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Smart Money Retirement

Retirement doesn’t necessarily mean sixty-five anymore. Retirement now can mean fifty to fifty-five years of age, when you could be offered early retirement!

If you are fifty-five years of age or older in the year of your retirement, you can withdraw any or all of the money, whenever you wish, from your qualified retirement plan without any penalties whatsoever. This rule of fifty-five and over pertains only to money in employee qualified plans, not for any other retirement account, such as an IRA, an IRA rollover, or SEP/IRA.

If you are 55 or older and transfer your funds from your qualified plan into an IRA rollover, you will also transfer away the right to access these funds at convenience without penalty until you turn 59 1/2 unless you take substantially equal periodic payments.

If you are not or will not be fifty-five in the year of your retirement, the best way to avoid penalties, if you need to access those funds, is by rolling over your funds into an IRA rollover and taking substantially equal periodic payments.

If you are presented with an early retirement offer, the following guidelines will help you in deciding if you can retire.

Tip: If you are taking early retirement because your spouse or partner’s earnings cover your financial needs and you are dependent on those earnings, you should consider purchasing a level term life insurance policy on him or her to protect you in case anything happens to your spouse or partner if he or she is not already adequately insured. (You will need the policy only for the number of years your spouse or partner plans to work. If he or she will retire in ten years, take out a ten-year policy.)

Tip: Most early retirement health benefit offers will not include dental or optical care. If your company now covers these two and if early retirement is in the air, get all your dental and optical work completed beforehand.

Tip: At age 70 1/2 you are required to start withdrawing funds if you have not already done so.

Tip: If you and your spouse have set up a living trust (hold your assets in trust), make sure the primary beneficiary named on all your retirement accounts is the individual name of your spouse and not the trust. If you name the trust as the primary beneficiary, it will be subjected to the same rules as a nonspouse and the account will have to be wiped clean within five years. The trust should be named the contingent beneficiary only.

(1) Any financial adviser who calls you cold-whom you don’t know and have never heard of-should be sent packing. Hang up. A successful adviser doesn’t have to look for clients. Clients seek her or him out.

(2) If an adviser has time to come to your home, something is probably radically wrong. When I was seeing clients—long before I wrote my first book—I didn’t have time to breathe, let alone get in a car and drive for half an hour across town to a client’s home and then drive back again.

(3) You should make it a point to visit a potential adviser’s office, in any case. You’ll want to pay careful attention to how he or she keeps his or her professional space. Is it neat? Are files in order? Is it busy?

(4) If you are married or have a life partner, a potential adviser should have found this fact out by asking and should see you only if you agree to bring your partner along or else have a very good reason why you prefer not to.

(5) A good financial adviser will ask you all—not some, but all—of the following questions: How is your health? (This is No. 1, in my opinion, since if you’re not healthy you’ll need first and foremost to plan for your medical care and possibly your income if and when you cannot work.) Are you in debt? (This is No. 2.) Are you responsible for aging parents? Do you have a will or trust? Will you inherit money someday? Do you need to make a major purchase like a new car or a new roof for your home? Do you have a retirement plan? Are you funding it to the maximum allowed by law? Do you have adequate insurance? Are you saving for your children’s education? Only after an adviser fully understands your financial situation should he or she ask you how much money you have to invest.

(6) An adviser should be a Certified Financial Planner, or CFP® Professional, just as I am. That means that he or she cares enough about his or her clients to have gone through a two-year certification process, with continuing education requirements mandating that he or she stay up-to-date on the kinds of information that you need.

(7) You should be told up front how, and how much, a potential adviser will be paid. You shouldn’t have to ask. The correct method of payment is by fee only. Any adviser who wants to be paid through commissions charged on the investments he or she makes for you has an incentive to move you in and out of stocks and other investments, perhaps in direct opposition to what’s best for you.

(8) An adviser should never ask you to write a check to him or her. You should write checks only to a brokerage, an insurance company, or another financial services firm.

(9) If you already have an adviser, that adviser should be calling you in down markets as well as in up markets. Has your adviser called you in the past 12 months?