How to Figure Out Retirement Benefits

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Make sure to figure out what your retirement benefits will be.
Make sure to figure out what your retirement benefits will be. (Image: retirement worries image by Jale Evsen Duran from Fotolia.com)

Your retirement benefits are funds that are payable to you when you stop working and decide to live off of your savings. When you decide you no longer want to work, you will rely on a 401(k), IRA, pension, Social Security or a combination of retirement accounts. Your retirement benefits may or may not be taxable according to how the contributions are made during your working years. Generally speaking, contributions made with after-tax dollars into qualified retirement accounts, such as a Roth IRA, will not be taxable when you withdraw the money during retirement. Contributions that are made on a pre-tax basis are generally taxable during retirement. But, before you can calculate any of that, you need to know how to figure out what your retirement benefits will be.

Call your employer's human resources department to check for any pension benefits that may be due. If your employer offers a pension, you want to know about it, and what the expected benefits are. Pension benefits are generally either defined contribution plans or defined benefit plans. If your employer contributes to a pension plan for you and you don't make any contributions, the benefits will largely be determined by your employer although the benefits are normally vested with you after a certain period. This means that the benefits are yours to take with you if you leave your employer based on a vesting schedule that your employer chooses.

Gather your private retirement savings accounts. Any 401(k) accounts, IRA accounts and other personal savings accounts are included in this calculation. Add up your retirement account balances and determine the total value of your personal retirement savings. For example, if your 401(k) has a balance of $245,000 and your Roth IRA account has a balance of $15,000, your total retirement savings is $260,000. Then, figure out what you would earn during your retirement with this money.

This can actually be a bit tricky and there are many methods that you can use to estimate how much money you could earn. However, the simplest method is to assume a fixed interest rate annuity payment for your savings. You'll need quotes from an insurance company on how much your savings would generate as a monthly income.

Add up your Social Security benefits. The Social Security online estimator can give you an estimate of what your Social Security benefits might be based on your income and the age that you want to retire. Click on "I agree" on the bottom of the estimator page if you agree with the terms of use. Enter your personal information on the next page and click "Continue" on the right-hand side of the screen. On the next page click "Confirm." Enter your last year's earnings in the box in the middle of the screen and click "Create estimate." You will see your estimated retirement benefits based on the next screen.

Add all of your monthly benefit payments together from your employer's pension, private savings and government Social Security. Add any other income you expect to receive on a monthly or annual basis and this will constitute your retirement benefits.

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