Chapter 7 – “Company Benefits”

In this episode, podcast host and author of “Control Your Retirement Destiny” Dana Anspach covers Chapter 7 of the 2nd edition of the book titled, “Company Benefits.”

If you want to learn even more than what there is time to cover in the podcast series, you can find the book “Control Your Retirement Destiny” on Amazon.

Or, if you are looking for a customized plan for your retirement, visit us at sensiblemoney.com to see how we can help.

 

Chapter 7 – Podcast Script

Hi, this is Dana Anspach. I’m the founder and CEO of Sensible Money, a fee-only financial planning firm. I’m also the author of Control Your Retirement Destiny, a book that covers all the decisions you need to make as you plan for a transition into retirement.

This podcast covers the material in Chapter 7, on company benefits.

If you like what you hear today, go to Amazon and search for Control Your Retirement Destiny. Or, if you are looking for a customized financial plan, visit sensiblemoney.com to see how we can help.

Let’s take a look at company benefits, and how you make the most of them.

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Company benefits used to be simple. Our grandparents, and in some cases our parents, worked for the same company for 25 or 30 years and retired with a gold watch and a pension.

Today, instead of pensions, most people have 401(k) plans. Now, you must decide how to invest your money, and when to take it out. In addition, you may have deferred compensation plans, stock options and various insurance benefits – ALL of which require you to make decisions.

Company benefits are far more complex than they used to be.

There are too many benefit programs out there to cover them all. Today we’re going to focus on the most common benefit option – the 401(k) plan. The goal is to show you how to use this type of retirement plan in a way that BENEFITS you the most.

There are four key things I want to cover: The creditor protection rules that apply to your 401(k). The age-related rules that impact when you can access your money and how it is taxed. How to pick investments in your 401(k). What to consider when you are deciding whether you should leave your funds in your 401(k) plan, or roll them over to an IRA.

First, creditor rules.

Your 401(k) assets cannot be touched by your creditors, even in the event of bankruptcy.

Hopefully, you’ll never need these rules. But, let me share with you a few real-life situations and how these rules apply.

Suppose you get a great business idea. You are 100% sure it will work out – but in order to get it going you need a little cash. “Hey,” you think, “I’ll just borrow it out of my 401(k) plan.” Or, maybe cash in the 401(k) account.

Bad idea.

If your business does not work out, your 401(k) money is gone.

Instead of using 401(k) money for a start-up business, use credit cards, or a bank loan. If you use a bank loan, and your business doesn’t work out, the worst case is that you file for bankruptcy—your 401(k) assets would then remain protected and still available for your retirement.

Another situation that many people found themselves facing in 2008 and 2009 was a job loss. After losing their job, they, of course, didn’t want to lose their home, so many cashed in their 401(k)s to continue making their mortgage payments. Unfortunately, many used up all their retirement funds and then lost their home anyway.

Making objective decisions about one’s home can be difficult, but as difficult as it may be, you need to look at the long-term consequences of any financial decision. In a job loss situation, you may spend a substantial amount of retirement money trying to keep a home that you end up losing. One lady I spoke with said, “The stupidest thing