This series has been filled with lots of information. Hopefully, the information has been helpful and not confusing.

With so many options, one can get lost and lose hope. My goal is to present the material as thoroughly as possible without overwhelming you with information. 😉

We began this retirement category with an overview, the types of accounts, and allocating your money.

Once you have your retirement plan and diversified your contributions, the next step is designating your beneficiaries.

Selecting Beneficiary Designations

Beneficiary Defined

In the event of your death, your beneficiaries are the people, trusts, or estates to whom you leave your benefits. You will need to designate at least one beneficiary for each retirement account.

Beneficiary Types

There are two types of beneficiaries: primary and contingent.

Primary

A primary beneficiary inherits the retirement benefits immediately upon the death of the account holder without going through probate and without consulting the will. Even if the account holder’s will gifts the retirement account to another, the benefits fall to the primary beneficiary.

One can name more than one beneficiary giving each a percentage of the benefits, but the total percentage must equal 100%. For example, Uncle Bob – 50%, Aunt Mary – 30%, and Cousin Joe – 20% = 100%.

If an account holder names someone other than a spouse as a primary beneficiary, most providers will require written permission from the spouse before accepting the beneficiary.

Contingent

The contingent beneficiary will receive the benefits if the primary beneficiary is unavailable or unwilling to do so. You may name more than one contingent beneficiary, but you must select the percentage per beneficiary. In some cases, you may name a second contingent beneficiary in the event the primary and the first contingent cannot accept the benefits.

Beneficiary Selection

If you are married and have an established trust, make your spouse your primary beneficiary and the trust your contingent beneficiary. If you have children, you might consider making your spouse your primary beneficiary, your children by percentages your first contingent beneficiaries, and then your trust your second contingent beneficiary.

If you have a trust, then contact the attorney who established it to ask for guidance regarding naming your beneficiaries. Each state or commonwealth handles probate, wills, and beneficiaries differently. Your attorney can advise accordingly.

Beneficiary Update

In the event of a birth, death, or divorce, you may need to update your beneficiary designations. As a general rule, check your beneficiary designations annually.

In using time wisely, check your retirement accounts for your beneficiary designations. If needed, make any necessary changes and keep copies or e-mails of all correspondence.

Weekly Project: Update your retirement beneficiaries.

As we continue organizing our important documents, designating and updating our beneficiaries guarantees our primary beneficiaries the benefits of our accounts. You have worked so hard to choose the right investment and allocated your contributions. Take time to designate your beneficiaries to guarantee those benefits to those you love. Happy designating!

Question: How often do you check your beneficiary designations? 

In working through our important documents, I am taking a bit more time on the retirement category to explain some very confusing aspects of investing.

Though I am not a financial adviser, I have been through this process. I know how confusing it is, and how much easier it is when you know your options.

Though I cannot choose for you, I can point you in the right direction and offer encouraging words along the way. 🙂

As we continue organizing our important documents, we are working on the second category of retirement plan documents in File Box 3. After the overview, we looked at the different types of retirement accounts. Today, we will consider how to allocate your money in those accounts.

Allocating your Money

Employer-sponsored Plans

When we signed up for our employer-sponsored plan, we had to choose how to diversify or invest our contributions. Honestly, this was the hardest part for me. I researched and found a breakdown I felt comfortable doing. Then I consulted my uncle to confirm my choices before forging ahead. This table from  Personal Finance for Dummies by Eric Tyson provided the guidance I needed: 

At the time we setup our accounts, we chose the 25-year-old allotment recommendations. In the next few years, we will adjust to the 45-year-old recommendations.

We looked among the available funds offered through our employer-sponsored plan and found a reliable balanced fund, larger company stock fund, smaller company stock fund, and international stock fund. By going a quick search on Swag Bucks, we found options we liked. The chart guided us to our choices.

Individual Retirement Accounts

Unlike the employer-sponsored plan, the individual retirement accounts can be setup at any financial institution. Though having so many options, making this choice was actually less complicated for me.

I knew from all the reading I had done that we wanted to invest in mutual funds. A mutual fund is run by a fund manager. Many investors pool their money together to purchase the securities and each owns a part of the whole. So, with a small investment, you can own shares of a fund that your one investment would never have been able to purchase alone.

Knowing we wanted mutual funds, we just looked for no-load options. This means that there is no commission charged. We chose Vanguard which is the largest no-load fund company and consistently has the lowest operating expenses in the business. By going with Vanguard, we keep more of our investment rather than paying high fees and expenses.

The recommendations from Eric Tyson we used to decide were the conservative portfolio and aggressive portfolio:

Conservative Portfolio – 50% stocks and 50% bonds

For example: Vanguard Total Bond Market Index – 25%, Vanguard Star – 55%, and Vanguard International Growth or Vanguard Total International Stock Index – 20%

Aggressive Portfolio – 80% stocks and 20% bonds

For example: Vanguard Star – 50%, Vanguard Total Stock Market Index – 10 to 20%, and Vanguard International Growth – 30 to 40%  OR Vanguard LifeStrategy Growth – 100%

Making these decisions is a prediction. We do not know what the market will do, but we chose based on the recommendation we had. Thus far, these investments have done well. We have seen the market drop and rise, but overall our investment continues to grow.

By researching and using guidelines, you can make informed decisions in allocating your money. With your plan in place and your money diversified among the funds, your retirement savings can grow to meet your future needs.

Weekly Project: Review your asset allocation within your retirement accounts.

In using time wisely to file your important documents, continue making progress. Next week, we will look at selecting your beneficiary designations. In the meantime, happy organizing!

Question: How often do you change your investments? 

Note: This post contains affiliate links. Using Time Wisely gets compensated by Amazon.com for referring customers to these links. For more information on my affiliate relationships, please read my disclosure policy.

When building a house, one begins by designing the framework. If you begin choosing tables and bedroom furniture, you might end up with too much space or not enough.

Starting with the framework and layout determines how you decorate. With retirement savings, one needs to begin with the framework – the plans.

In organizing our important documents, we are concentrating on our retirement plan documents held within File Box 3.

Last week, I provided an overview of the retirement category, and today, we start by defining the types of accounts.

Defining Retirement Account Types

Though there are numerous types of retirement accounts, the four major types are employer-sponsored, self-employment, individual, and annuities.

Employer-sponsored Plans

401(a) Account

Coming from the section of the tax code regulating these plans, the 401(a) is a qualified governmental plan. If you work for local, state, or federal government, you probably have this option. These plans provide an account into which both the employee and the employer contribute or the employer solely contributes.

The retirement income is based on the account balance accumulated throughout the years of the retiree’s employment at the time of retirement. Any distributions, investment gains, or investment losses will affect this balance. The account balance is a combination of the contributions, performance of the investment funds selected, and fees and expenses from the investment options offered through the employer’s investment providers.

These plans accrue tax-free. Taxes are owed only when the funds are dispersed from the account.

401(k) Account

The 401(k) plans are usually offered through payroll deduction from your employer. With contributions excluded from your reported income, these amounts are usually free from federal and state income taxes. You will not pay taxes until you withdraw the money.

A benefit to this plan is if your employer matches your contribution. If your company matches 6% of your contribution, then you will want to contribute at least 6% (if you can afford it) to get the full matching benefit.

If you cannot contribute the maximum matching percentage, then aim to do so. This is extra savings in your account.

403(b) Account

These 403(b) plans are for nonprofit organizations. They carry the same benefits as the 401(k), but have slightly different regulations for setting up. The tax code section is different which is why this is a separate type of account.

Self-employment Plans

SEP-IRAs

This type of retirement plan is a Simplified Employee Pension Individual Retirement Account. If you are self-employed, then this type of account is an option for your retirement savings. Consider doing some research on the benefits.

