How to Tell if You Have a Good 401(k) Match

401k concept word in bird nestThe fastest way to increase your retirement savings is to get 401(k) contributions from an employer. Company 401(k) contributions will grow your account balance far faster than you could on your own. But 401(k) contributions vary considerably by employer, and the match can be difficult to get for people who only stay at a company for a year or two. Here’s how to tell if your employer is providing a generous 401(k) match.

What percentage is matched? The most obvious way to evaluate a 401(k) match is by the percentage of your contributions the company matches. A 401(k) match worth 50 cents for each dollar you save is a 50 percent return on your investment. A dollar-for-dollar 401(k) match effectively doubles your money. Some employers have more complicated match formulas such as dollar-for-dollar for the first 3 percent of pay and then 50 cents per dollar on the next 2 percent of pay. A few companies even set up their matches to vary by age, job tenure or other variables chosen by the company. Often the employer stops matching your contributions once you save a specific percentage of your pay in the account, such as 6 percent of your salary.

How much do you need to save to get the match? Some employers contribute to 401(k) accounts on behalf of employees without requiring them to save anything at all. Other companies require workers to save a specific amount in order to get the match. Savings requirements can make it difficult for people who can only afford to save a limited amount to take full advantage of the 401(k) match. For example, if your employer matches 50 cents of each dollar saved for retirement up to 6 percent of pay, but you can only afford to save 3 percent of your pay, you will miss out on half of the 401(k) match you could have gotten. Many new employees are automatically enrolled in 401(k) plans, typically at 3 percent of pay. Sticking with the default savings rate could cause you to miss out of part of your employer match.

Is there a match cap? Some employers set a maximum amount of money they will contribute to a 401(k) for a single employee. For example, an employer might stop providing a match once you hit $2,000 in employer matching funds in a single year.

How soon does the match start? Most 401(k) plans begin providing a 401(k) match as soon as you start saving in the plan. However, some companies have waiting periods of up to a year before they will match employee contributions to the 401(k) plan.

When do you get to keep the match? You don’t get to keep company contributions to your 401(k)account until you are vested in the plan. Some employers immediately vest workers in the 401(k) plan, while others require a specific number of years of service with the company, such as two or three years, before you get to keep any of the 401(k) match if you leave the job. In this case, people who switch jobs within a year or two won’t get to keep any of the 401(k) match. Other employers allow you to keep a percentage of the employer contributions based on your years of service. For example, if you become 20 percent vested in the 401(k) plan for each year of service and you leave the job after two years you will get to keep 40 percent of the company contributions to your 401(k) plan. You always get to keep your own contributions to the retirement account.

What Couples Really Want in Retirement

Grandmother playing with grandson

Ah, retirement. That second honeymoon you’ll spend lounging around with your main squeeze. Which is who, exactly?

While about 60 percent of men want to hang with their wives during retirement, only 43 percent of wives agree, according to a survey from Fidelity and the Stanford Center on Longevity.

Instead, 70 percent of women cite quality time with grandkids as a big motivator to retire. The survey draws on responses from those ages 55 and up — and as workers get older, turns out the idea of spending retirement with a spouse loses more of its luster.
Could that be encouraging some employees to stick it out at the office well past 70?

Another thought-provoking survey finding is that about half of Americans plan to stop working on a specific date — no matter how much they’ve saved up for retirement.

They’ve got big plans that involve, well, not really needing to plan anything. Almost 75 percent of respondents expressed that the No. 1 reason for retiring was to have freedom and flexibility, even to simply relax at home.

And if they do take on a side gig or two, 61 percent say it’s because they enjoy doing the work and want to feel valued.

Or, just maybe, it’s a welcome break from spouse overload. Right, retired wives?

If you’re looking to get on the same page as your significant other, here are sometips for talking retirement dreams — and finances.

6 Reasons to Remain in Your Current Home in Retirement

Senior couple using tablet computer at home
The typical retirement dream involves riding off into the sunbelt, golf clubs and beach umbrella in hand. However, the reality is that the majority of retirees never leave home. Most people opt to age in place, or if they do move, they find a smaller house near their old neighborhood.

