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Retirement Saving Plans – What every investor should know.

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You are lucky to have a job and a retirement account to save money in so that one magical day you can blissfully retire in the sunshine. Your retirement account may be labeled a 401K, 403b, 457, IRA and so on. Most of these kinds of retirement accounts you put money in before paying taxes – it comes right off your taxable income, sits in the account and grows without further taxation. Then when you retire and take money out of the account, you pay taxes on everything that comes out of the account.

Things you should know about retirement accounts:

In general, try to maximize employer contributions. For example, they may add 5% if you add 5%. They are basically giving you a free 5% of your income as long as you invest too. Do this!

  • Pay attention to how the account is invested – information and guidance may be limited so be

proactive.

  • There is generally a 10% penalty on any money taken out before you are 59 1⁄2, but exceptions

do exist. There is a required minimum distribution (RMD) at 70 1⁄2 a and a 50% penalty on missed withdrawals, but exceptions do exist. Note that the RMD changes every year so try to have this withdrawal automated.

  • If you make a mistake and forget to take your RMD or take too little, you can ask the IRS to forgive your error. First take the RMD out of the account, second write a letter explaining the situation to the IRS, and third file IRS form 5329 along with the letter. The IRS tends to be forgiving if it is corrected and was an innocent mistake.
  • Your kids can inherit your retirement account so that it basically becomes their own retirement account but they may have to take out an Inherited IRA RMD.

By Cammie Humke, Investment Adviser at The Humke Group, Inc Located at 555 S. Randall Rd in St. Charles, IL, phone 630-584-7343

The Humke Group, Inc is an independent firm offering securities through Summit Brokerage Services, Inc., Member FINRA/SIPC. Advisory Services offered through Summit Financial Group Inc., a Registered Investment Adviser. Opinions expressed are that of the author and are not endorsed by the named broker/dealer. All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy.