Dollars and Sense
Chapter 2
Retirement Considerations
Medicare Supplemental Insurance
Every individual is aware that out health is likely to deteriorate as we age. Few elderly Americans would be willing to bear the risk of living without health insurance once they retire; luckily, they don’t have to since we have socialized medicine in the form of Medicare. Most people who qualify for Medicare also carry private insurance to supplement Medicare’s coverage, appropriately named Medicare supplemental insurance. Rather than traditional Medicare supplemental coverage, many retirees are now opting for Medicare Advantaged plans that incorporate Medicare with private insurance.
Today there are four parts to Medicare: Part A (hospital), Part B (medical), Part C (advantage plans), and Part D (prescriptions).
Part A of Medicare is called hospital insurance because it covers costs associated with care in the hospital as an admitted patient. Part A will also cover (if the patient medically qualifies) some amount of skilled nursing home care and home health care. No individual should assume nursing home confinements will be paid by Medicare. Medicare covers only skilled care, not custodial or intermediate care, which is the type most people need. There is no cost for Medicare Part A as long as the individual or their spouse paid Medicare taxes during their working years. If the individual did not pay into the system Part A may be purchased.
Part B of Medicare is called medical insurance because it covers medically necessary physician fees and outpatient care. Part B will cover some preventative services, emergency ground transportation (ambulance), laboratory fees, and blood transfusions as well. For a detailed list of all that is covered, the beneficiary should refer to their Medicare & You handbook supplied by the Department of Health & Human Services. There is a cost for Part B of Medicare and this amount is usually deducted from the individual’s Social Security check each month. The amount is usually a standard amount that everyone pays, but premiums might be higher if:
Medicare will notify the individual if he or she must pay a higher amount.
Part B has a deductible each year that must be met before Medicare begins paying its share. Medicare then pays 80% of the Medicare-approved amount. The remaining 20% and any amount above what Medicare has approved for the service must be paid out-of-pocket if the beneficiary has not purchased additional insurance to pay the differences between what the service cost and the amount Medicare paid.
With the creation of Part C of Medicare, there are now references to the “Original Medicare” and “Medicare Advantage Plans.” Under the Original Medicare plans Medicare deals directly with the beneficiary whereas under Advantage plans Medicare deals directly with the insurer (Health Maintenance Organization or Preferred Provider Organization, for example). Even under the original plans, however, the doctors and medical suppliers must bill Medicare on behalf of their patients. Advantage plans receive a monthly payment from Medicare; they must then supply the medical care for this amount, plus whatever premiums and fees are charged to their patients. Medicare will never pay more than the agreed upon monthly fees.
Although all companies that work with Medicare to provide Part C Advantage Plans will have some common elements, all companies are not the same and do not necessarily provide the same benefits. Both benefits and costs can vary widely. There are likely to be co-insurance requirements and deductibles, especially when hospitalization occurs. An individual with End-Stage Renal Disease (ESRD) generally cannot join and receive care through Part C Advantage plans. It may only be possible to join Advantage plans at specified times, unless the individual is just now becoming eligible for Medicare (turning 65 years old).
Part D of Medicare is for prescription drug coverage. Many of the Part C Advantage Plans incorporate prescription drug coverage into their plans so buying additional Part D coverage is not necessary. If prescriptions are not provided through another avenue, those on Medicare can elect to purchase Part D coverage so their prescriptions will be paid for (deductibles and copayments generally apply). Typically, those who choose the Original Medicare plans would be the individuals who would elect to buy Part D coverage separately. Part D coverage is available through private companies that work with Medicare to provide prescription drug benefits. Whether Part D prescription coverage is obtained privately or through an Advantage plan, they are called “Medicare Drug Plans.” If the beneficiary does not join a Part D plan when he or she is first eligible, he or she will pay a higher rate if they join later on. This higher rate is due to the penalty for late enrollment that is added to the premiums.
Long-Term Care Insurance
Most people are aware of the Medicare benefits that are available. As we age, we may need another type of insurance coverage unless we are wealthy enough to pay for long-term services out-of-pocket: long-term care in an institution or other setting.