Keogh Plan

Though more paperwork than a SEP-IRA, the Keogh plan allows one to put aside a large percentage of the self-employed income. These types of accounts are a bit complicated with filings and four different types. If you are interested, please research and find a great resource to help you set it up and administer correctly.

Individual Retirement Accounts

Traditional IRA

A traditional individual retirement account allows one to deposit money into this account tax-free. Since you are making the deposit on after-tax dollars, you claim these contributions on your tax return which lowers your income for the year.

Your money accrues tax-free until you make a withdrawal. When you make a withdrawal, you will claim that money on your tax return and claim the appropriate amount of tax.

One downside of a traditional IRA is the requirement to  begin making withdrawals at the age of 59 ½ .

ROTH IRA

The ROTH IRA is another type of individual retirement account. Unlike the Traditional IRA, one pays taxes on the money before investing.

The benefit is that at the time of withdrawal, no tax is owed. The money still accrues within the account, but you are not required to withdrawal the money at any specific age. You can just let it build until you need it, even if you wait until age 75.

Annuities

With contracts backed by insurance companies, annuities are not tax-deductible. This type of investment makes sense for those who reached the limit on employer-sponsored and self-employment plans, made the maximum contributions to an IRA, and willing to leave the money compounding for at least 15 years.

With so many types of retirement plans, these four are basic ones. There are many different forms these types take, but just understanding the types gives you a framework for deciding on the best options for your family. If this was too much information, just concentrate on the employer-sponsored and IRA options. These are the typical accounts one would carry.

Weekly Project: Determine which types of retirement plans you carry.

In using time wisely to get your important documents organized, keep gathering your retirement documents. Next week, we will continue looking at how to allocate your money within your desired plan. Keep learning!

Question: How many types of retirement accounts do you have?

After a Quick Tip Week’s post and a credit report update, our commercial break is over and back to our regularly scheduled post. 🙂

As a recap, we have organized our important documents in File Box 1 and File Box 2. In File Box 3, our system has been organized into 5 categories. We have completed the first category, social security documents. Today, we begin one of my favorite sections: retirement plan documents.

Though I will share the choices Paul and I have made, these decisions may not work for you. I am not a financial planner and am not giving you financial advice. I will share what I have learned along the way. If you have specific financial planning questions, I highly recommend researching your options.

Retirement Resources

In researching our options, I read numerous financial books of which The Road to Wealthby Suze Orman and Personal Finance For Dummiesby Eric Tyson are my favorites.

Upon narrowing down the information to our situation, I selected a few options. Then I took those options to my uncle who is a Chief Financial Officer. He then added some additional information to point us in the right direction.

Empowered with knowledge, Paul and I acted on the information we had. Most of these decisions were made the first year of our marriage. Now, 14 years later, we have evaluated our choices and found them working how we envisioned.

Retirement Research

With this category, I will do my best to give you the big picture and explain the options available. I realize how confusing stocks, bonds, 401K, load vs. no-load, IRAs, and numerous other terms scare people. I was there. I had no idea what these terms meant, so I educated myself.

I read and re-read until I understood how it works. My brain naturally thinks in an organized manner. With financial and legal systems working in an exact order, I understand these systems and enjoy them.

If you care not and just get confused, then let me break it down for you. Ignoring these items will not solve the problem. Retirement is coming and planning now is using time wisely.

Retirement Plan Documents

• Defining the Types of Accounts
• Allocating Your Money within an Account
• Selecting Beneficiary Designations
• Transferring Accounts
• Investing in Multiple Plans

In the coming weeks, I will explain the individual parts for the first 4 weeks, and then pull it all together in week 5, including a list the items I have filed in my File Box 3.

Weekly Project: Starting finding all your retirement documents.

You may not have many of these items or you may have many more. Whatever your situation, let’s get these documents organized to assist in using time wisely. Happy organizing!

Question: Do you enjoy figuring out the different retirement options, or do you run from the topic?

Note: This post contains affiliate links. Using Time Wisely gets compensated by Amazon.com for referring customers to these links. For more information on my affiliate relationships, please read my disclosure policy.