Section 1: Tax Changes & Inflation

Section 2: Planning Your Retirement

Section 3: Your Pension Plan

Section 4: Your 401(k) Plan

Section 5: Your Benefits

Section 6: Divorce

Section 7: Survivor Checklist

Section 8: Life After Your Career

Section 9: Sources

Individuals must be aware of any new changes implemented by the IRS. The key elements influencing employees will be the following:

• The standard deduction for will rise to $16,100 for single filers and married couples filing separately, $32,200 for joint filers, and $24,150 for heads of household.

• Taxpayers over the age of 65 or blind can increase their standard deduction by $1,550. If you are not married or have no surviving spouse, the payment increases to $1,950.

 

Retirement account contributions: Contributing to your employer's 401k plan can dramatically reduce your tax burden, and the amount you can save has increased for . Individuals' 401(k) contributions in will climb to $24,500, up from $24,500 in .  The catch-up contribution ceiling for employees 50 and older will rise to $7,500.

As a taxpayer employed by a corporation, you should be aware of the following key changes to the Earned Income Tax Credit (EITC):

 

Retirement planning is a verb. And consistent action must be taken whether you’re 20 or 60.

The truth is that most Americans don’t know how much to save or the amount of income they’ll need.

No matter where you stand in the planning process, or your current age, we hope this guide gives you a good overview of the steps to take and resources that help you simplify your transition from Northrop Grumman into retirement and get the most from your benefits.

You know you need to be saving and investing, especially since time is on your side the sooner you start, but you don’t have the time or expertise to know if you’re building retirement savings that can last after leaving Northrop Grumman.

 

'A separate study by Russell Investments, a large money management firm, came  to a similar conclusion .  Russell estimates a  good  financial advisor can  increase investor returns by 3.75 percent.'

 

When you invest in your company's retirement plan, you can potentially increase your wealth by 79% at age 65 over the course of 20 years.

*Source: Bridging the Gap Between 401(k) Sponsors and Participants, T.Rowe Price,

As the decades pass, you're most likely well into your career at your company, and your salary reflects that. However, the difficulties in saving for retirement stem from substantial competing expenses such as a mortgage, raising children, and saving for their college.

Saving for retirement vs college is a basic planning issue. Most financial advisors will advise you that retirement from your employer should be your main priority because your child can usually receive financial aid, however you will be on your own to fund your retirement.

 

We always base our retirement investment recommendations on your specific financial circumstances and aspirations. Consider investing at least 10% of your earnings for retirement in your 30s and 40s.

As you enter your 50s and 60s, you should be at the pinnacle of your earning potential, with some of your major expenses, such as a mortgage or childrearing, behind you or soon to be behind you. This is an excellent moment to think about whether you can increase your retirement savings goal to 20% or more of your income. For many people, this could be their only chance to save money.

Workers over the age of 50 can invest up to $24,500 in their retirement plan/401(k) in , and after this limit is reached, they can contribute an additional $8,000 in catch-up contributions for a total yearly contribution of $30,500. Annually, these restrictions are increased to reflect inflation.

Why are 401(k)s and matching contributions so popular?

These retirement savings vehicles allow you to take advantage of three major benefits:

• Compound growth prospects (as described above)

• Tax-saving opportunities

• Matching contributions

Matching contributions are exactly what they sound like: your company matches your 401(k) contributions with money from the company. If your company matches, the company money will normally match up to a specified percentage of the amount you contribute.

Unfortunately, many consumers do not take advantage of their business's matching contributions because they do not contribute the sufficient amount to obtain the entire corporate match. 

According to Principal Financial Group research published in , 62% of employees believe that business 401(k) matches are critical to meeting their retirement goals.

According to Bank of America's " Financial Life Benefit Impact Report," despite 58% of eligible employees enrolling in a 401(k) plan, 61% contributed less than $5,000 this year.

The study also discovered that fewer than one in every ten members' contributions exceeded the IRS Section 402(g) optional deferral limit, which is $24,500 in .

A Financial Engines study titled "Missing Out: How Much Employer 401(k) Matching Contributions Do Employees Leave on the Table?" discovered that individuals who do not maximize their business match typically leave $1,336 of extra retirement money on the table each year.

For example, if your business matches up to 3% of your plan contributions and you only contribute 2% of your salary, you will not receive the entire company match.  By just increasing your contribution by 1%, your firm now matches the entire 3% of your donations, for a total combined contribution of 6%. This ensures that you do not leave money on the table.

 

Whether you're changing jobs or retiring, deciding what to do with your hard-earned retirement funds can be challenging. A company-sponsored plan, such as a pension or 401(k), may account for the majority of your retirement assets, but how much do you actually understand about it and how it works?
 
There appear to be an infinite number of restrictions that differ from one retirement plan to the next, including early withdrawal offers, interest rate affects, age penalties, and intricate tax implications.

Increasing your investment balance and lowering taxes are the keys to a successful retirement plan spending strategy. At The Retirement Group, we can explain how your company's 401(k) fits into your entire financial picture and how to make it work for you.

'Getting help and leveraging the financial planning tools and resources your company

makes available can help you understand whether you are on track, or need to

make adjustments to meet your long-term retirement goals...'

Lump-Sum vs. Annuity

Retirees who are qualified for a pension are frequently given the option of receiving their pension payments throughout life or receiving a lump-sum payment all at once.  The lump amount represents the equivalent present value of the monthly pension income stream, with the intention of taking the money (rolling it over to an IRA), investing it, and generating your own cash flow through methodical withdrawals throughout your retirement years.

The monthly pension has the advantage of being guaranteed to continue indefinitely. Thus, whether you live for ten, twenty, thirty, or more years after retiring from your firm, you are not at risk of outliving your monthly pension.

The main disadvantage of the monthly pension is the early and untimely death of the retiree and joint annuitant.  This frequently results in a reduced payout or the pension being terminated entirely upon death. The other disadvantage is that, unlike Social Security, employer pensions seldom include a COLA (Cost of Living Allowance).  As a result, if the dollar value of the monthly pension remains constant throughout retirement, it will lose purchasing power as inflation increases. 

In contrast, choosing the lump-sum option allows you to invest, earn higher growth, and perhaps produce even more retirement income flow. Furthermore, if something happens to you, any unused account balance will be available to your surviving spouse or heirs. However, if you fail to invest the funds for sufficient development, the money may run out entirely, and you may regret not taking advantage of the pension's "income for life" guarantee. 

Finally, the "risk" assessment that should be performed to determine whether or not you should choose the lump sum or the guaranteed lifetime income that your employer pension provides is determined by the type of return required to match the annuity payments. After all, if a 1% to 2% return on the lump-sum is all that is required to generate the same monthly pension cash flow stream, the risk of outliving the lump-sum is reduced. However, if the pension payments can only be replaced with a higher and more risky rate of return, there is a bigger danger that those gains will not materialize and you would run out of funds.

 

Interest Rates and Life Expectancy

Many defined benefit plans, such as the NGC pension plan, give current and future retirees a lump sum payment or a monthly pension benefit. These plans may have billions of dollars in unfunded pension liabilities, and in order to remove the burden from their books, they give a lump payout.

Depending on life expectancy, the first lump sum is usually smaller than recurring pension payments throughout a typical retirement period. Most people who choose the lump-sum plan, however, invest the majority of the income because the assets aren't needed right away after retirement.

Another thing to bear in mind is that current interest rates, as well as your life expectancy at retirement, affect annuity payment options in defined benefit pension plans. Lump sum distributions are normally higher in a low interest rate environment; however, lump sums fall in a rising interest rate environment.

Furthermore, predicted pension lump sum payments for current employees frequently drop as they age and their life expectancy declines. This might possibly be detrimental to continuing to work, thus it is critical that you run your pension statistics frequently and clearly grasp the timing difficulties. Other criteria, such as income requirements, the necessity for survivor benefits, and tax liabilities, frequently influence the decision to select the lump-sum over the annuity option on the pension.

401(k) Savings Plan

Employees are advised to immediately enroll in a 401(k) savings plan. Northrop Grumman's 401(k) plan allows employees to contribute pre-tax, Roth 401(k), and after-tax dollars. Additionally, there are Company-matching contributions equal to:

 * 100% of the first 4% of pre-tax, Roth 401(k), and after-tax contributions; and

* 50 percent of the subsequent 4% of employee contributions

You can invest before tax and/or after tax (regular or Roth) and select from a variety of investment options with varied levels of risk. You can also transfer pre-tax and Roth contributions from other qualifying plans.