Definitions of long-term care will vary depending upon the context in which it is used. Federal guidelines define it as care received for at least 90 days or more. Long-term care involves care that is necessary due to frailty, physical disability, or cognitive impairment such as Alzheimer’s disease. We usually think of long-term care involving older Americans but we are seeing an increasing number of younger individuals requiring care for a long period of time, perhaps even until their death. Those who require long-term care typically need help with the daily activities of life. This would include bathing, dressing, toileting, eating, transferring from beds to chairs, and general supervision. Insurance policies refer to “activities of daily living” or ADLs and will state a specified number of activities and provide definitions of each. Care may often be provided by individuals with only modest medical training rather than highly skilled nurses.
Long-term care can be very expensive. It is not unusual for costs to run $6,000 or more per month, although actual cost will depend upon the services provided and where the care is received. There are many variables when it comes to cost. While it is possible for some people to manage such costs without insurance, people are increasingly turning to insurance to cover the risk. Long-term care insurance is costly but just a few months in a nursing home will more than pay back the cost of the premiums. Consumers who decide to purchase a long-term care policy will make decisions regarding daily policy benefits, length of insured stay, and even whether or not they protect their assets through the purchase of the long-term care policy. Federally promoted “Partnership” policies will provide asset protection even if the insured ends up needing to apply for Medicaid benefits because their own policy benefits have been exhausted. Although four states have had such Partnership policies for some time, the majority of states only had the opportunity to provide asset protection since the passage of the Deficit Reduction Act of 2005. Each state then must pass legislation dealing with Medicaid funding and asset recuperation before the Partnership asset-protecting policies may be sold.
Since premiums for long-term care policies are based upon the benefits purchased, the more the consumer wants the more the policy will cost. There was a time when financial planners did not see the need to purchase long-term care coverage, but that is changing. Today’s financial planners realize that with longer life comes greater potential of needing some amount of long-term care. Since such care is very expensive, especially in the types of settings that most of us would prefer, long-term care insurance seems prudent. As a result, we are seeing this type of insurance increase in sales despite the cost.
Forward Planning
Most of us plan our vacation far better than we plan our retirement. Most of us go to work every day, put in our eight hours, go home, and repeat this routine over and over all our working lives. When we know a vacation is coming, however, we probably spend several hours going over our options: where we will stay, the route we want to drive, and the activities we want to participate in. The few hours we spend on these plans do not alter our lives. The grass is still mowed, the dishes are still washed, and the kids still get to school.
If each American spent only an hour each month looking over their retirement accounts, creating meaningful goals, and monitoring their steps in getting to those goals, retirement would be much easier financially. Of course, this could be applied to any financial goal, whether it is a college education for the children or a down payment on a house.
We are told that Americans are very poor savers in general. We are more likely to max out our credit cards than any other country, more likely to spend than save, and more likely to wait for the winning jackpot in a lottery drawing. It isn’t that we don’t know we need to save for retirement; no person who opens a newspaper or listens to the news on television could avoid hearing the statistics. Perhaps we are just very good at denying the obvious: we must live somehow once we quit working.
Some interesting facts that will affect everyone’s retirement:
If we are to live comfortably in retirement the only option is to make financial goals and keep them. Otherwise, those retirement years may feel more like prison steel than a golden retirement.
Become Involved
Suze Orman writes in her book Women & Money that she finds women often fail to take the time to educate themselves in finance. Men may gain financial experience in the workplace; women traditionally have not had the same opportunity so they must seek knowledge. That doesn’t mean investors (men and women) must become experts in the investing field, but they do owe it to themselves to learn enough to make wise decisions. Whether or not our clients have any financial education, every financial planner and agent has a professional duty to do the best possible job for each of their clients. There is no acceptable excuse for performing poorly. An informed investor will make better choices than the uneducated person, so agents may be wise to provide as much knowledge as practical. If the client makes better choices, the agent or financial planner will be able to do a better job as well.
Agents and financial planners must be aware of their client’s goals. What the client wishes to accomplish through the investment often makes the professional’s job easier since he or she has a clear view of the objective. Clients may feel disappointed in the professional’s performance if their objectives are not met, but if the agent or planner did not understand the client’s intent how can he or she help them arrive there?
Safety and Security
As a worker nears retirement, he or she is generally seeking safety of funds. When an individual is young, he or she can afford risk since there is time to make up losses. This is not necessarily possible as the individual nears retirement since time is no longer on their side. In multiple studies consumers have said that safety is more important than return as they near or enter retirement. In other words, the investor is more concerned that their principal stays intact than they are with earning higher interest.
