So, why the push for early retirement? It is most common in the auto industry. Many American manufacturing companies are barely able to stay afloat. They need to trim costs. One of the easiest ways is with layoffs. Unfortunately, the workers costing these financially strapped companies the most money are those who have been with the company the longest. Most are in their 50s. If you are one of those individuals, your employer may suggest early retirement or push for it. Yes, early retirement does sound nice, but is it right for you? What happens to and how does this influence your 401k plan?
First, take your age into consideration. Most individuals wait until they are between the ages of 60 and 65 to retire. This is when most can dip into their 401k plans, Individual Retirement Accounts (IRAs), and collect Social Security. If you are 52 years old, you may have planned to work at least 8 more years. 8 years is a long time. Your plan was to work these years. You anticipated having steady income and more additions to your retirement accounts, like your 401k.
One of your options is to take an early withdrawal from your 401k plan. Unfortunately, you will be charged penalties. There is 10% charge for early withdrawals. The money in a 401k is tax sheltered, until used. For that reason, you will not only be charged an early withdrawal fee, but you must pay taxes on that money. How much does that leave you? A 10% early withdrawal fee may not seem like much, but it is money you are losing. Most importantly, since you are considering early retirement, you need to account for those added years. Remember, your plan was to work until 60 years of age. That leaves 8 years of life financially unaccounted for. How will you survive? You better know before accepting an offer of early retirement.
An employer can suggest early retirement, but you have the option to deny that request. However, the offer was made for a reason. As an older, long term worker, you are costing your company money. You are paid more than recently hired employees. If you do not accept early retirement, you may still find yourself in the unemployment line. This does however give you the opportunity to find a new job. If your new employer offers 401k and has a solid program, you can do a rollover. Your funds and investments will switch hands. Continue working until you reach your planned retirement age and live off your retirement without the added risks and penalties.
If you find yourself faced with unemployment or early retirement, take a step back and look at the situation as a whole. Learn more about self directed ira llc and self directed 401k at mywayira.com
Article Source: ArticleRich.com