Retirement Planning Strategies for Women with 401(k) and 403(b) Plans

In the 2024, “Winning Every Wednesday” series, “Shalisa’s Sisters” is celebrating the lives of all Women over 50! My mission is to provide female survivors of Domestic Violence and all women with uplifting, empowering, transformative information, resources, and guidance to enrich your life. I see you, Sister!... You’re Beautiful, You’re Important and the Wisdom you have is Valued! Thank you

???????????? After World War II ended and American soldiers returned home, several key factors emerged that significantly shaped U.S. history: birth rates surged, Veterans utilized their GI Bill to buy homes and pursue their education, improvements in healthcare enhanced public health, and traditional family values were at the forefront of the American society. Babies born after World War II are known as “Baby Boomers” (born between 1946-1964). In 2024, 4.1 million “Baby Boomers” are expected to turn 65 and those age 67+ can legally retire; individuals that participate in a 401k or 403b can begin drawing down on theses retirement accounts.

??????????? Retirement is defined as “the phase of life when a person stops working full-time, usually after reaching a certain age or after years of employment. It is often marked by the transition from earning a regular income through employment to relying on savings, pensions, or other sources of retirement income.”

A 401(k) is a type of retirement savings plan offered by United States employers to their employees that work at a for-profit business. Please note, that there is no specific threshold for the number of employees that a for-profit employee must have, and employees can voluntarily participate in this retirement plan to both save and invest a portion of their paycheck before taxes are taken out; this can help reduce their taxable income for the year. Employee participation in this savings plan is capped yearly and there are financial penalties for early withdrawals; consult your employer’s financial advisor or seek your own reputable certified money manager for additional information.

Here is a general breakdown of a 401k Retirement Savings Plan:

1. Savings:? Consider these facts when planning for retirement, if you retire at age 65 and plan to live until nearly age 82 for women then you’ll need almost 17 years of savings to cover your living expenses for housing, medication, and related essential living costs, on average the life expectancy for U.S. women is 81.1 years, so should plan to save at least 10-12 times the amount that you earned while working.
2. Contributions: Employees can choose to have a portion of their salary deducted from their paycheck and deposited into their 401(k) account. There are annual limits on how much you can contribute, set by the IRS. For 2024, the limit is $23,000 for those under 50, and $30,500 for those 50 and older (due to a catch-up contribution provision).
3. Tax Benefits: Contributions to a traditional 401(k) are made before taxes are deducted, reducing your taxable income for the year. Taxes are paid when you withdraw the money, typically in retirement. There is also a Roth 401(k) option, where you pay taxes on contributions upfront, but withdrawals (including earnings) are tax-free if certain conditions are met.
4. Employer Match: Many employers offer a matching contribution, which means they contribute additional funds to your 401(k) based on your own contributions. For example, an employer might match 50% of your contributions up to a certain percentage of your salary; you choose the specific amount to be matched.
5. Investment Options: The money in your 401(k) can be invested in various assets, such as mutual funds, stocks, bonds, and more, depending on the plan's offerings. You can usually choose how to allocate your investments based on your risk tolerance and retirement goals. The closer you are to retirement the more aggressive your diversified investments will become; with the goal for you to receive substantial savings for your retirement.
6. Vesting: Employer contributions may be subject to a vesting schedule, which means you have to stay with the company for a certain period of time before you’re fully vested which is usually between 3-5 years however, employers determine the vesting schedule.
7. Withdrawals: Generally, you can't withdraw money from your 401(k) without penalties before age 59?, there are some exceptions. When you withdraw funds in retirement, they are taxed as ordinary income.
8. Loans and Hardship Withdrawals: Some plans allow you to take out a loan or hardship withdrawal from your 401(k), but these options can come with their own set of rules and potential penalties. Overall, a 401(k) is a powerful tool for building retirement savings due to its tax advantages and the potential for employer matching contributions. *Please keep in mind that your 401(k) is meant to take care of your financial needs after your retirement and early withdrawals outside of hardships/loans can adversely impact your quality of life.

??????????? Now that you have a basic understanding about 401(k) Retirement plans let’s now turn the focus on retirement savings for those working for not-for-profit employers to determine how to prepare for life after working. If you work in the public sector or for certain types of non-profit organizations, you can still participate in a retirement savings plan through your employer. Bear in mind, whether you participate in a 401(k) or 403(b) you can add additional monies to your savings account and if you leave employment prior to being vested in either plan, you can take your monies with you and roll it over into a Roth IRA or into a new 401(k) or 403(b) with your new employer. I encourage you to take advantage of your employer's complimentary wealth management services to answer your questions about your retirement plan.