Many families do not discuss finances even with each other so it is difficult to effectively discuss them with their agent. Agents must find ways to bring out their client’s goals and concerns in a relatively short time period. Certainly, people are concerned with having enough assets to last until their death, but the details necessary to arrive there may not be voiced.
The insurance producer’s or planner’s job is often made easier when a worker nearing retirement has already discussed their financial position with their children. Having gone over the details once with family members makes the total picture clearer in their minds so they can more readily relay their goals and concerns to their agent. Unfortunately, many families do not discuss finances. Parents are concerned their children may be greedy if there could be an inheritance; children are fearful that their parents may perceive them as greedy if they ask questions. Therefore, nothing is spoken and no one in the family knows the financial circumstances of the other.
One reason parents and children should discuss the financial position of the parents has to do with the future. Children need to know how their parents would like to live when health and cognitive functions may not be as strong as they are today. Does the parent wish to remain at home, even if that means live-in care? If a nursing home becomes necessary, does the parent have preferences of location? If the parent can no longer manage their assets, which child should do so? Especially important is a list of all assets so the child can manage them effectively. If children do not know what assets their parents have, an outside party could exploit them once the parent develops a cognitive impairment; the children may never be aware it even happened.
It can be difficult talking about future incapacities but doing so may make all the difference for those dealing with the situation. Children may not realize what their parents would have wanted or where all their assets are located.
An Emergency Fund
For decades financial planners have told their clients to keep enough cash in a readily accessible account to cover living expenses for at least 90 days. This fund is for paying bills and putting food on the table if an emergency arises that prevents working. It might be an illness, an injury, or the loss of a job.
If an individual earns $2,000 per month a 90-day emergency fund would require $6,000 in liquid assets. By “liquid” we mean in an account that can be easily accessed without incurring penalties. Obviously, such things as annuities would not be sensible for an emergency fund. Financial planners are now frequently recommending six to nine months of living expenses be kept in an emergency fund since it commonly takes that long to find a job following a layoff.
If the individual earns $5,000 per month but his or her bills are only half that amount, he or she could save just the amount that is required to pay the bills but it is important to be sure half that amount ($2,500) would realistically pay all the bills, including credit card charges and insurance or other costs that come due only once or twice a year. If a bill comes due quarterly, two quarters should be considered when figuring the amount that needs to be in the emergency fund. It is always better to have saved more than necessary than less. Losing a job is stressful; the inability to pay all the bills will make that stress far worse. For years we have heard that most Americans are only one paycheck away from disaster but few seem motivated to do anything to correct this situation.
Most people realize it is wise to have an emergency fund but all too often they never get around to creating one. There is little an agent can do past showing clients how to create and keep such an account.
Durable Power of Attorney
A durable power of attorney is an estate planning tool that is an absolute must for every person regardless of their age. It is a simple form appointing someone else to make decisions and exercise financial rights under specific conditions. The person appointed need not be a family member. This power is called durable because it remains effective even after the person who signed it becomes incompetent and cannot, as a result of the incompetency, manage his or her own affairs.
Estate Planning Tools
There are many estate planning tools that may be used to accomplish a smooth transition through the final years of life and into death. Wills, trusts, powers of attorney and other vehicles are available that, when appropriately used, can make this time easier for those who assist the elderly individual. Choosing the tools used may be less important than making sure there is someone who is aware of their existence. At some point some person or institution, depending upon the choices made, will need to gather all the necessary information together due to the individual’s illness or death. Although a family member or friend may not necessarily charge the estate for their services, a professional person or institution most certainly will. Aside from the fees that may be charged for pulling all the information together, it just makes sense to be organized.
Many individuals, due to personal reasons, do not want family members handling their affairs during an illness or the estate upon their death. In such cases a family attorney is often called upon to act on their behalf during these times. Of course, the attorney will charge a fee and it is reasonable for him or her to do so.
When an individual divorces or remarries this is certain to affect how the estate will be settled. Any major change should be addressed through the will and possibly through some type of trust. Families sometimes resent a new spouse brought into the family since members (especially children) might worry that the new spouse will affect inheritances (and they often do).
It is impossible to recommend how such a situation should be handled since all families bring their own unique personalities to the table, but many agents recommend purchasing life insurance policies with each child being a beneficiary. To prevent unnecessary resentment, many agents further recommend that separate policies be purchased so that each child may be handed their issued policy for safe keeping. The parent need not explain their estate in these cases since each child is assured of receiving compensation for being born.
