Will You Have Enough In Retirement?

Studies show that most retiees pension plans do not make up the difference between what you really need and what Social Security provides. The key is to build a solid financial plan for retirement. You need about 70% of your income before retirement to live up to the lifestyle that you now have. Here's how to make sure your retirement funds last as long as you do:

• Don’t borrow from your retirement plan or permanently withdraw funds before retirement unless absolutely necessary.

• Your retirement plan may allow you to borrow from your account, often at very attractive rates. However, borrowing reduces the accounts earnings, leaving you with a smaller nest egg. Also, if you fail to pay back the loan, you could end up paying income taxes and penalties. As an alternative, consider budgeting to save the needed money or pursue other affordable loan options.

• Also avoid permanently withdrawing funds before retirement. This often happens when people change jobs. According to a study by the Employee Benefits Research Institute and Hewitt Associates, only 47 percent of workers changing jobs rolled over into an IRA or a new employer’s retirement plan the money they received from their former employer’s retirement plan.

• Pre-retirement withdrawals reduce the ultimate size of your nest egg. In addition, you’ll probably pay federal income taxes on the amount you withdraw (10 percent to as high as 39.1 percent) and a 10 percent penalty may be tacked on if you’re younger than age 59-1/2. In addition, you may have to pay state taxes. If you’re in a SIMPLE IRA plan, that early withdrawal penalty climbs to 25 percent if you take out money during the first 2 years you’re in the plan.