Feel confident about your future

With money comes questions. From maximizing your retirement income to choosing an appropriate investment strategy for your goals—it can be a lot to think about. Having an advisor by your side can help you make smart decisions and feel more confident about your future. Financial Planning, Management, and Advice | Vanguard.

Financing retirement has become increasingly complex and can cause unnecessary anxiety, especially for those who plan to access their retirement assets in the next several years. An array of investment options, combined with fluctuating interest and inflation rates and other variables, make it difficult to determine how much you will need, where you should invest, and to whom to turn for assistance.
The complex tax and legislative environment surrounding retirement planning only compounds the confusion. With qualified plans, such as IRA, pension, profit sharing, and 401(k) plans, the timing and amount of withdrawals are critical in order to avoid additional tax penalties. And if you have accumulated significant qualified plan assets, you may face additional problems, such as the “Double Tax Dilemma,” where the government can tax these assets twice.
To guide you through the complexity of retirement planning, our team is dedicated to help you:

  • Develop customized short- and long-term investment strategies based on your personal objectives, risk tolerance, time frame for accumulation, and current financial situation.
  • Work to preserve and grow your net worth through investment opportunities and proper allocation and diversification of assets.*
  • Provide you with access to select investment vehicles, including those that offer tax-deferred accumulation and potential tax-free distributions.
  • We are prepared to deliver sophisticated individual and corporate solutions to help you reach your unique goals and needs for retirement.


• * Diversification and asset allocation can potentially help mitigate losses but cannot assure against market loss.

- 401(k) plans:

  • For a 401(k), an employee chooses a percentage to be automatically taken out of each paycheck and invested in a 401(k) account. The employee then picks which investment options offered in the plan to allocate these funds to.
  • Depending on the details of the plan, matching contributions may be made by the employer. The money invested will generally be tax-deferred, meaning you will not owe taxes on it until it is removed from the plan. If your employer matches contributions, financial experts recommend that you contribute enough each year to get the maximum match.
  • One of the biggest upsides of a 401(k) plan is that the contributions you make are tax deferred. A portion of your salary drops directly into your 401(k) before taxes. It can then grow tax-free until you begin making withdrawals after you retire.
  • The tax-deferred status brings two main benefits. First, you can lower your taxable income, which means you pay less in taxes. Second, you may be in a lower tax bracket in retirement than you are while you are working.
  • With a 401(k), you choose the portion of your paycheck to contribute and determine what fund or funds to invest in from the choices your plan offers. A big benefit is that some employers match your contributions up to a certain amount.

- Pension plans:

  • A pension plan is a retirement plan that requires an employer to make contributions to a pool of funds set aside for a worker’s future benefit. The pool of funds is invested on the employee’s behalf, and the earnings on the investments generate income for the worker upon retirement.1
  • Pensions are usually paid out in guaranteed regular payments until the employee dies. However, payments may be passed on to a surviving spouse or child depending on the plan. Your pension amount is determined by a few different factors, including your salary, the number of years you worked for your employer, and any special terms your employer may have set.
  • With traditional pension benefits, you’ll keep receiving the same amount for the rest of your life.
    Employees with traditional pensions, however, have no say in the management of the funds. This can be both a benefit and a disadvantage. On the one hand, you don’t have to worry about choosing investments for your retirement or adjusting your asset allocation as you approach retirement. On the other hand, your nest egg is in the hands of a fund manager who may make mistakes.
  • With a traditional pension plan, your pension is guaranteed, regardless of investment performance. But a pension fund could struggle if its investments don’t pan out or if there’s a recession. And it’s not unheard of for companies, and even municipalities, to go bankrupt and struggle to pay out benefits.
  • Before you’re guaranteed benefits, you must work for your employer long enough for your benefits to “vest.” Vesting can happen all at once or it can occur in steps. Make sure you know your vesting schedule if you’re enrolled in a pension plan. It’s important to know if you’re walking away from a lot of money if you leave a job too early.

- What do I do with my 401(k) after retirement ?

You can either leave the money from your 401(k) in your former employer’s plan or you can roll over that money into an Individual Retirement Account (IRA) or an annuity. Rolling over your 401(k) will give you more control over how your money is invested. This is also a good time to begin consolidating the various retirement assets you may have accumulated, making your retirement planning more manageable and easier to track.

- What are 401(k) rollover options ?