It is highly recommended that the individual consult with an estate planning attorney, one who specializes in estates rather than handling them along with all other types of law. Most attorneys probably handle estates but one who specializes in this type of law is generally preferred since their expertise will be greater than the general law practitioner. An elder care attorney may be a sound choice although he or she is not necessarily an estate expert. Elder care attorneys do bring much experience, however, in the types of law that may apply to an individual as he or she ages. Just as selecting doctors that specialize may make a difference in the type of care received; selecting proper attorneys can also make a difference.
Necessary Steps
Although most people will eventually end up retired, few people land comfortably in retirement without having done some financial planning over the years. Unfortunately, too many people simply want, hope, and pray for financial security; they don’t actually take the steps necessary to achieve it. While everyone would appreciate a rich uncle leaving them a fortune or finding the winning lottery ticket, most of us will have to do the necessary planning and saving for ourselves.
Of course, retirement is not the only reason people establish savings goals. For example, people may be saving for a down payment on a home or for college tuition for their children. Whatever the eventual destination happens to be, growth of funds is necessary to reach the goal. If the goal is long-term (retirement) interest accumulation is vital. While an individual could save the entire amount needed to retire, interest earnings makes that unnecessary – if the account is established early enough.
Financial planning is the ongoing development, implementation, and revision of a financial goal. There is a beginning, middle, and end. Financial planning is never the products used; products are merely the instruments used to reach the final goal. Financial planning must be flexible, able to respond if the individual’s circumstances change.
A financial goal can be virtually anything from a secure retirement to purchasing a luxury item. Regardless of the actual goal, the steps taken to achieve success are basically the same:
· Identification of the goal;
· Determining the amount of money it requires;
· Setting up a plan of savings based on the length of time available;
· Selecting a vehicle to hold the savings;
· Begin saving on a regular basis.
While there are many reasons an individual fails to start saving part of their income on a regular basis, a commonly stated reason is lack of ability (“I don’t earn enough to save anything”). There is no doubt that saving money can be difficult, especially in these tough economic times. However, our parents and grandparents managed to save in worse times than these. The bigger problem is how we determine necessities. Today’s population grew up buying what they wanted immediately; there was no such thing as waiting until it was affordable. If the neighbors have it, we want it. Out comes the credit card and we go deeper into debt.
Parents want their children to have what other children have. Individuals want what the advertisers are selling. Everyone has lost the ability to stop and say “no” to additional debt. Financial analysts are predicting that for the first time in a couple of generations our children will be worse off financially than their parents. Yes, some of it has to do with the economic times, but much of it has to do with our lost ability to save money and spend sensibly. Americans generally spend more than they earn and consume more goods than they produce, becoming increasingly dependent upon the goods manufactured in other countries.
Americans have been on a national shopping spree for the last thirty years with foreigners subsidizing that spending. Other countries realized what Americans did not: if we continue to spend without saving at some point, we will hit the brick wall and have nowhere to go but down. Meanwhile foreigners are financing more than half the Federal budget deficit and purchasing huge chunks of U.S. real estate and corporate stock. This leads to many key decisions regarding America’s economic future determined not only by politicians and businessmen in America but also by economists and businessmen in Tokyo, London, Frankfort, Amsterdam, and Toronto. As foreign concerns own greater portions of America, we can expect future loans from those countries coming with strings attached, such as economists appointed from their countries. There are concerns that borrowing from foreign countries eventually weakens our defenses against everything from terrorism to domestic crime. On the other hand, if we seem unable to curb our own personal and government spending perhaps outside influence is desirable. There are many opinions but few hard facts. One thing we do know: the government and Americans must change how they spend and save.
Although most Americans have not seen a rise in their standard of living over the last twenty years, not everyone has had stagnant incomes. Those at the top, such as CEO’s, have seen their standard of living rise by a whopping 220%. In contrast foreign CEOs earn dramatically less and seem to have more in common with their employees. Past events have made it obvious that higher pay does not necessarily equate to added value, as companies faced financial failures and requested bailouts from the lower paid workers through loans and tax reductions. It equated to the poor and middle class subsidizing some of the highest paid executives in the world. Even the CEO of charities, such as Goodwill, earns thousands of dollars while employees bring in minimum wages.
