Bring Clarity to Your Finances™

Clarity Financial Planning Services is an advocate for your financial future who takes a holistic approach to your needs and goals.

Avoid Retirement Plan Fees and Penalties

The main message about retirement is that you need to save (and you do!) but once you have some retirement savings, you also need to make sure you maximize your savings by not paying fees you need not pay. There are ways in which fees and penalties can eat into the resources you work so hard to save.

U.S. News & World Report offers information on “5 Retirement Fees You Should Never Pay” to get you thinking about how you can use your retirement money to benefit you instead of paying penalties.

Early withdrawal penalties: You may be aware that there are penalties when you withdraw money early from an IRA or 401(k) before you reach certain ages but you may not be aware of the life circumstances that are exceptions to these rules. The article talks about some of these and  you can work with a financial planner to be sure that you understand what circumstances would allow you to avoid the penalty.

Required Minimum Distributions (RMDs): Once you reach the age of 701/2, you are required to take certain minimum distributions from 401(k)s and traditional IRAs. The penalty for not taking your RMD is hefty and you will still need to pay income tax on the RMD as well. You can donate your IRA distribution to certain charitable organizations to satisfy the need for a RMD.

Social Security: There is a penalty  when you sign up for Social Security before reaching full retirement age. The article outlines the ways you can get bigger payments if you realize that you signed up earlier than you should have but it is not simple. Better to work with Fee-Only financial planner on a financial roadmap before you retire so you don’t feel the need to apply early.

Medicare: Did you know that there is a fee if you apply late for Medicare? U.S. News & World Report says,“Failing to sign up for the various parts of Medicare during the months around your 65th birthday can result in significantly higher premiums for the rest of your life.”

Your plan may not go 100% as you imagine but having a plan for retirement will give you a good foundation for dealing with the unexpected.