Retirement plans require determination, planning

Worried about your future?

If you are like millions of Americans, you might wonder if you will have enough money to travel or do what you’ve always wanted to do when you retire.
Financial experts agree that with today’s threat of Social Security running out, it is important for everyone to start investing in his or her future.
“One way to start investing in your future is in a 401(k) plan,´ said Ed Cullen, investment representative for Edward D. Jones & Co.
These plans are designed by certain companies to match a percentage of pre-tax dollars withdrawn from your paycheck, explained Roger Sample, certified public accountant for Sample & Bailey in Fort Collins.
For example, at Hewlett-Packard Co., the company will match dollar for dollar the first 3 percent withdrawn from each paycheck. And the next 2 percent deducted from the employee’s paycheck will be 50 cents per dollar, said Gordon Bretzing, compensation specialist at Hewlett-Packard’s Fort Collins site.
However, it is up to the individual company how much it is willing to match, Cullen said.
The key to success when looking into a retirement plan is getting the right kind for your long-term goals, Cullen said.
Typically, the largest set of assets is gained in a retirement plan, Cullen said.
Retirement plans help not only employees but the company as well.
“The real benefit of a retirement plan is that it gives a company the competitive edge by recruiting and maintaining high-quality employees,” Cullen said. “It is a great economic benefit to the corporation.”
In addition to the 401(k), there are also retirement plans that fall under defined benefit plans where a company funds the pension plan 100 percent based on a company formula.
Stock ownership is also an option for interested investors to purchase stock in their company, which will possibly match the amount of shares purchased by employees, Bretzing said.
Profit sharing is also offered by certain companies. This is where approximately 12 percent of pre-tax profits are divided by the amount of people’s salaries, as with Hewlett-Packard, Bretzing said.
“These plans are really terrific because you will receive profits no matter how your company is performing,” he said. “And for that reason, many companies are turning away from these types of plans.”
The trend nowadays, however, is toward the 401(k) plan because both the company and employees will have tax benefits, Cullen said.
It is more and more common for companies to shift the financial responsibility to their employees, Bretzing said.
Bretzing said that after one year of employment, H-P employees are eligible to invest in a 401(k) plan.
Many 401(k) plans offer money-market accounts, mutual funds, bond funds and stock funds.
However, if a person wants to withdraw money at some point from their fund, they must follow certain guidelines. Generally, there must be a “triggering event” that takes place such as terminating employment, reaching retirement, becoming disabled, death, or divorce, in order to draw out funds.
Many of these categories fall under hardship withdrawals and have a mandatory 20 percent withholding tax. In addition, if someone tries to withdraw before age 59.5, a 10 percent penalty is assessed, Cullen said.
With approximately 80 percent of Hewlett-Packard’s employees in Fort Collins, Greeley and Loveland investing in a 401(k) plan, it is now important for companies such as Hewlett-Packard to offer seminars to their employees on investing.
“My advice to investors is to diversify your funds and stick with what you have,” Bretzing said
“We tell most of our employees the 401(k) plan is great because it is a painless way of saving money before they get their hands on it, since it is directly withdrawn from every paycheck,” Bretzing said.
It is also important to remember that the most successful plans are those handled by a team of investment professionals who you know will be watching your dollars on an everyday basis, Cullen said.
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