Serving Rome, New York residents with legal issues

How do I make the most of my defined contribution plan?

by | Jun 15, 2017 | Division Of Pensions

A defined contribution plan is an important part of a person’s finances and needs to be protect when headed for divorce. Before you even consider divorce, you need to know how you can make the most of your defined contribution plan so it works for you in retirement and in divorce in New York.

A defined contribution plan can include a 401(k), a 403(b) a 457 or the Thrift Savings Plan. These plans do not pay the holder benefits upon retirement. Instead, employers make contributions to these plans, typically no more than simply matching what the employee deposits.

When looking to make the most of your defined contribution plan you will want to continue to make contributions to them each month you are still working. This is especially true if you did not begin saving for retirement until later in life.

Do your best to maximize the amount of money you can contribute to the plan from your paycheck. At the same time, take advantage of the employee matching offer at your company because a match is basically free money.

Never spend your retirement plan savings until you actually retire. Spending this money prior to retirement will make it incredibly difficult to actually pay for retirement once you reach the milestone. If you get divorced after you retire and have spent this money already, you will come into even more financial hardship.

Never take the lump sum option from a defined contribution plan. If you choose this option you will have to pay taxes on the lump sum. If you take smaller distributions during retirement you can spread the taxation out over many years.

When it comes time to invest the defined contribution plan make sure you do so with the help of a financial consultant. This is not a situation you can take lightly.

Headed for divorce in Oneida? An experienced family law attorney can answer all of your defined contribution plan questions and guide you in the right direction.

Source: My Retirement Paycheck, “Defined Contribution Retirement Plans,” accessed June 15, 2017