To better understand your specific retired employee benefits, see a financial planner. They can also show you how to make the most of your federal employee retirement benefits in retirement, including the Social Security benefits you may be able to receive.
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Tax-Deferred Savings
Savings in tax-deferred accounts, like 401(k) plans and 403(b) plans, allow individuals to invest and grow their money without paying taxes on those earnings until they withdraw the funds, typically during retirement. Since it delays their tax due until they are in a lower-income tax bracket, this can offer lower-income workers significant tax benefits.
Tax-deferred savings are a great way to save for the future, but weighing the inherent disadvantages of these types of accounts before making a decision is essential. You can determine the optimum type of accounts for your particular circumstances with the assistance of your financial counselor. Your planner may also provide you with a range of valuable tools and investing ideas that will enable you to get the most out of your retirement funds.
Matching Contributions
Many companies will match the amount of money you contribute to your retirement account up to a certain percentage of your salary. This is one of the most effective ways to grow your savings and advance in retirement.
These employer contributions are pre-tax, and you will pay taxes only when you withdraw the funds from your 401(k) at retirement. These tax savings can significantly reduce the impact of inflation on your future income.
Some employers will offer dollar-for-dollar matching up to a specific contribution limit. In contrast, others may have a vesting schedule, such as cliff vesting after a set number of years or graded vesting, where a portion of the company’s matching becomes yours yearly. Either way, saving as much as possible is essential to maximize this benefit.
Profit-Sharing
Profit-sharing is among the unique Boeing employee benefits that give employees a share of the company’s profits. It’s an effective way to motivate staff and align their financial goals with the company’s success. Employees who feel invested in the company often return that loyalty with greater productivity and better work habits.
The plan works like an end-of-year bonus program, and companies can offer employees cash or stock. If desired, the company can also include a portion of the profit-sharing in a retirement savings account.
Employees can take their vested profit-sharing funds when they leave or retire, as the contributions aren’t subject to Social Security and Medicare withholding taxes. The employer can handle the administration of the plan in-house or can use a third party to manage the investment, reporting, and other fiduciary duties.
Insurance
The last primary form of retirement compensation involves paying former employees for health and other insurance coverage. These benefits can be significant expenses and require stringent reporting requirements.
2004, for example, employers provided health insurance coverage to about seven of every ten adults near traditional retirement ages. Most of these coverages supplement Medicare, which covers most medical costs for people in the traditional retirement age group.
This type of retiree insurance is increasingly disappearing as companies need help with rising healthcare costs and global competition. Some companies require retirees to pay more toward their premiums, while others are dropping coverage altogether. The trend toward fewer employer-offered retiree insurance is especially striking among small firms. The share of firms offering retiree health coverage declined between 1997 and 2003.
Estate Planning
While estate planning is often a topic that gets overlooked, it’s vital for those who wish to leave behind a legacy that will take care of loved ones and other heirs after they pass. A financial planner will review a client’s assets and help ensure all beneficiary designation forms are correctly updated. This includes assets in the retirement plan and life insurance policy.
It’s also essential for those nearing retirement to discuss their Minimum Required Distribution (MRD) rules with a financial advisor, which dictates how much must be distributed each year from a qualified account. This rule is based on the participant’s age and must be calculated using an IRS table. A financial planner can assist with this and help reduce the risk of penalties.
