Are You a Retirement Expert?

In this week's podcast, Certified Retirement Counselor Miguel Gonzalez challenges your retirement savings knowledge with a True or False test. Tune in to see how much you know!

Cortburg Retirement Advisors is a full-service, boutique financial planning firm dedicated to guiding clients through both turbulent and calm economies. Our mission is to help you grow, protect, and preserve your assets from your first job through retirement. With comprehensive in-house capabilities, our experienced team assists with all financial needs, including wealth management, estate and tax planning, group retirement, employee benefits, insurance, and retirement planning.

About Miguel Gonzalez, MBA, AIF®, CPFA®, PPC®, CRC®
Miguel Gonzalez is a Retirement Specialist with over 20 years of experience in retirement income planning, investment management, and retirement plan design.

Former Financial Advisor at JP Morgan Chase Bank, Merrill Lynch, and ING Financial Advisors.
Consultant for Barbara Corcoran Inc. and the World Bank.
MBA from Columbia Business School.
Life and Health insurance licenses, Series 7 and 66 registrations held through LPL Financial.
Fluent in English, Spanish, and Russian.
Certifications: Certified Retirement Counselor®, Certified Plan Fiduciary Advisor®, Accredited Investment Fiduciary®, Professional Plan Consultant®.

Welcome to Cortburg Speaks Retirement Podcast
with Miguel Gonzalez, MBA, AIF®, CPFA®, CRC®

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Transcript

Welcome to Cortburg Speaks Retirement

An audio podcast about investing in the stock market, financial planning, money management and retirement planning.  Each Wednesday, we help investors at all stages of life learn how to potentially grow and preserve their money from first job through retirement.

Now here is your host, Miguel Gonzalez.

 HOST

Good morning and welcome to the CORTBURG SPEAKS RETIREMENT audio podcast.   

This week let’s gauge your retirement savings plan knowledge with a True or False test!

Even though I'm young, I should still make saving for retirement a priority.

True. Because of the power of compounding, your youth is actually one of the best reasons to start contributing now. Compounding is what happens when your plan contributions earn returns, and then those returns produce earnings themselves. Over time the effect can be dramatic. And the younger you are, the more time you have to let compounding work for you. So even if you're struggling to balance rent and food with car loans and school loans, try to contribute even a small amount to your retirement savings plan on a regular basis.

If I work two jobs, each with its own retirement savings plan, I can contribute twice the maximum limit on a pre-tax basis.

Maybe true, maybe not. The maximum amount that you can contribute to 401(k) and 403(b) plans in 2024 is $23,000, plus any catch-up contributions if you're age 50 or older (up from $22,500 in 2023). If you contribute to more than one plan, you're generally responsible for making sure you don't exceed these limits. If you do exceed the annual limits, you need to request a refund of the excess contribution amount or report the excess on your tax returns in both the year the contributions were made and the year they are withdrawn. If you're lucky enough to participate in a 457(b) plan as well as one of the plans listed above, you may be able to contribute a total of $46,000 ($23,000 to each plan) in 2024, plus catch-up contributions if you're eligible.

Once I join my plan, I can "set it and forget it."

False. Your plan decisions are not a one-and-done deal. Once you join your plan, determine your contribution amount, and choose investments, you can feel confident that you've taken some smart first steps. However, any successful retirement savings strategy depends on regular reviews and periodic changes to keep up with your changing lifestyle.

All the money in my retirement savings plan is mine to keep, from day one.

Maybe true, maybe not. Your own contributions to the plan and any earnings on those contributions are always yours to keep. However, contributions made by your employer, as well as any associated earnings, may be subject to a "vesting schedule." Some plans allow you to become fully vested in employer contributions immediately, while others require you to earn rights to the employer contributions over a period of time, up to a maximum of six years or until you reach the plan's normal retirement age, whichever comes first.

You can find details about your plan's vesting schedule in your Plan Highlights or Summary Plan Description.

Employer matches on my Roth contributions may go into my Roth account.

Maybe true, maybe not. In 2023, a new law took effect that permits employer contributions to be invested in Roth accounts, provided participants are fully vested in those contributions. However, employers are not required to offer this plan feature . If an employer chooses not to add this feature, all matching contributions will automatically be invested in pre-tax accounts.

Alternatively, you may be able to convert your employer's matching contributions to Roth contributions, if your plan allows. If you do, they'll be subject to income tax in the year of the conversion. But a benefit of the conversion is that future qualified withdrawals of those contributions and associated earnings will be tax-free at the federal, and possibly state, level.

Because I contribute to my employer-sponsored retirement plan, I cannot contribute to an IRA.

False. Your contributions to your employer-sponsored retirement savings plan have no effect on your ability to open or contribute to either a Roth or traditional individual retirement account (IRA). However, your (or your spouse's) participation in an employer-sponsored plan may affect your ability to deduct traditional IRA contributions on your tax returns, depending on your filing status and income. (Roth IRA contributions are never tax deductible.)

A plan loan is always a good idea, because you pay yourself back with interest.

False. If your plan permits loans, they typically should be considered as a last resort. Although it is generally true that your loan repayments go back into your account, there are several negative consequences to consider:

1.    Any money you take out of your plan will diminish the compounding potential in your account.

2.    You may not be able to save anything extra while paying back the loan. 

3.    If you leave your job, the loan may need to be repaid in full by your tax return due date.

4.    A loan defeats the whole purpose of your choice to participate in an employer-sponsored savings plan in the first place. That choice is one of the best financial decisions you can make. Why derail that smart move by taking money out of your account now?

When you're facing a financial need or even a crisis, a plan loan can seem tempting. However, after weighing the pros and cons carefully, you may conclude that a plan loan is not worth the long-term risk. This is one of the main reasons why financial professionals recommend having at least three to six months worth of living expenses set aside in an emergency savings account — so you can stay on track in other areas of your financial life when an unexpected need hits.

If I'm nearing retirement, I should move all of my money into conservative investments.

Generally, false. Although it typically makes sense to gradually shift your asset allocation away from more aggressive investments as you age, it's usually a good idea to keep a portion of your portfolio in stocks to help maintain some growth potential in your plan. One of the biggest risks retirees face is losing purchasing power due to the rising cost of living, or even running out of money altogether. Maintaining some stock investments even during retirement can help your portfolio stay ahead of inflation (although there are no guarantees). However, these are just general guidelines; your asset allocation depends on your unique circumstances.

Fortunately, I don't need to be an "expert."

True. Regardless of how you did on this pop quiz, you can take comfort knowing you don't need to be an expert to take maximum advantage of your retirement savings plan. You just need to familiarize yourself with your plan's features, review your plan contribution levels and investments every so often, and consult your plan materials and financial professional for any specific questions. In retirement plan investing, a little knowledge goes a long way.

Make sure to visit our website, www.CortburgRetirement.com. Our site is filled with educational videos, eBooks, publications, and financial calculators designed to help you learn more about your finances.  As you search our site, send us a note regarding any questions you may have about any particular investment concepts or products. We will get back to you quickly with a thoughtful answer.

This is Miguel Gonzalez, Certified Retirement Counselor (CRC) and Managing Partner, with Cortburg Retirement Advisors signing off for this week’s educational podcast.