Last Week’s Question of the Week: When discussing Social Security, what do the letters FRA stand for? ANSWER: FRA stands for “Full retirement age”
HOST: Before we get to discussing the topic of the day, can you please remind our listeners as to whom Klaas Financial is, and exactly what it is that you do?
KLAAS FINANCIAL: Yes, so our firm, Klaas Financial is celebrating our 42nd year of business and as a mid-size Registered Investment Advisory firm with offices in Fitchburg and northern Illinois, we help clients every day sort out what their future retirement is going to look like. On our weekly show here, we are always trying to focus on the “how to retire better” and that brings us to a quick description on what true financial planning actually encompasses.
HOST: So, one area I think you assist your clients with is understanding their retirement plan at work and how to maximize it?
KLAAS FINANCIAL: Yes, this a big area that we work with clients who are serious about their retirement planning.
So first, we look at what plans they have available to them.
- Do they have a 401k, a 403b or 457 plan? If not, do they have an IRA they can contribute to? What we are trying to find is ways that we can put away the most amount of money into retirement accounts, either pre-tax or post tax. MAXIMIZE contributions when possible!
- Is there a match to your contributions? Free money!
- Also, many people start saving for retirement later than they would like. We discuss the catch-up provisions that are allowed for when you are 50 or over.
- We look at if there will be a pension when they retire and possible choices that they may have to consider for the continuation of that pension if they should pass away.
- Also, looking at investment choices within your retirement plan at work is important. Making sure you are taking an appropriate amount of risk for your age, temperament, years till retirement and your own circumstances.
HOST: So, what if I find out I do have choices in the type of 401k I can save into, say Roth or Traditional? What should I do? How much can I put away?
KLAAS FINANCIAL: Well that depends.
Where to save into is a question regarding possible taxes in retirement that we look at given probably income flows and potential tax rates. Sometimes it seems clear for our younger clients to move towards Roth 401ks, but for some, due to high incomes and current taxes, they prefer and need the tax benefit today.
So, how much can you put away? In 2018, you can put away $18,500 if you are under 50, and an additional $6000 if you are over 50 into a retirement 401k plan. Your employer can make contributions on top of this, but that is the max for the 401k plans.
IRA limits remain at $5500 for under 50, and $1000 catch-up contribution for over 50.
So how much should you be putting away? Probably as much as you can afford to.
Kiplinger’s just released a figure in March of 2018, that Americans have stashed away $26.6 trillion in retirement savings.
In our experience, most people don’t say that they have too much money when they go to retire! Especially for those who do not have a pension to fall back on.
Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.
