What Every Adult Child Should Know

When making the decision whether or not to leave work or reduce your hours of work to become a caregiver for an aging parent or other relative in need of constant care, you have several areas to consider.  How will it affect your current spending plan?  How will it affect your retirement?  Losing a couple years of contributions when you're near retirement may not make a big difference in your account balance.  The longer you have until you plan to retire, however, the greater the impact on your retirement savings.  This is because of the effect of compound interest.

Using an online retirement calculator, see how much you will need to save for retirement if you and your employer had continued to make contributions to retirement plans and savings.  Then, enter the information without any additional contributions.  Comparing the results will show the impact on your retirement if you're no longer making contributions.  This is money you will need to save, or be compensated for, to maintain your projected lifestyle in retirement.

In addition, you may not be able to keep all the funds currently in your account.  VESTED funds are those you are entitled to even if you leave.  Any money you contribute is immediately vested at 100%.  Depending on your employer's plan and how long you work for the company, the employer's contribution may not be 100? vested.  Talk to your human resource department or refer to your last pension statement to find out what percentage of your employer's contribution is vested.  In addition if you take money out of your plan prior to age 59 1/2, you will have to pay a 10% penalty tax on it as well as income taxes.

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