Clear solutions in a complex world®
Russell G. Lowry
CFP®, CRPC®
Wealth Planning Advisor
Sagemark Consulting
100 Northfield Drive
Suite 200
Windsor, CT 06095

ph: 860.298.1800
fax: 860.298.1812
toll free: 888.921.8455

russell.lowry@lfg.com
How is a pension plan different from a 401(k) plan?
A pension plan is designed to provide an employee with retirement income. Benefits are generally based on a variety of factors, including salary, length of service, and a benefit formula that averages the employee's earnings over a prescribed period of years. In some instances, an employee may make additional contributions. To receive benefits, you generally must wait to reach the normal retirement age (NRA), typically age 65, and attain a certain number of years of employment. Upon retiring, you may have options as to how and when you collect your benefits, such as in monthly payments or in one lump sum.

A 401(k) plan, offered by many private employers, provides you with the opportunity to contribute part of your salary, with restrictions, into a retirement fund. Your employer may match your contributions up to a pre-determined percentage, subject to a maximum. For example, if your employer matches your contributions by 50%, for every dollar you put into the fund, your employer will add $.50. Your contributions are pre-tax, so you defer any payment of taxes until you begin taking withdrawals. If you withdraw money from your 401(k) before the age of 59½, you may incur a 10% federal income tax penalty, except under certain circumstances (such as hardship, purchase of your first home, or education expenses).

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Life Goals: Financial Essentials For Your 70s

Here are several financial steps you may want to consider taking right now:


1. Review your Will and Living Will.

Changes in your family or other circumstances make it important to regularly review your plans for your property and your medical care.

2. Review estate plan.

Work with an advisor to develop or review a plan for your property and assets, including your Will, trusts, liquidity of assets and gifting.

3. Re-evaluate budget and cash flow.

Creating a budget is crucial to fulfilling your plans for retirement. Be sure to plan on a reserve for emergency situations when evaluating your needs.

4. Make sure long term care needs are met.

Plan and discuss your desires and needs for possible long-term healthcare with your family.

5. Supplement Medicare.

Medicare may not be enough to provide the level of care you need; work with an agent to determine an affordable level of coverage.

6. Review business agreements and transfer plans.

If you have a business, you need to plan for a fair and predictable transfer of your business should you die or wish to move on.