Benjamin Franklin said, “We promise the pursuit of happiness but it is up to the individual to catch it.” Democracy is based on the idea that each of us has an equal opportunity to become affluent through self-improvement and hard work, but we have a growing segment of our population that believes affluence is permanently beyond their reach. These people include the homeless, working poor, laid-off blue- and white-collar workers, high school dropouts, and the functionally illiterate. At one time we believed their children, through educational opportunities, would rise above the conditions their parents endured but as higher education has become increasingly expensive that dream also seems to be fading. Additionally, we have college graduates unable to find meaningful employment, working at coffee houses and in department stores, struggling to pay off huge college loans. Their financial dreams may be years from fulfillment.
Jobs still exist in America, but they seem to be increasingly in the service sector (waitresses, clerks, and so forth) rather than in manufacturing and other higher paid fields. Employment in the auto and steel industries is down by more than 50% over the last two decades and continues to decrease, despite government bailout money. The mid-western industrial heartland is disappearing. We don’t want to end up a nation of fast food counter clerks. Employment should have the ability to bring job satisfaction and affluence. That is the American dream. The ability to be a stay-at-home mother has mostly disappeared as households must have two incomes just to pay all the bills.
Americans still want to believe they can spend their way to affluence but we must realize – soon – that spenders never outlast savers. Having a nice home, decent job and better life is still possible but it is harder to obtain than it used to be. For some Americans the dream of “having it all” has turned into home foreclosures, evictions, job downsizing and the realization that credit card due dates keep coming even after the income stops. Fewer and fewer people are making it. It took the massive home foreclosures and debt failures to bring us back to financial reality, though not necessarily to financial reform.
It isn’t just spending recklessly that has harmed America’s economy. We have also failed in the educational field (including financial education) turning out high school graduates that are poor readers and lack mathematical training. We have told our citizens they don’t need to support themselves as long as we have the government to do it for them. Three out of every ten Americans is on public assistance and there is a growing permanent class of fifth-generation welfare families. Children who do not learn any other way to live have little understanding or appreciation of the rewards a job brings. Instead, they continue to stand with their hands out with entitlement in their heads.
How do we break the habit of spending and sow the seeds of saving for tomorrow and into retirement? It can be very difficult to change the habits of an individual, let alone an entire nation. Recent economic conditions should certainly highlight the need to change and begin protecting ourselves financially through regular saving routines.
Good Decision-Making Requires Knowledge
Before an agent can make meaningful recommendations, he or she must gather facts pertinent to the situation. This is done by asking questions. One might assume that the first question should pertain to the assets the client currently has but that is usually not the most important information. Questions might include the following:
· Where do you feel you are financially right now today?
· Where would you like to be financially in five and also ten years?
· What do you feel you need to have saved for retirement?
· Are you aware of the choices available to you?
· What financial vehicles are you interested in based upon what you know today?
· What have you saved up until now?
· Are you currently saving on a monthly basis?
· What do you feel you need to do to accomplish the goals you have?
The point of asking questions is not necessarily to discover the client’s assets but rather to provoke thought. If the individual has never saved a dime, he or she needs to begin thinking about doing so. If the individual is saving but not enough, he or she needs to begin saving more. The goal is to get the “thinking” converted to “doing.” If the agent tells the client he or she needs to begin saving money for retirement, the client may or may not believe the statement. If the client says they must save for retirement, he or she already believes it is true.
Deferred Compensation Plans and Divorce
Most of us can expect to live many years in retirement. Since we know Social Security will not provide sufficient retirement income, workers must provide retirement income for themselves. Men are more likely than women to receive a company sponsored retirement plan since men are more likely to stay with the same job for a long period of time. Women are more likely to work around their children’s needs and their husband’s career. Although this is changing, the change is coming at a time when companies are dropping their company-sponsored retirement plans as part of many cost-cutting measures.
Deferred compensation refers to traditional employer-sponsored pension plans, 401(k) plans, Individual Retirement Accounts (IRA) or any other retirement asset providing income during retirement. Regardless of which spouse earned the pension, it often becomes part of property settlement procedures during divorce. How pension plans are divided will depend on the type of asset, its value, and what the divorcing spouses each have from their jobs. Sometimes it may be an even division, but not necessarily so. One of the worst scenarios is the transfer of retirement assets to a former spouse with the original pension owner being liable for the taxes and any penalties resulting from early withdrawal.