Most people choose to roll over or transfer their funds to an IRA or to the 401(k) plan of a new employer. A Roth IRA is another type of individual retirement account. The difference is that with a traditional IRA the money you put in isn’t taxed, but withdrawals are. With a Roth IRA, the money you put in is taxed, but when you take it out the money you’ve invested isn’t taxed. If you have not reached age 59½, though, you may owe taxes and a 10 percent penalty on earnings. A much less popular option is to cash out your 401(k), but this comes with significant penalties; income taxes must be paid, and if you’re under-age 59½ there will be an additional 10% penalty tax. When considering rolling over the proceeds of your retirement plan to another tax-qualified option, such as an IRA, please note that you may have the option of leaving the funds in your existing plan or transferring them into a new employer’s plan. You may wish to consult with your new employer, if any, to learn more about the options available to you under your plan and any applicable fees and expenses. You may owe taxes if you withdraw funds from the plan. Please consult a tax advisor before withdrawing funds.

- What are 401(k) rollover options ?

Most people choose to roll over or transfer their funds to an IRA or to the 401(k) plan of a new employer. A Roth IRA is another type of individual retirement account. The difference is that with a traditional IRA the money you put in isn’t taxed, but withdrawals are. With a Roth IRA, the money you put in is taxed, but when you take it out the money you’ve invested isn’t taxed. If you have not reached age 59½, though, you may owe taxes and a 10 percent penalty on earnings. A much less popular option is to cash out your 401(k), but this comes with significant penalties; income taxes must be paid, and if you’re under-age 59½ there will be an additional 10% penalty tax. When considering rolling over the proceeds of your retirement plan to another tax-qualified option, such as an IRA, please note that you may have the option of leaving the funds in your existing plan or transferring them into a new employer’s plan. You may wish to consult with your new employer, if any, to learn more about the options available to you under your plan and any applicable fees and expenses. You may owe taxes if you withdraw funds from the plan. Please consult a tax advisor before withdrawing funds.

- Are there other retirement income options besides a 401(k) ?

One example has already been discussed here: traditional pensions, which offer a fixed monthly benefit for the rest of your life. Another option is a Guaranteed Lifetime Income Annuity. This type of annuity will provide a steady stream of income that’s guaranteed to last for the rest of your life—no matter how long you live.1 If you purchase an annuity, you won’t have to worry about the impact that a decline in the market would have on your payments.

- What’s the safest 401(k) option ?

Many 401(k) plans offer a stable value option. This pays a guaranteed rate of return for the year. The rate will change from year to year, but it is relatively stable. While it is safe in terms of preserving your money, it does not provide the upside potential that riskier options may provide.

- Why do people with 401(k)s retire later ?

While there are many potential reasons for those with 401(k) plans to retire later, most of them can be boiled down to a single word: uncertainty. While traditional pensions promise retirees a fixed monthly benefit for the rest of their lives, 401(k)s and other defined contribution plans offer no such guarantees.
Since the money we set aside in a 401(k) may have to last well into our 80s or 90s, it comes as no surprise that workers with these plans are delaying retirement in order to build the largest possible nest egg.2.

- How much do you need for retirement ?

With a 401(k), the burden of saving for retirement shifts from the employer to the employee. But how much money do we need? While financial experts routinely toss around figures that range between $1 million and $2 million, the amount we need to save depends greatly on the lifestyle we hope to lead.

- What is a Roth IRA ?

A Roth IRA is an individual retirement account designed to help you save for retirement. It allows for after-tax contributions with the potential for tax-free income in retirement. The Roth IRA was created through the Taxpayer Relief Act of 1997 to provide an alternative to making nondeductible contributions to traditional IRAs. It is named for the senator who was a sponsor of the legislation, William Roth.

- How does a Roth IRA work ?

You contribute money to your Roth IRA from your earned compensation – whether you are employed or self-employed – after you pay income taxes. Then your future, qualified withdrawals are tax-free. Roth IRAs allow you to contribute up to $6,000 a year, plus an additional $1,000 catch-up contribution each year if you’re 50 or older.

Roth IRA contributions are required to be made either in cash or by check. Once you’ve made your contribution, you can choose from a variety of investment options within a Roth IRA, including stocks, bonds, certificates of deposit (CDs), mutual funds, Exchange Traded Funds (ETFs) and money market funds. Having these choices gives you the opportunity to diversify your savings with an appropriate mix to help meet your retirement objectives.

- What are the differences between a Roth IRA and a traditional IRA ?

One of the main differences between a Roth IRA and a traditional IRA is the way contributions and withdrawals are taxed. Roth IRA contributions are made after-tax and future, qualified withdrawals are tax-free. Traditional IRAs are the opposite. Contributions to traditional IRA accounts may be tax-deductible, are tax-free and future withdrawals are taxed like income.

