Saving for retirement
Invest in your future now and begin saving for retirement.
Why start now?
- The earlier you start saving, the more wealth you'll have available to meet your needs later.
- Retirement savings and earnings grow tax-deferred. With tax-deferred accounts, you pay applicable taxes on the money when you withdraw it in retirement.
- Many employer plans offer ‘company matching’ of contributions you make. That’s free money.
- The more you save, the less you’ll need to rely on Social Security for your personal long-term financial security.
The power of compounding
Compounding occurs when interest is earned not only on the amount you save, but also on all the interest your savings accumulate over time. 401(k) accounts and traditional IRAs benefit from tax-deferred compounding. You only pay taxes on the money you withdraw in retirement (when you may be in a lower tax bracket).
Retirement plan basics
The following are a few of the most common retirement savings plan options:
Changing jobs? Here are your 401(k) options.
If you have a 401(k) account with your current employer, you have four basic choices of what to do with your retirement savings.3
- Leave the account with your former employer 4
- This requires little or no effort on your part, but you may lose track of the account as you change jobs over your career (missing out on making smarter investment decisions).
- Roll the balance into your new employer’s 401(k)
- If permitted, this is a great way to help keep your retirement funds consolidated.
- Roll over to an Individual Retirement Account (IRA) or convert to a Roth IRA
- If you’re looking for broader investment options, or want to convert your funds to an IRA, then moving the 401(k) funds into a traditional IRA or Roth IRA may make sense.
- Take a cash distribution for the account value
- Taking a lump sum distribution rather than rolling over into another plan or IRA lets you re-invest or spend the funds as cash, but you may be subject to taxes and penalties.5
1 Schroders U.S. Retirement Survey, March 2022.
2 Distributions are taxed on the account's accrued earnings and the contributions you made for which you received income tax deductions in the years you made the contributions.
3 You have choices for what to do with your 401(k) or other type of plan-sponsored accounts. Depending on your financial circumstances, needs and goals, you may choose to roll over to an IRA or convert to a Roth IRA, roll over a 401(k) from a prior employer to a 401(k) at your new employer, take a distribution, or leave the account where it is. Each choice may offer different investment options and services, fees and expenses, withdrawal options, required minimum distributions, and tax treatment, and provide different protection from creditors and legal judgments. These are complex choices and should be considered with care.
4 Your employer has discretion to fully distribute your account if your balance totals less than $5,000.
5 The early withdrawal penalty will apply if you are under age 59 ½ and the distribution will be taxed as ordinary income at your current marginal tax rate for the year.
6 The information we are providing is educational in nature and discusses options you may have related to your employer sponsored plan assets. Individuals should consider their own specific facts and circumstances when considering a rollover and may wish to consult a tax advisor.
7 If you directly roll over your assets to an IRA or another plan, mandatory withholding rules will not apply. If you elect to receive a distribution and subsequently wish to roll over the assets, you must complete the rollover within 60 days of receiving the withdrawal. Mandatory 20% federal withholding will apply, and if you are under age 59 ½, the early withdrawal penalty may also apply.