Vesting

As a participant, you become eligible for the employer match after three years of service. If you leave your job after fewer than three years, you lose the corporate match but keep the rest.

Note: If you contribute at least 8% of your earnings, you will receive a 6% corporate match.

If you have 401(k) plan balances at the time of retirement, you will receive a Participant Distribution Notice in the mail. This notification will outline the current value of each plan and explain your distribution alternatives. It will also tell you what steps you need to do to obtain your final allocation. Please call The Retirement Group at (800)-900-5867 for additional information, and we will put you in touch with a retirement-focused advisor.

Next Step:

• Watch for your Participant Distribution Notice and Special Tax Notice Regarding Plan Payments. These notices will help explain your options and what the federal tax implications may be for your vested account balance.
• ' What has Worked in Investing ' & ' 8 Tenets when picking a Mutual Fund '.
• To learn about your distribution options, call The Retirement Group at (800)-900-5867. Click our e-book for more information on ' Rollover Strategies for 401(k)s '. Use the Online Beneficiary Designation to make updates to your beneficiary designations, if needed.

Note : If you voluntarily terminate your employment from Northrop Grumman, you may not be eligible to receive the annual contribution.

In-Service Withdrawals
 
In general, you can withdraw funds from your account while still employed with your firm, subject to the conditions outlined below.

Certain withdrawals are subject to standard federal income tax, and if you're under age 59½, you may also face an additional 10% penalty tax. You can check if you're qualified for a withdrawal and then request one online or by phoning your company's Benefits Center.

Rolling Over Your 401(K) 

An in-service dividend can be rolled over to an IRA if the plan participant is under 72 years old. A straight rollover avoids both the 10% early withdrawal penalty and the necessary 20% tax withholding. More information, including potential rollover and withdrawal limits, can be found in your company's plan summary.

Because a withdrawal permanently decreases your retirement savings and is taxed, you should always consider obtaining a loan from the plan rather than withdrawing to satisfy your financial needs. Loans, unlike withdrawals, must be repaid and are tax-free (unless you fail to repay them). In other situations, such as hardship withdrawals, you are not permitted to make a withdrawal unless you have taken out the maximum loan available under the employer plan.

You should also be aware that your company's plan administrator reserves the right to change the regulations governing withdrawals at any moment, and may further restrict or limit the availability of withdrawals for administrative or other purposes. All plan participants shall be made aware of any such limits, which apply equally to all business workers.

Net Unrealized Appreciation (NUA)

When you qualify for a distribution, you have three choices:

• Roll over your eligible plan to an IRA and continue to defer taxes.

• Take a distribution and pay regular income taxes on the entire amount.

• Take advantage of NUA and profit from a more favorable tax structure for gains.

How does Net Unrealized Appreciation Work?

First, an employee must be eligible for a distribution from a qualified company-sponsored plan. At retirement or age 59 1⁄2, employees often get a 'lump-sum' distribution from their plan, which distributes all assets over a year period. The portion of the plan that consists of mutual funds and other investments can be transferred to an IRA for additional tax deferral. The highly appreciated firm shares is subsequently moved into a non-retirement account.

The tax benefit occurs when you transfer business stock from a tax-deferred account to a taxable account. At this point, you apply NUA and pay ordinary income tax on the cost basis of your shares. The stock's appreciated value above its basis is taxed at the lower long-term capital gains rate, which is now 15%, rather than the higher ordinary income tax. This could result in savings of over 30%.

You may want to learn more about NUA by scheduling a complimentary one-on-one consultation with a financial advisor from The Retirement Group.

IRA Withdrawal

When you qualify for a distribution, you will have three options:

Your retirement assets could include IRAs, 401(k)s, taxable accounts, and others.

So, what is the best approach to withdraw your retirement income after leaving your company?

Consider fulfilling your retirement income demands by withdrawing from taxable assets rather than tax-deferred investments.

This may help your company's retirement assets last longer by allowing them to grow tax-deferred.