Another difference between these two types of accounts is the required withdrawal. If you have a traditional IRA, the IRS requires you to withdraw a minimum amount each year when you reach the age of 72. These are known as required minimum distributions (RMDs). A Roth IRA has no RMDs, so you can decide when you want to withdraw money. If you don’t need to make a withdrawal, your money can potentially keep growing tax-free.

- What are the benefits of a Roth IRA ?

In addition to enjoying tax-free, qualified withdrawals and no RMDs once you reach 72 years of age, there are additional reasons to consider a Roth IRA. There is no age requirement to open a Roth or even a Traditional IRA account. If you earn an income and pay taxes, you are eligible. You have the opportunity to contribute to both a Roth IRA and a 401(k) to keep growing your money. You also have the flexibility to contribute to a Roth IRA anytime during the year and up to your tax-filing deadline, which is traditionally April 15. Roth IRAs have no minimum contribution amount, which can help you start saving for your retirement faster. Plus, tax-free retirement income means you may not have to worry about future income tax rates. Your Roth IRA can also be inherited by your spouse and children and still maintain its same tax-free growth.

- Do I need a Roth IRA if I have a 401(k) ?

A 401(k) plan through your employer is designed to allow you to contribute a pre-tax percentage of your salary for retirement savings. If your employer provides a matching program, it can also reduce the tax burden for you and your employer. It’s important to keep in mind that your 401(k) is tied to your employer and is managed by an investment firm chosen by your employer with limited investment options.

A Roth IRA is an account you contribute to and manage. It offers you more control over how your contributions are allocated and invested. Having both a 401(k) and a Roth IRA can be an advantage by enhancing your opportunities to save more for retirement.

- Are there any age or other deadline requirements for a Roth IRA ?

There are no age requirements to open a Roth IRA. If you earn a taxable income, you can open an account. In fact, if you start contributing at a younger age, you increase your earning potential once you decide to retire. You can even make contributions to your Roth IRA after you reach age 70½.

You can contribute 100% of your taxable compensation – up to the annual contribution limit. If you are age 50 or older, you can make additional catch-up contributions. Keep in mind, these limits are reduced by any amount you are contributing to a traditional IRA.

You also have the flexibility to contribute to a Roth IRA throughout the year. All contributions for a given tax year must be made by the tax-filing deadline.

- How does my marital status or income affect my Roth IRA contributions ?

If your income exceeds certain dollar amounts, your maximum Roth IRA contribution may be lower. These contribution amount limits are $6,000 for anyone age 49 years and younger or $7,000 for anyone age 50 and older. If you have more than one IRA, your total combined contributions can’t exceed these contribution limits.
It’s possible that your income may prohibit you from being able to contribute to a Roth IRA at all. This is based on your modified adjusted gross income (MAGI) determined by the Internal Revenue Service.
Review the MAGI charts to see if your income or joint income falls into Roth IRA contribution limits. If your MAGI falls in the “partial” range, a tax professional can help you determine your exact IRA contribution maximum.
You can make contributions to a Roth IRA for a non-working spouse if you are married, file a joint return and are earning a taxable salary.
Are there rules about making withdrawals from a Roth IRA?
In general, you’re allowed to withdraw Roth IRA contributions and earnings without being taxed or penalized. If your Roth IRA account isn’t at least five years old or if you’re not yet 59½, the earnings portion of any withdrawal may be subject to taxes and a 10% penalty. The five-year count starts with your first contribution to the account.
The IRS has defined two specific rules for the five-year holding period. Here are the details of these rules.
Five-Taxable-Year Holding Period:

  1. The First Holding Period Rule applies when determining if the five-year requirement has been met for a qualified distribution. This five-taxable-year holding period begins with the individual’s taxable year for which they first make a Roth IRA contribution or, if earlier, the individual’s taxable year of the first conversion. The period ends on the last day of the fifth consecutive taxable year.
  2. The Second Holding Period Rule is used to determine if the ten percent early withdrawal penalty applies to taxable converted amounts that are distributed within five years. This five-taxable-year holding period begins with the taxable year of each taxable conversion. The 10% early withdrawal penalty will apply to distributions of taxable converted amounts before this five-year period has been satisfied unless the distribution is made under a penalty exception as defined in IRC 72(t). In addition, nontaxable converted amounts are always tax- and penalty-free. The five-taxable-year period ends on the last day of the fifth consecutive taxable year.

The five year holding period is not restarted when the Roth IRA owner dies; however, the distribution options and the tax treatment of the distributions will be dependent on who the beneficiary or beneficiaries are.

- How do I open a Roth IRA ?

If you’re considering opening a Roth IRA, we encourage you to contact a financial advisor to help you get started. Our financial advisors will work with you to determine what’s important to you now and in the future.
Together we will review your retirement options and design a personalized retirement strategy based on your investment goals.