Project Retirement

First, Choose a Custodian

There are many choices for who will hold your money including banks, mutual funds, and brokers. Not surprisingly, each has its relative advantages, not to mention its particular fee and commission structures. To make the right decision, it’s important for you to get several pieces of information.

Broadly speaking, you have three custodian choices: banks, mutual funds, and brokerage firms.

Banks frequently offer lower account minimums, so they may be a great choice if you have just a small amount to invest. Just make sure they have the investment options you need and watch their fees, especially any fee specifically for a small balance account.

Directly investing with mutual funds can be a good choice too as it helps to keep things simple. Most mutual fund families offer enough investment choices for you to find the appropriate option for you but not so many as to become overwhelming. Like with banks, be sure to evaluate mutual funds’ fees and commissions. In addition, compare the expense ratios between mutual funds. There can be enormous differences. You’ll often find that index funds have much lower expense ratios, often with superior recent performance. (Although, of course, past results are not an indication of future performance.)

Brokerage firms usually offer the most choices for your investments, so those people looking for anything sophisticated will almost have to start here. Even those whose needs may be more basic may find that a brokerage is still a great place to begin, especially as account balance minimums have fallen in recent years.

Second, Fill Out Their Forms

Once you’ve selected your custodian, you’ll have to fill out some fairly basic forms. Just take your time and answer the mostly demographic questions. You can do this online, at a branch, or even a combination (print them out online and then mail or hand them in). Once your completed forms have been processed, you’ll get confirmation that your account is open and receive an account number!

Third, Fund Your Account

The next thing you’ll need to ensure is that the money you’ve set aside finds its way into your IRA. To do so, you’ll typically need to mail (or hand) a check representing your initial deposit. Afterwards, you can often set things up so that you can make future deposits electronically.

Last, Invest Your Money

Now that your money is in your brand new IRA, don’t forget to invest it. After all, when your money is first received into an account, it’s still cash. You need to provide instruction for what types of investments to purchase. You’ll need to make sure you properly allocate your assets as part of this process. For the equity piece, an index fund is a wonderful way for new investors to begin.

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Retirement Memoir Guidelines
1. The retiree’s titles must match the titles that appear in Wolverine Access (unless any of those
titles are found to be in error).
2. Emeritus titles in general should match titles in introductory paragraph unless a title does not
carry over into emeritus status.
3. The second paragraph must include degrees (type, date received, institution), history at the
University (date hired, all job titles/promotions, and dates). All information must be
verifiable from information available on official records. This includes the names of any
awards received from the University or elsewhere.
4. Names of all awards, titles, degrees, and institutions must be checked and must be official
(e.g., “The Ohio State University,” NOT “Ohio State”; “The Johns Hopkins University,”
NOT “Johns Hopkins”). If in doubt, almost all of these things can be verified on institutional
websites.
5. Capitalization, abbreviations, punctuation, etc., generally follow guidelines outlined in the
Chicago Manual of Style. Titles are only capitalized if they refer to a specific person or the
official name of an office or department, e.g.,
“Provost Sullivan attended the meeting.”
“The provost and the vice president for research attended the meeting.”
“She works in the provost’s office.”
“She is an administrative associate in the Office of the Provost and Executive Vice
President for Academic Affairs.”
6. Memoir must fit on one page in 12-point, Times Roman font, with 1” borders.
7. Please include the name and phone number of the person who prepared the memoir, in case
there are any questions.

In a press release, the IRS announced it will leave the 401k limit at $15,500 for 2008. The annual limit on catch-up contributions for those 50 and over will remain unchanged at $5,000.

Your 401(k) fund pre-tax contribution limits set by the IRS for 2008 are:

# $15500 for those under 50 years of age

# $15500 plus $5000 additional catch up contribution for those over 50 years of age

There are several different limits that apply to a 401(k) plan in addition to the overall contribution limit. These limits could result in a contribution limit less than that specified by the IRS. Your plan administrator should have written information about your particular plan that explains these limitations as well as other regulations that apply.

To maximize your 401(k), you should try to contribute the maximum amount you are allowed each year.

Resources:
IRS
PlanAdviser

A 401K plan is a company sponsored qualified retirement plan for employees. Contributions and earnings in a 401K plan are not subject to federal and most state income taxes until the funds are withdrawn. A 401K plan allows you to save money on a pretax basis with most employers contributing matching funds to make the plan even more lucrative. Usually you will have the option to decide how much you contribute (up to the maximum allowed by the government) and where you will invest your contributions (from a list of funds provided by your plan sponsor).

You can find out when you are eligible to start participating in your company’s 401K plan from your benefits coordinator. Once you are eligible to sign up, you will be given a list of funds in which you can invest. You can invest up to the yearly maximum allowed by the IRS. In the calendar year you turn 50, there is a catch-up amount you can invest in addition to the maximum for each year.

Your contributions are deducted from your pay check before taxes are withheld. These contributions are then invested into the funds you select from the sponsor's list. Your employer’s matching funds are also invested at the same time.

Most fund sponsors have a web page where you can access your account, change your investment options, and maintain your account information. You will also receive a statement of your account periodically showing how much your plan is worth along with an accounting of your investments. You should study this statement to be sure your investment strategy is working in your favor.

The best way to maximize your 401K investments is to participate in the plan. Check with your benefits coordinator to find out if and when you are eligible to start participating in the 401K plan. Next, you should contribute the maximum you can afford up to the limits placed by the government or your plan. At least contribute the amount necessary to get the company matching funds. Consider your contribution a payment to yourself and the matching funds an extra bonus. The earlier you start to contribute to any retirement fund, the more money you will accumulate at retirement. Starting early will also allow for recouping fluctuations in the market. Learn all you can about the funds offered for investment so you can make the best choice possible. Continue to research the funds offered so you can be ready to rebalance your plan if necessary.

Each company has a vesting process and it is to your benefit to understand exactly when you will become vested. The vesting schedule outlines how much of the company matching contributions and earnings on those contributions that you own at any given time. If you leave the company before you are fully vested, you will lose the unvested portion of the money in your plan.

Some 401K plans allow for hardship withdrawals. If you have a qualified hardship and decide to withdraw from your fund, the withdrawal is taxable and your ability to contribute to the fund is suspended for six months. If you are under 59 1/2 you will have to pay a 10 percent penalty unless the money is for certain medical expenses or a disability. Some 401K plans offer participants the benefit of borrowing against retirement savings. Plans usually allow you to borrow up to 50 percent of your vested assets up to $50,000. You usually must repay the loan in equal payments over a five year period using payroll deduction and you can repay the loan in full at any time. Check with your benefits coordinator for your company's policy on loaning money from the 401K plan.

Once you have started participating in a 401K plan, you should check to see if you need to rebalance your investments on a regular basis. Most companies will have a yearly open enrollment period at which time you can discuss your retirement goals with the plan sponsor. Once you have reassessed your goals and your risk factor, you can look at your investments to be sure you have the correct balance.

A 401K plan is an important part of retirement planning. You should learn everything you can from your employer about the plan that is offered. Gather information on such things as vesting, contribution limits, and matching funds. Research all available information on the funds offered for investing. Track your investments regularly and ask for assistance if you feel your investment options aren't performing satisfactorily.

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