Types of Retirement Assets
There are three kinds of deferred compensation plans, each having subcategories. The three types include:
1. Saving plans, which includes such things as IRAs, 401(k) Plans, ESOPs, and Thrift Savings Plans.
2. Defined contribution plans, where contributions are “defined.” The plan’s value is, therefore, determined in part by the amount of contributions made. The money contributed is typically invested in some manner chosen by the participant with the growth contributing to the final plan value. No actuarial estimates are necessary since employer contributions are determined by the plan agreement and are often a percentage of the employee’s earnings. Often the employees manage these plans rather than the employer.
3. Defined benefit plans, which have a “defined” monthly benefit that will be paid upon retirement and ending only upon the death of the worker. Depending upon beneficiary designations, the monthly benefit may continue until the death of the worker’s spouse. Defined benefit plans use a formula based on the number of years the worker is employed by the company. The employee is entitled to mandatory employer contributions, interest, and a specified benefit at some predetermined time period (defined as retirement age). Defined benefit plans were the most common at one time, but they have lost favor with employers due to their high cost.
Saving plans (such as IRAs) are considered cash plans because they may be liquidated prior to retirement age, although there may be penalties and/or taxes that are due upon withdrawal. Although cash plans are usually the easiest to divide in a divorce before any division may be made the custodian of the account must receive and review a certified copy of the court order requiring division. The non-employee spouse must fill out documents requesting their preferred manner of payout. IRA proceeds may be cashed out and paid directly to the receiving spouse or they may be "rolled" over into a new IRA in the receiving spouse’s name. If the IRA or other savings plan is simply cashed out prior to age 59½ there may be tax and early withdrawal consequences that could reduce the plan proceeds by more than 30%. It must be decided in the divorce proceedings which party will pay taxes and penalties on early withdrawals. Often the party’s lawyers will recommend waiting to withdraw funds until retirement age to maximize values.
Defined Contribution Plan values will be based in part on its vesting status. The valuation may generally be determined by multiplying the account balance by the percentage of vesting. While this method may not be exactly accurate, it will give a general value for purposes of the divorce. Defined contribution plans generally can be divided in the divorce with each party receiving half of the current vested value.
Defined Benefit Plan values generally cannot be liquidated prior to retirement age. The non-participating spouse may receive a retirement plan in his or her name for his or her marital interest in the participant's plan. Generally, the spouse’s half is subject to the same terms and conditions as the original plan, which is why it cannot be liquidated in most cases. Upon retirement the plan participant (worker) may typically choose a payment method from several available options. Most people choose a monthly income lasting throughout their retirement years. The chosen method will affect the amount or timing of the payments to both the participant and any receiving spouse. This may mean that retirement benefits are received when the original participant decides to retire, not when the recipient spouse retires.
Generally, a defined benefit plan may be divided in one of two ways.
1. Cashing Out: The worker may elect to receive the money in the retirement plan outright, cashing out his or her interest. The present value must be determined when cashing out the plan. "Present Value" is the current value of the worker’s future benefit. Today’s defined benefit dollar is going to be worth more at retirement because it will have accrued interest between today and retirement. Therefore, benefits that would have been received at retirement age would have a lower value today if paid in a lump sum. Typically, the present value is determined by an actuary or qualified accountant. Even when the divorce attorneys do not require this, it may still be necessary since value determination is often complicated.
2. Division of Future Benefits: Rather than cashing out the current value, a defined benefit plan may be divided by dividing the future stream of retirement income, which is often more beneficial to the divorcing spouse. This is accomplished through a Qualified Domestic Relations Order (QDRO), which is a court order instructing the pension plan to pay an Alternate Payee (the former spouse) a portion of retirement benefits accrued by the plan participant. Under this method the court retains jurisdiction until benefits are paid.
A 457 Deferred Compensation Plan is a supplemental retirement savings program that allows the participant to make contributions on a pre-tax basis. Federal and usually state income taxes are deferred until assets are withdrawn. This usually happens at retirement when the participant is likely to be in a lower tax bracket.
If the participant changes jobs he or she will have the flexibility to move the account into the new employer's retirement plan. If the new employer does not have a retirement plan the worker may make other changes necessary to preserve the retirement funds. If the participant retires or leaves service early, there is no penalty for withdrawals.
End of Chapter 2