Only about 7 percent of older Americans move every year, according to a long-term study by the Center for Retirement Research at Boston College. And even though more people have recently been relocating with the improving economy, an AARP survey found that most people approaching retirement hope to remain in their current residence as long as they can.

Here’s why retirees resist the siren call of the beach and tropical breezes:

Home is where the heart is. Many people feel attached to their home towns. Whether they grew up there or moved there to raise a family, they still enjoy going to the park where they took their kids as toddlers. They feel comfortable knowing about the best hardware store and the best pizza place. Many old-line suburbs have developed programs and amenities for their older population. Another benefit: urban centers in the north provide better public transportation than the retirement meccas of the sunbelt. There’s no subway in San Diego or T in Tampa.

Home is where your friends are. You go to the library and see familiar faces. Maybe you belong to a book club, or regularly meet friends for lunch, tennis or golf. All the research says that a strong social network is crucial for successful aging. Friends not only supply emotional support, but sometimes offer practical benefits like loaning you a book or DVD, helping with a project at home or giving you a ride. Why should you uproot yourself, move a thousand miles away and then be faced with the sometimes difficult challenge of finding a new group of like-minded friends?

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People retire in the last place they land.Some people never settle down to live in one place for 20 or 30 years to raise their kids in a single community. Many baby boomers have moved around for work, or just because they’re restless, and then finally put down roots when they’re in their 40s or 50s. For example, my sister-in-law grew up in New Jersey, then moved to Michigan, Texas and finally in her late 40s settled down in Pennsylvania. She’s pretty adamant that she’s not moving again.

You don’t necessarily save much money. It costs a lot to move. You give up about 10 percent of the selling price of your house in real estate commissions, legal fees and taxes. Then there’s the cost of buying, moving and resupplying your new house. If you’re moving a long distance there are additional expenses involved in traveling and researching your new location. You might need to rent for a while or store some furniture. It’s not worth it if you only save a couple thousand dollars a year in your cost of living.

It doesn’t have to cost a lot to age-proof your home. Of course you can spend a lot of money if you want to remodel your entire house. But many of the safety issues involved in age-proofing a home involve modest expenses. Improve the lighting in stairways and outdoor areas. Change out doorknobs for lever handles that are easier to manipulate. Install bathroom grab bars and raised toilet seats. Get rid of scatter rugs, and put down colorful traction strips on the front edge of your stairs to help prevent falls. None of these changes costs much money. Depending on the layout of your home, it may even be possible to turn a study or den on the first floor into a master suite, converting the upstairs rooms into guest quarters.

Visit a virtual village. Virtual retirement villages can help seniors access resources to make it easier to age in place. A virtual village is a local non-profit organization that posts information online, providing referrals to member-recommended service companies and volunteers available to help out with dog walking, yard work and other homeowner needs. Some villages host social activities such as concerts, restaurant gatherings and group trips. Check outVillage to Village Network to find out more information on what villages do and how they work.

6 Ways to Land Your Dream Job in Retirement

mature man and woman in cafe with digital tabletOne retiree profiled here is fulfilling a longtime goal. Several others are taking a hobby to a new level. Still others are starting a business or enjoying an engaging, part-time job. Whatever the gig, these people have found pastimes that not only deliver a paycheck (or the promise of it) but also are downright fun.

Retirement can be an ideal time to pursue your dream and thrive. Think about it: You’ve had years to build savings and home equity, establish a credit history, and nurture social and professional networks — all of which can be key to launching a business or a new career. Starting at 62, you also have access to Social Security benefits if you need them (although full retirement age is currently 66), and you may have income from a pension or a still-working spouse. Plus, you’re rich in the one asset that full-time workers lack: time. “At this stage of life, you can really be in control,” says Jeff Bucher, a registered investment adviser in Perrysburg, Ohio, who specializes in retirement planning. “Now is the time to branch out.”

Here’s how several post-careerists pulled off their dream jobs.

Build Something Big

Ephraim King, 65, retired from his job as a senior manager at the Environmental Protection Agency four years ago. His initial plan: hike the Appalachian Trail and then return home to Takoma Park, Md., to work as a consultant on clean water, his area of expertise. The hike, which took five and a half months, went fine, but consulting proved to be as stressful as his career job. After a few months, he announced to his wife, Carol Lindeman, “That’s it. I’m done.”

