Following a recent on-site coaching event, our friends and clients at MPCA had some good questions about work-based pension plans. I thought I’d post my responses here.
Thanks to all of you who attended our spring investor on-site coaching event – I was glad for a full room and thankful that a good pizza still holds that kind of draw!
Some good questions were asked during and after the meeting. I thought I’d hit a couple of those points here and encourage you all to schedule a phone or face-to-face meeting with me in my offices in Okemos some time to discuss things further.
How should I rollover my previous 401k, and what do I roll it into?
This is a great question. You have two main options: First, as a current MPCA employee, you can move your old 401k into your new 403b. This is my recommendation. Second, you can also move it into what is called an IRA rollover account, which is separate from any of your work-based plans. This could be a good move given your particular situation (I’m glad to talk further with you about the issues surrounding that decision).
In an era where “the job” may be less permanent, you need to make sure that you are accumulating enough over time from all of your different jobs. My main advice is to never take money out of a retirement account before retirement. Keep rolling it forward as you move through life. Think about your IRA rollover as a big snowball. As you may have the need to change jobs from time to time, always add your old 401k/403b to it and watch it grow as it rolls. Stay invested!
Should I contribute to the 403b here at MPCA?
First, you don’t need to contribute to get the MPCA contribution. This is one of the most generous plans I’ve seen. You get 7% of your income as a contribution even if you don’t contribute yourself. So, who should invest some of his or her own money in addition to this? Maybe you. Consider investing more into your 403b if . . .
~ You don’t have credit card debt – pay credit cards off first.
~ You have an emergency fund. Have at least three months’ worth of monthly living expenses in your savings account. This is very important.
~ Your household is in the 25% tax bracket. If you are in a lower bracket, I generally recommend a Roth IRA outside of this plan (call me to explain and evaluate).
~ You have a good plan for the education of your children.
These are just a few of the things to consider before adding from your own pay into your 403b, but if you meet these criteria, it may be a wise move.
It is recommended that you save 10-15% of your gross annual income into a retirement savings account. If you do this consistently, and you have no debt, including your mortgage, by the time you retire, then you will not likely be disappointed. For a more personal look at your plan, please call Liz and set an appointment.
I look forward to coming back for the fall event. Until then, have a wonderful spring and summer!