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Financial Fitness Challenge September—Review Your Retirement Plans
by Susan Tiffany, CCUFC
Introduction
There's some logic to looking at this month's Financial Fitness Challenge during harvest time. You could think of September as a metaphor for the years approaching your retirement—time to review those retirement plans and see what your harvest is like. Here's what to look at:
- A month or so before your birthday each year you receive a statement from the Social Security Administration about your anticipated benefits. Look at your summary and see if there are any errors. The statement will give you instructions about how to proceed if you see problems.
- Review recent statements for your 401(k), 403(b), and the like. Keep a few key points in mind:
- Are you contributing enough to meet your personal retirement goals? If not, examine your budget and see how you can increase your contribution each paycheck. If you're 50 or older, you might be eligible to make catch-up contributions.
- Smart habit: If you're still a young worker, make a goal to increase your contribution by one percentage point each year until you hit the max. For example, someone who starts contributing 5% of a $50,000 salary annually to a 401(k) at age 30, and keeps the contribution the same for the next 30 years, would have $305,865 at age 60.
But if that person at age 30 increases her contribution by 1% for the next 10 years, and keeps the contribution at 15% for the next 20 years, she would have $694,133 at age 60--more than doubling her nest egg. Both examples assume an average portfolio return of 8% with a mixture of stocks and bonds.
- How long has it been since you rebalanced your portfolio? Over time, have the balances in your plan shifted too much from your preferred allocation? If yes, rebalance to bring all the components back in line with your goals and risk tolerance.
- Examine the summary plan description you receive from your employer or plan provider. This important document details your company plan and tells participants what the plan provides and how it operates. It will explain when you become eligible to participate, how benefits are calculated, when you become vested, and how to claim your benefits. If your plan changes, you must be informed. These documents are free to participants.
Monthly maintenance
This month's basic maintenance task is to request a free copy of your credit report. Get your free TransUnion credit report at annualcreditreport.com, and check it for accuracy. Or, you can call TransUnion toll free at 800-916-8800.
You may recall that we began in January by getting a free report from Equifax; in May, we requested the report from Experian. The FACT Act requires each credit-reporting agency to provide you one free copy of your report each year. The idea is to stretch out your free annual requests, asking for one every four months. This way, you monitor your credit reports for mistakes and signs of identity theft or fraud year round.
The most important element of a strong report: Do you pay your bills, on time, all the time? If you do, you'll stay out of trouble and lenders will be happy to see you come in the door.
Remember that the whole point of the Financial Fitness Challenge is to help you make good habits that will help you achieve your goals. Don't neglect your retirement preparation because you think it's too hard or that retirement is too far in the future.
The good news—it's never too early, and it's never too late. And the people at your credit union are always ready to help.
ST
Susan Tiffany, CCUFC
askem@cuna.coop
Published September 1, 2007, Reviewed January 14, 2008
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