His neighbor, Stephen Brown, 63, had already retired from his job at a family-owned printing company. Having spent his early career in construction and working as a carpenter, he was a natural to volunteer for Habitat for Humanity; he enlisted King, who had spent years rehabbing his own home, to do the same. The two worked on several projects for the home-building nonprofit.

When those projects ended, they decided to go into the home-rehab business on their own. “Both of us really enjoy the complexity and variety a large house project offers,” says King. “It’s not just painting or sanding a floor; it’s everything coming together.”

King and Brown each tapped home equity to come up with about $390,000 (split evenly) to buy, fix up and then sell a small, three-bedroom home in nearby Hyattsville. The house, a foreclosure, needed to be totally gutted.

King and Brown took on the project partly as a pastime, but they treated the business side seriously, hiring a business lawyer and forming a limited liability corporation to protect their assets. Both men were mindful that they were tapping family resources. “The money we’re using isn’t coming out of nowhere,” says King. “We’re fortunate that we have spouses who understand what we’re doing and are supportive.”

Playing the role of owner, general contractor and worker requires setting priorities, says Brown. “You learn a lot of lessons about sequence. The guy can’t wire the walls if you haven’t put them up.” The pair have also had to get up to speed on new standards for safety and energy efficiency. Despite their best efforts, says Brown, they’ve had to redo some work. Then there’s their own, uh, aging infrastructure. “It’s easy to say ‘I can do this and this and this,’ but I’m in my sixties. I can’t do as much as when I was younger,” says Brown.

The best part? Working alongside the subcontractors. “It’s fun. You meet great people. They’re good at what they do,” says King. As for the dollar payoff, their expectations are modest, at least for this go-round. “Our purpose is to work through the learning curve and to break even,” says King.

Create New Works of Art

When Deborah Nolan, 68, retired eight years ago from her job as a New Jersey deputy attorney general, she couldn’t wait to pursue her longtime avocation — writing — full-time. Nolan had been meeting with a group of fellow writers for almost 30 years and had already written a young-adult novel, which she stashed in a desk drawer. Her focus now: writing romance suspense novels.

Nolan had always enjoyed reading the genre, and “I wanted to write what I like,” she says. She also realized that her chances of succeeding were better with romance than with other types of fiction. “The romance-writer community is very welcoming, and the conferences are fabulous. Everyone is willing to talk to you and be helpful. It’s much easier to find an editor and get your foot in the door.”

Nolan’s plan to write full-time didn’t pan out, however. “I’m too social to be writing every single day. It’s not my personality,” she says. At loose ends, she took part-time work as a family court lawyer in upstate New York, where she and her husband, Frank, have a weekend home. (The couple also have an apartment in Manhattan.) She settled on a routine of appearing in court a few days a month and writing two days a week.

That combination was serendipitous: “The stimulation of being in court helped my writing,” she says. It also provided fodder for her novels, whose protagonists are female lawyers. Nolan’s first romance novel, Suddenly Lily, was published by Avalon in 2009, followed by Conflict of Interest in 2011 and Second Act for Carrie Armstrong (published by Desert Breeze Publishing) in 2014.

Nolan doesn’t have to make a living at her dream gig. She collects a pension as well as Social Security benefits, and she has the post-careerist’s dream asset: a working spouse. (Frank is a partner in a law firm.) Her first check, from Avalon, was a modest $500 when she submitted the manuscript; she received another $500 when it was published. But bigger checks started rolling in after Amazon

purchased Avalon in 2012. Last year, Nolan made more than $10,000 in royalties. As far as she’s concerned, that qualifies as a happy ending (and maybe a promising prequel). “I like to write anyway,” says Nolan, who is working on a sequel to Suddenly Lily. “Making some money at it is really nice.”

Develop a Product

Dave and Pam Barret, of Temecula, California, were still working as educators — he as a special education teacher, she as an educational consultant — when they came up with the idea of creating and selling a board game about the U.S. Constitution. They had found games to be good teaching tools and had already devised several of their own. “We thought, When we retire, let’s put our games out there,” says Dave.

