Savant Wealth Management

After years of full-time employment, it’s easy to get used to receiving a regular salary, employer-sponsored retirement plan, health insurance, life insurance, and sick days. As you prepare to retire, review these common traps and address any issues now so you can increase your chances of avoiding them.

Trap #1: Insufficient cash account balance

When you’re retired, the bank may not give you the same consideration for a loan as you received when you were a full-time employee. It could be more difficult than you think to get a loan post-retirement.

Now is the time to accumulate as much cash as possible in your bank account or negotiate a line of credit. Don’t assume that your IRA or other retirement account is a cash source. The bank cannot accept your retirement plan as collateral.

Trap #2: Losing Your Benefits

Replacing the benefits and paycheck once provided by your employer becomes a primary objective for many as they reach retirement. Most people have three major assets:

  • Their retirement account, which could consist of $1 million or more
  • Their home
  • Their group life insurance program

Remember to replace your life insurance before you retire! Don’t forget that the life insurance policy provided by your employer will terminate when you retire. Take precautions — either extend your coverage within the benefits program or secure your own private policy to retain that life insurance.

Trap #3: Losing Sight of Your Tax Bill

Tax planning is an essential part of financial success. Most investors focus on achieving a higher return on their portfolio or a higher interest rate at the bank. It’s easy to forget that lowering your tax bill can also impact your bottom line.

Trap #4: Rolling Over Your 401(k) Assets into a More Expensive Account

A 401(k) rollover is when you move money from a 401(k) into another tax-advantaged retirement account. The potential benefit — if it’s done properly — is that the money is transferred from the retirement account to the IRA without tax consequences. Another potential benefit of a rollover is that an IRA can be self-directed. Before you make any decisions, be sure to do your homework as this may not be the best option for your personal situation.

If you’re changing jobs, you’ll want to consider how the fees and expenses in your new employer’s plan compare to other options such as an IRA. Because IRAs offer a wider variety of investment options, you’ll want to check the transaction fees, commissions, and mutual fund expense and load ratios. Even a 0.1% difference in fees can impact the eventual value of your investment portfolio.

Are You Prepared for Retirement?

Any one of these traps could significantly impact the quality of your retirement. In addition, there are other moving pieces to consider as you start planning your transition into retirement: Social Security, healthcare, and Medicare, to name a few.

About Savant Wealth Management

Savant Wealth Management is a leading independent, nationally recognized, fee-only firm serving clients for over 30 years. As a trusted advisor, Savant Wealth Management offers investment management, financial planning, retirement plan and family office services to financially established individuals and institutions. Savant also offers corporate accounting, tax preparation, payroll and consulting through its affiliate, Savant Tax & Consulting.

©2022 Savant Capital, LLC dba Savant Wealth Management. All rights reserved.

Savant Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments and/or investment strategies recommended and/or undertaken by Savant, or any non-investment related services, will be profitable, equal any historical performance levels, be suitable for your portfolio or individual situation, or prove successful. Please see our Important Disclosures.

A client or prospective financial advisory client leaving an employer typically has four options regarding an existing retirement plan (and may engage in a combination of these options): (i) leave the money in the former employer’s plan, if permitted, (ii) roll over the assets to the new employer’s plan, if one is available and rollovers are permitted, (iii) roll over to an Individual Retirement Account (“IRA”), or (iv) cash out the account value (which could, depending upon the client’s age, result in adverse tax consequences). If the financial advisor recommends that a client roll over their retirement plan assets into an account to be managed by the advisor, such a recommendation creates a conflict of interest if the advisor will earn new (or increase its current) compensation as a result of the rollover. When acting in such capacity, a registered investment advisor serves as a fiduciary under the Employee Retirement Income Security Act (“ERISA”), or the Internal Revenue Code, or both. No client is under any obligation to roll over retirement plan assets to an account managed by a financial advisor.