers, which can be difficult if they have set criteria for getting out of the plan.