They learned that developing a board game is no stroll along Boardwalk. They spent a year researching and brainstorming questions and answers about the Constitution as well as distractor answers — those that are incorrect but not obviously so. They wove elements of chance into the game, so the history buffs wouldn’t always win, and they took pains to write clear directions. Then they invited players of all ages to try out their masterwork. Says Dave: “We had people in different rooms of our house playing different versions of our game. We wanted to know: Is it fun? Are you learning? That was really important to us: making learning fun.”

They also enlisted experts, including mentors from Score to help with their business plan; a graphic designer to create a prototype of the game; and a team of lawyers to help them get a copyright, a design patent and four trademarks. A local printer produced the first run of 2,500 games. Their initial costs totaled about $70,000, which they charged to credit cards after finding that local banks were unwilling to lend money to untested entrepreneurs.

The financial risk paid off: The Constitution Quest Game, $50, has racked up more than $700,000 in sales, allowing the Barrets to retire from their career jobs. The couple fields about 100 orders a day. Their five grown children and two older grandchildren occasionally pitch in to get the orders out.

One lesson they learned from Score early on: “Don’t let the business run you,” says Pam. The couple close up shop at noon so they can also appreciate the relaxing side of retirement. “We want to see the grandchildren and enjoy life,” she says.

Go Back to School

John Graves was 22 when he was accepted to the University of Michigan Law School, in 1968. At age 63, he dug out his acceptance letter and enrolled in the law school full-time.

Graves, now 70, had planned to postpone law school for just a few years while he scraped together the money to cover tuition. As a stopgap, he accepted a teaching job, and he ended up staying in the profession, earning a doctorate in education. He later became a school superintendent, most recently in Jackson, Michigan.

5 Tips for Using Dividend Stocks to Pay for Retirement

hand clicking dividend on word...
With many savings accounts paying less than 1 percent interest, some retirement savers are turning to dividend stocks to provide a more reasonable return. Dividend stocks provide a stream of income as well as the potential for capital gains, but they also carry more risk than a savings account, certificate of deposit or bonds. Here’s what you should know about using dividend stocks to pay for retirement.

Dividends can stop at any time. Dividends are distributions of company profits to shareholders. Using the income derived from dividend paying stocks to fund retirement is a viable strategy for many people. However, if profits decline, your dividend might also decrease or even be eliminated. You have to be prepared for the possibility of a surprise dividend cut in the future. If the companies you choose have a bad year, your retirement income might suffer as well. Of course, the reverse could also be true. A company that performs well might provide an increase in dividend payments.

Diversification difficulties. Companies that pay significant dividends are concentrated in a few industries. Investing exclusively in dividend stocks isn’t likely to provide adequate diversification of your investments. It’s difficult to make a diversified portfolio of stocks that currently sports a high yield and has the ability to grow its dividend for the foreseeable future. You may have to spend time researching and monitoring these stocks during your retirement years.

Less volatility. Dividends are less volatile than stock valuations. Dividend stocks tend not to increase as quickly as the market as a whole, but they also tend to hold their value a little better when the market goes down. However, dividend stocks are not a risk-free investment, and carry more risk than high-quality bonds. The business landscape is always changing. Investing in a single stock always carries the risk of something going wrong at that company. A stock that does extremely well for decades could suddenly start declining because innovations are disrupting that industry. You may be able to mitigate some of the risks by building a diversified portfolio with many stocks or investing in high-dividend mutual funds or ETFs instead of picking stocks on your own.

Tax efficiency. Dividends are typically taxed at a lower rate than bonds or other ordinary income, which makes dividend stocks a tax-efficient source of retirement income. However, when you sell the investment you may also owe capital gain taxes. If you are forced to sell all of your stock in a company years from now at a tremendous gain because the prospects are no longer bright for that company, it could result in a large tax bill. Selling only a portion of your investments every year, and spreading out the capital taxes to be paid in multiple years and possibly within a lower tax braket, could result in a smaller overall tax bill.

Spending only income will result in money for heirs. If you spend only the dividends your investments generate, you will almost certainly leave money behind for heirs. This may be desirable to parents who want to pass on wealth to their children, but it also means that you aren’t spending as much as you could in retirement.