You should also prepare to take the required minimum distributions (RMDs) from any company-sponsored retirement plans, as well as traditional or rollover IRA accounts.

This is due to IRS guidelines for , which state that you must begin taking distributions from these types of accounts when you reach age 73. Beginning in , the excise tax on each dollar of under-distributed RMD will be decreased by 50% to 25%.

There is new legislation that allows account owners to postpone their first RMD until April 1 of the calendar year in which they reach age 73 or, in a company retirement plan, retire.

Two flexible distribution alternatives for your IRA

When it comes to drawing on your IRA for income or taking RMDs, you have a few options. IRA distributions are taxed and may have penalties for those under 59½.

Partial withdrawals: You may remove any amount from your IRA at any time. If you're 73 or older, you must withdraw money from one or more IRAs to pay your annual RMD.

Systematic withdrawal plans: Set up regular, automatic withdrawals from your IRA based on your income needs once you retire from your company. If you are under 59½, you may face a 10% early withdrawal penalty (unless your withdrawal plan meets Code Section 72(t) criteria).

Your tax advisor can assist you in understanding distribution alternatives, determining RMD obligations, calculating RMDs, and establishing a systematic withdrawal strategy.

HSA's

Health Savings Accounts (HSAs) are frequently praised for their usefulness in controlling healthcare costs, especially for people with high-deductible health plans. However, its advantages go beyond medical cost management, placing HSAs as a potentially superior retirement savings vehicle compared to typical retirement plans such as 401(k)s, particularly after employer matching contributions are exhausted.

Understanding HSA

HSAs are tax-advantaged accounts established for people who have high-deductible health insurance policies. For , the IRS defines high-deductible plans as those having a deductible of $1,600 for individuals and $3,200 for families. HSAs offer pre-tax contributions, tax-free investment growth, and tax-free withdrawals for qualified medical costs, making them a triple-tax-advantaged account.

The annual contribution limits for HSAs in are $4,400 for individuals and $8,750 for families, with an additional $1,000 allowed for those 55 and older. Unlike Flexible Spending Accounts (FSAs), Health Savings Account (HSA) money build and can be carried over indefinitely.

Comparing HSAs to 401(k)s After Matching

Once an employer's maximum match in a 401(k) is reached, additional contributions provide less immediate financial benefit. This is where HSAs can play a strategic role. While 401(k)s provide tax-deferred growth and tax-deductible contributions, withdrawals are taxable. In contrast, HSAs allow for tax-free withdrawals for medical expenses, which account for a large amount of retirement costs.

HSA is a Retirement Tool

After age 65, the HSA proves itself as a powerful retirement tool. Funds can be taken for any reason, with the exception of non-medical expenses, for which standard income tax applies. This flexibility is similar to that of regular retirement plans, but it also includes tax-free withdrawals for medical bills, which is a substantial benefit given escalating senior healthcare costs.

Furthermore, unlike 401(k)s and Traditional IRAs, HSAs do not require Required Minimum Distributions (RMDs), giving you more discretion over tax planning in retirement. This makes HSAs especially appealing to those who may not need to withdraw their funds immediately at retirement or who want to reduce their taxable income.

Investment Strategy for HSA

Initially, it's best to invest conservatively in an HSA, focusing on ensuring that there are enough liquid funds to cover the near-term deductible and other out-of-pocket medical bills. However, if a financial cushion has been developed, treating the HSA as a retirement account and investing in a diverse mix of stocks and bonds can dramatically increase the account's long-term growth potential.

Using HSAs in Retirement

In retirement, HSAs can cover a range of expenses:

• Healthcare bills Before Medicare: HSAs can pay for healthcare bills to bridge you to Medicare.

• Healthcare Costs After Medicare: HSAs can be used to pay for Medicare premiums as well as out-of-pocket medical expenses, like as dental and vision care, which are frequently excluded from Medicare.

• Long-term Care: Funds can be used to cover approved long-term care services as well as insurance payments.

• Non-medical Expenses: After the age of 65, HSA funds can be used for non-medical expenses without penalty, while withdrawals are subject to income tax.

