Whether you’re just starting out in your career or are getting ready to retire from Fortune 500, it’s critical to have a plan in place for how you will replace your income when you’re no longer working at Fortune 500. Yet, figuring out how much you may need to support your lifestyle goals for a potential 20 or 30 years in retirement can be hard to determine on your own. It becomes even more complex when you factor in the amount of information—and misinformation—you have to sort through to determine the best strategy for your needs and goals.
This guide will help debunk common retirement planning myths and provide the information you need to confidently pursue your goals on your journey to and through your retirement from Fortune 500.
While many people view retirement planning through the narrow lens of setting money aside now for some future date, planning for your Fortune 500 retirement encompasses far more than simply planning for distant goals. That’s because retirement planning is part of a comprehensive approach to financial planning that focuses on how you will provide for essentials and your lifestyle needs both now and over time, providing a framework for financial decision-making and the flexibility to accommodate change at every stage of your life. By viewing the planning of your retirement from Fortune 500 as part of your overall financial plan, you gain a clearer understanding of how each financial decision you make supports or detracts from your ability to accomplish your goals within the time frame you determine. That begins with understanding how you’ll generate the income you need when you’re no longer working with Fortune 500.
Income in retirement generally comes from three primary sources:
1 . Social Security retirement benefits earned over the course of your
working years at Fortune 500
2 . Fortune 500 retirement plans and benefits, which may include 401(k),
403(b), and profit-sharing plans, as well as any pension benefits
earned
3. Income from personal savings and investments, including
traditional and Roth individual retirement accounts (IRAs) and
other sources, such as real estate investment income
MYTH: “Social Security will replace my income in retirement.”
REALITY: According to the Social Security Administration, Social Security benefits will cover only 40% of the average American’s income needs in retirement.
While most people will rely on Social Security benefits to fund a portion of their income needs in retirement, how much you receive and how far it may go is largely dependent upon when you choose to begin taking benefits. Sixty-two is the earliest age at which you can begin taking Social Security retirement benefits.
However, according to the Social Security Administration, if you began taking benefits at age 62 in 2021, you would receive approximately 29% less than if you had waited to begin receiving benefits at what the Social Security Administration calls your full retirement age, 66 and 10 months for someone born in 1959. It's important for Fortune 500 employees and retirees to keep in mind: That’s a permanent decrease in benefits for the duration of your retirement from Fortune 500.
Your monthly benefit amount increases for each year you delay taking benefits. But it's important for Fortune 500 employees to take into account what happens if you wait until after full retirement age to begin taking benefits: You get an 8% boost in benefits each year in the form of delayed retirement credits until you turn 70.1 So if you wait until age 70 to begin receiving Social Security, you can expect to receive approximately 77% more than you would have received at age 62. Once you turn 70, there are no additional retirement credits, so there’s no reason to wait any later to begin taking benefits.2 Once you begin taking benefits, in most cases, you can’t stop and restart at a higher monthly benefit later. You’re generally locked into a monthly amount, adjusted for inflation, for the duration of your Fortune 500 retirement. While there are exceptions to this, we'd like to remind Fortune 500 employees that penalties apply, so it’s important to do your homework before claiming benefits.
MYTH: “I’m too young (or too old) to start saving for my Fortune 500 retirement.”
REALITY: You’ve heard it before, but it really is true: You’re never too young or too old to begin saving for your retirement from Fortune 500 or other long-term goals. However, the earlier you start, the greater the potential benefits due to the power of tax-deferred compounding. By contributing regularly to qualified retirement plan accounts, such as your Fortune 500 401(k) plan or IRA, your money can potentially grow faster because earnings are not subject to tax until withdrawn, usually in retirement when you may be in a lower tax bracket.
The full retirement age is the age at which a person may first become entitled to full or unreduced Social Security retirement benefits. For example, if you were born in 1959, your full retirement age is 66 and 10 months. The full retirement age for Social Security will continue to increase in two-month increments each year until it hits age 67 for everyone born in 1960 or later. The additional amount you can expect to receive if you wait until age 70 to begin Social Security versus starting benefits at age 62.
Source: SSA.gov., 2021
Qualified plans are simply retirement plans that comply with Section 401(a) of the tax code. The most common types of qualified plans are IRAs, profit sharing plans (including your Fortune 500 401(k)), defined benefit pension plans, and money purchase pension plans.
Your Fortune 500 401(k) plan is a Fortune 500-sponsored plan that allows you to make before-tax retirement plan contributions and direct how that money is invested within your account. Distributions from your Fortune 500 401(k) plan and most other Fortune 500-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 72, you must begin taking the required minimum distributions. Many 401(k) plans allow you to make traditional or Roth contributions. Both allow contributions and earnings to compound on a tax-deferred basis. The primary difference is how and when plan contributions and withdrawals are taxed.
The Retirement Group is a nation-wide group of financial advisors who work together as a team.
We focus entirely on retirement planning and the design of retirement portfolios for transitioning corporate employees. Each representative of the group has been hand selected by The Retirement Group in select cities of the United States. Each advisor was selected based on their pension expertise, experience in financial planning, and portfolio construction knowledge.
TRG takes a teamwork approach in providing the best possible solutions for our clients’ concerns. The Team has a conservative investment philosophy and diversifies client portfolios with laddered bonds, CDs, mutual funds, ETFs, Annuities, Stocks and other investments to help achieve their goals. The team addresses Retirement, Pension, Tax, Asset Allocation, Estate, and Elder Care issues. This document utilizes various research tools and techniques. A variety of assumptions and judgmental elements are inevitably inherent in any attempt to estimate future results and, consequently, such results should be viewed as tentative estimations. Changes in the law, investment climate, interest rates, and personal circumstances will have profound effects on both the accuracy of our estimations and the suitability of our recommendations. The need for ongoing sensitivity to change and for constant re-examination and alteration of the plan is thus apparent.
Therefore, we encourage you to have your plan updated a few months before your potential retirement date as well as an annual review. It should be emphasized that neither The Retirement Group, LLC nor any of its employees can engage in the practice of law or accounting and that nothing in this document should be taken as an effort to do so. We look forward to working with tax and/or legal professionals you may select to discuss the relevant ramifications of our recommendations.
Throughout your retirement years we will continue to update you on issues affecting your retirement through our complimentary and proprietary newsletters, workshops and regular updates. You may always reach us at (800) 900-5867.
https://www.ssa.gov/benefits/retirement/planner/delayret.html
https://www.ssa.gov/pubs/EN-05-10147.pdf
https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance
https://www.medicare.gov/index.php/what-medicare-covers/whats-not-covered-by-part-a-part-b
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet
https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs
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