TCU

Changing Jobs?  Retiring?
Don’t Leave your Retirement Plan Dollars Up in the Air

If you’re changing jobs or retiring, you're in the midst of an enormous change.  You should seriously be considering what to do with your money in your employer’s pension plan, 401(k), 403(b)/TSA or 457 plan.  After all, it’s probably one of your biggest assets.  The wrong move could cost you thousands and greatly affect the quality of your retirement years.

Generally, there are four options for your retirement plan:

1. Leave it in your former employer plan
2. Transfer it to your new employer plan
3. Roll it over to a traditional IRA
4. Cash out and pay taxes and possibly penalties

Each decision has its pros and cons.  Need help deciding what option is best for you?  Contact TCU Investment Services for a no-cost, no-obligation consultation. B2MM-0405-2BA8

Rollover IRAs Put You in Control

When you leave a company, one of the most important decisions you have to make is what to do with your 401(k) account. You have several options--you can leave the account where it is (depending on the amount), roll it into a traditional IRA (individual retirement account) or rollover IRA, roll it into your new employer's plan or cash it out.

Unless there's a dire emergency; financial experts recommend not cashing out a 401(k) account. When you cash out a 401(k) account, you'll have to pay ordinary income tax, plus a 10% penalty, and state and local taxes on your 401(k) distribution. That will leave you with only 40% to 60% of your 401(k) savings, depending on your tax bracket.

By rolling your 401(k) account into an IRA, you can take control of your retirement money and invest it the way you want to. An IRA is one of the safest and most convenient ways to invest your retirement money.

Financial Tips for Turbulent Times

Whether you're an older worker with seemingly few options to recoup significant investment losses, or a younger worker with minimal or no investment savings at all, don't let the financial crisis scare you into not taking any action at all.

Take stock of your situation, learn from others' mistakes, and don't panic or pull all your money out of the stock market. Formulate a plan by starting with the basics:

• Rebalance your portfolio. Do your investment choices reflect your risk tolerance and investment strategy?
• Keep some liquidity. Consider stashing some cash perhaps three to six months' of living expenses in a TCU Money Market account which is insured to at least $250,000 by the National Credit Union Administration.
• Increase your contributions. Most stock prices are at low, bargain-basement levels. If possible, bump up your contribution.
• Diversify. Spread your wealth among a variety of investments: domestic, international, financial services, technology, health care, and so on.
• Use dollar-cost averaging. By having just $50 each paycheck automatically directed to a mutual fund, your contributions will purchase more shares when the price is low, and fewer shares when the price is high.
• Pay down debt. Reduce the chokehold credit cards have on your budget. Use the PowerPay principle: Pay off the highest interest-rate card first, and then apply that payment to the next-highest interest-rate card. Stop charging.
• Spend less. Identify needs vs. wants, and then set priorities. Many so-called needs actually are wants in disguise.
• Work longer. If you're close to retirement, consider hanging on to your current job longer than planned, if you can. Or, secure part-time work after retirement. This reduces the number of years you'll dip into your investments and helps build additional savings.

TCU is ready to help during these tough times. Call or stop by today.