A 403(b) plan is a retirement savings plan is specifically designed for employees of certain tax-exempt organizations, such as public schools, universities, hospitals, and some non-profits (i.e. primary/elementary schools, colleges/universities, non-profits like {United Way/American Red Cross} etc.

Here’s an overview of a 403(b)-Retirement Savings Plan:

1. Eligibility: 403(b) plans are offered to employees of qualifying non-profit organizations and public sector entities for example if you work as a law enforcement officer, educator, social worker etc. these individuals can choose to participate in their employer’s retirement plan.
2. Contributions: Employees can contribute a portion of their salary to their 403(b) account on a pre-tax basis, which reduces their taxable income for the year. There is also a Roth 403(b) option available, where contributions are made after taxes, but withdrawals in retirement can be tax-free if certain conditions are met.
3. Tax Benefits: Taxes are paid when you withdraw the money, typically in retirement. Roth 403(b) contributions are taxed upfront, but qualified withdrawals are tax-free.
4. Contribution Limits: For 2024, as an employee participating in a 403(b) plan, you can contribute the following yearly amounts towards your plan: $23,000 for those under 50, and $30,500 for those 50 and older (catch-up contributions).

5.???? Employer Contributions: Some employers may offer matching contributions towards your 403(b) plan, though this is less common compared to 401(k) plans. For example, an employer might match 50% of your contributions up to a certain percentage of your salary; you choose the specific amount to be matched.

1. Investment Options: Investment choices in a 403(b) plan may include mutual funds, annuities, and sometimes other options, depending on the plan provider. The specific options and their performance can also vary.
2. Vesting: If the employer makes contributions towards your 403(b), those contributions may be subject to a vesting schedule, meaning you need to remain employed with the employer for a certain period of time before those contributions fully belong to you; meaning once you’re vested then decide to stop working for this employer then you can take all your monies that you contributed to your 403(b) plan and invest the money with your next employer or roll it over into a Roth IRA or Roth 403(b) plan; please consult a certified/reputable wealth manager to determine the plan the best meets your financial goals.
3. Withdrawals: Generally, you cannot withdraw funds from a 403(b) before age 59? without facing penalties, although there are exceptions for certain circumstances. Withdrawals in retirement are taxed as ordinary income.
4. Loans and Hardship Withdrawals: Many 403(b) plans allow participants to take out loans or make hardship withdrawals, though the rules and availability can vary by plan. For example, for over 20 years, I worked for non-profit organizations and personally requested a one-time hardship withdraw from my 403(b) account. I paid 20% in taxes upfront in order to avoid tax penalties at the end of the year. I met all the criteria’s to complete this transaction and discovered during my tax filing that I paid too much to complete the early withdrawal; my wealth manager did explain in great details what might happen during my tax filing if I completed the transaction however, I erred on the side of caution to avoid additional IRS tax penalties. I really believe I made a sound decision for my family at that time; however, I never withdrew monies again from my 403(b)-retirement plan.

??????????? Preparing for retirement can be scary, confusing and overwhelming for some however, if you participate in your employer’s retirement plan, you’re provided with complimentary wealth management services. Wealth managers can assist you with devising a retirement plan that prepares you for your Golden Years; there’s no limit on how many times you can tap into these services and usually once a year your wealth management team comes to your work site to answer your retirement planning questions, they can enroll you in a retirement plan and provide you with valuable information; please consider attending this presentation.

Retirement represents a significant transition in your life, offering you time to reflect on your past achievements, explore personal passions, and create new experiences. While you were working, you may have delayed traveling or participating in your favorite hobbies/interests. Your time is now to spend more quality time with your loved ones, take a nap in the middle of the day, or taking more day/staycations and living out your retirement dreams.

Unless you have a trust fund or a rich uncle that leaves you an inheritance, it’s imperative to save for your retirement and consult with a reputable wealth manager to discuss strategies for your retirement goals. Take into consider how much your day-to-day living expenses will cost; perhaps you can live with friends/family to share living costs thus stretching your dollar, perhaps you want to live out your retirement in an exotic destination; speak to your fiduciary consultant about becoming an expat; some countries outside the United States offer tax breaks for U.S. retirees, for example (Portugal, Mexico, Spain, Malta, Belize, Ecuador, Costa Rica, Panama), the cost of living is more affordable in other countries thus providing you with a more affordable retirement lifestyle. While other countries such as (Barbados, Mauritius, Georgia-between Eastern Europe & Western Asia, Antigua, Barbuda) pay U.S. expats to live in that country or provide significant tax incentives for retirees to establish a business in these countries; please note certain requirements must be met to take advantage of these tax breaks.

If you decide to live out your retirement years in the United States, think about affordable states/regions where your dollar can be stretched; what’s vital is having enough money to meet your basic needs for the remainder of your retirement. I eagerly anticipate my retirement, I'll have the freedom to discover exotic destinations and savor delicious cuisine from around the globe, but what’s important to me is enjoying my leisure time without punching a clock. I wish you a joyful, healthy and prosperous retirement!

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RESOURCES:

National Domestic Violence Hotline-?If you or someone you know is in an abusive romantic relationship and needs resources, please call?1-800-799-7233.?TTY?1-800-787-3224.?Text- “START” to 88788. Open?24/7, 365?by call/text/chat (You can speak to representatives in English & Espanol).?https://www.thehotline.org/

Social Security Administration- The Social Security Administration provides Americans with retirement benefits, disability, survivor, and family benefits, and enroll individuals in Medicare. They also provide Social Security Numbers to American citizens, which are unique identifiers needed to work, handle financial transactions, and determine eligibility for certain government services. https://www.ssa.gov/

*When utilizing the Internet, please only use official websites with a lock symbol next to the URL (“A URL, or Uniform Resource Locator, is the address used to access resources on the internet. It specifies the location of a resource and how to retrieve it”, these are only a few examples. Ex: https://example.com/path/to/resource OR https://example.com OR https://www.ssa.gov/

REFERENCES:

Holy Bible- Scripture/Passage (New International Version-NIV). Malachi 3:10. https://www.biblegateway.com/passage/?search=Malachi%203:10&version=NIV

403(b) “Hardship withdrawal” (personal experience). Wall, Shalisa. Summer 2011. [email protected]

ChatGPT AI- 401(k)/403(b) (Retirement Savings Plans)/Definition of URL. https://chatgpt.com/

Article. “State of Retirement Finances: 2024 Edition (amounts retirees have or should save)”. Brannon, Matt, January 22, 2024.

Article. “Average US Life Expectancy Statistics By Demographics 2024!” (Life expectancy of American Women). El, Sa, May 9, 2024. https://www.simplyinsurance.com/average-us-life-expectancy-statistics/

?Article. “America is hitting, “peak 65” in 2024 as record number of boomers reach retirement age. Here’s what to know” ?(How many Americans are turning 65 in 2024). Lee, Anne Marie, Picchi, Aimee (Editor), January 29, 2024. https://www.cbsnews.com/news/retirement-medicare-401k-what-to-know-peak-65/

Google Search Engine- "When were Baby Boomers born?" https://www.bing.com/search?q=when+were+baby+boomers+born&form=ANNTH1&refig=a22b36b0b09548dd9b3de480b416b0b2&pc=HCTS&pq=when+were+baby&pqlth=14&assgl=27&sgcn=when+were+baby+boomers+born&qs=LS&smvpcn=0&swbcn=10&sc=10-14&sp=1&ghc=2&cvid=a22b36b0b09548dd9b3de480b416b0b2&clckatsg=1&hsmssg=0

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?SCRIPTURE OF THE DAY:

Malachi 3:10 NIV– “Bring the whole tithe?into the storehouse,?that there may be food in my house. Test me in this,” says the?Lord?Almighty, “and see if I will not throw open the floodgates?of heaven and pour out?so much blessing?that there will not be room enough to store it.”

?DISCLAIMER: I am a survivor of Domestic Violence, and my goal is to provide free helpful resources to other female survivors to support you in your healing journey.?The statements, thoughts and comments are my own. The resources provided are from legitimate entities that I have no affiliation with nor receive compensation from these businesses. Please comply with all your local, Federal and state laws as it relates to your individual Domestic Violence situation.? If you know someone that’s in immediate danger, please call 9-1-1 or your local law enforcement emergency number.

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