Conclusion

In conclusion, HSAs have distinct features that can make them a better choice for retirement savings, especially once the benefits of 401(k) matching have been utilized. HSAs are an important part of a comprehensive retirement strategy because of their flexibility in fund usage and tax advantages. Individuals can maximize their financial health in retirement by properly managing their contributions and withdrawals, ensuring both medical and financial security.

What Happens If Your Employment Ends

Your life insurance coverage, as well as any optional coverage you acquire for your spouse/domestic partner and/or children, expires on the date your employment with your firm ends, unless it is due to disability. If you die within 31 days of your company's termination date, your beneficiary receives benefits for both your basic life insurance and any supplemental life insurance coverage you choose.

Note:

• You may be able to change your life insurance to an individual policy or choose portability for any optional coverage.

• If you cease paying additional contributions, your coverage will expire.

• If you are at least 65 years old and pay for additional life insurance, the insurance company should send you literature in the mail explaining your options.

• Make care to notify your beneficiaries. For more information, consult your company's sales and profit statement.

 

Beneficiary Designations
 
As part of your retirement and estate planning, you should designate someone to receive the proceeds of your benefit programs in the event that you die. This is how your employer will choose who should receive your ultimate compensation and benefits. This includes life insurance payouts, as well as any pension or savings balances you may have.

Next step:

Schedule a Call

Understanding and claiming Social Security can be challenging for many retirees, but determining the best ways to do so is critical to your retirement income planning. Social Security benefits are not intended to be the primary source of retirement income, but rather to supplement your total withdrawal strategy.

Knowing the fundamentals of Social Security and applying that knowledge to your advantage will help you collect the most benefit.

It is your duty to enroll in Medicare Parts A and B when you first become eligible, and you must remain enrolled to receive coverage for Medicare-eligible expenses. This also applies to your dependents who are qualified for Medicare benefits.

You should understand how your retiree medical plan selections and Medicare eligibility affect your plan alternatives. Before you resign from your employer, contact the Social Security Administration at 800-772-1213, your local Social Security Office, or ssa.gov.

They can assist you in determining your eligibility, enrolling you and/or your eligible dependents in Medicare, and providing information about other government programs. Please call us if you need additional information about Social Security.

Before you depart from your employer, double-check your Social Security benefits status. Contact the Social Security Administration in the United States, your local office, or go to ssa.gov.
 
Are you already or soon to be eligible for Medicare?
If you or your dependents become eligible for Medicare after leaving your telecom industry company, Medicare will normally become your primary coverage as soon as they are. This has an impact on the medical benefits given by the firm.

When you initially become Medicare-eligible, you and your dependents must enroll in Parts A and B. Medical and MH/SA benefits payable under the company's sponsored plan will be lowered by the amounts Medicare Parts A and B would have paid regardless of whether you enrolled in them.
Please see your company's summary plan description for more information on benefit coordination.

 

If you or an eligible-dependant do not enroll in Medicare Parts A and B, your provider may bill you for amounts not covered by Medicare or your company's medical plan. This increases your out-of-pocket spending dramatically.

According to the Employee Benefit Research Institute (EBRI), Medicare only covers roughly 60% of an individual's medical expenses. This indicates that a 65-year-old couple with typical prescription-drug expenses for their age will require $259,000 in savings to cover 90% of their healthcare costs. A single man will need $124,000, whereas a single woman will need $140,000 because to her longer life expectancy.

28% of couples over the age of 53 will not experience the happily ever after and until death do us part. Most couples save for decades, expecting they would retire together. Following a divorce, they must face the expenses of a pre- or post-retirement lifestyle while only having half of their savings.

If you're divorced or in the process of divorce, your ex-spouse(s) may be interested in a portion of your company's retirement benefits. Before you may begin your pension—and for each former spouse who may be interested—you must submit your firm with the necessary documentation:

• A copy of the court-filed Judgment of Dissolution or Judgment of Divorce, together with any Marital Settlement Agreement (MSA)

• A copy of the court's Qualified Domestic Relations Order (QDRO)

To avoid having your pension payout delayed or suspended, please provide your firm with any needed documentation. Please contact us for more information on options for dealing with divorce and its impact on your company's retirement benefits.

Regardless of how long or brief your marriage was, you must submit this evidence to your company's online pension center. *Source: The Retirement Group, "Retirement Plans - Benefits and Savings," U.S.