Signing up for retirement online

The Baltimore Sun

You can work, shop and fall in love online. Now many people are retiring there, too.

Thousands of federal employees are becoming eligible to initiate their retirement from the government online, and many private employers are already there, employee benefits experts said.

Nearly half of private employers, 49 percent, allowed workers to start their final retirement distributions via an Internet site at the end of 2006, up from a quarter of employers in 2001, said David Wray, president of the Profit Sharing/401(k) Council of America in Chicago.

But, experts caution, automated isn't foolproof.

Federal employees, some of whom have begun retiring online, will receive a financial incentive to do so.

Because of the backlog associated with processing paper forms, federal employees often receive reduced interim pension checks upon retirement until their final benefit calculations are made.

Under the new program, a governmentwide modernization effort known as RetireEZ, the goal is to pay full benefits within 30 days of retirement, said Reginald Brown, modernization director for the Office of Personnel Management. The program is expected to be systemwide by early next year.

Individual company plans are all different, but what's happening in general is that private employers frequently are allowing people to complete all the human resources forms, from final beneficiary designations to 401(k) disbursements, online, without even mailing home a signature card. The federal program still requires a final written signature to release benefits.

Is there a downside?

Although many employees are embracing online retirement tools for planning, using a Web site to complete the process is relatively rare, said Sarah Rasmuss, vice president of Web strategy for JPMorgan Retirement Plan Services in Kansas City, Mo.

"When it comes to actually pulling the trigger for retirement, most people want to interact with a human," Rasmuss said.

As more people retire with a greater portion of their nest eggs coming from large 401(k) balances, many feel they need personal guidance, she said.

But that's changing, experts said.

"People are becoming more comfortable online, so if some employees still want to call HR, great, but we'll continue to see that decline," said Barbara Hogg, a principal and senior retirement consultant with Hewitt Associates in Lincolnshire, Ill.

There are a couple of caveats to keep in mind. Just because the whole process has become easier doesn't make it simple.

Wray and other experts say there are still decisions retirees need to make for themselves that can't be automated away, and it's important not to forget them:

*Should my money go, too?

More employers are offering distribution services (typically free) to retirees who keep their 401(k) money in the company plan upon retirement, Wray said. Why? It's a matter of size. Bigger plans can negotiate smaller fees from service providers, so it pays off to keep as many people enrolled as possible.

If you've never really looked at your company plan's investment options and expenses with a critical eye, do so and compare it with what you would have access to and have to pay in an individual retirement account.

Another consideration that won't necessarily be flagged by an online retirement form: your company stock. At retirement, you could roll that out separately from the mutual funds you may be depositing into an IRA. This move could save you a bundle under a special tax treatment known as net unrealized appreciation, which allows you to pay ordinary income tax on the shares' cost basis but presumably lower long-term capital gains rates on their appreciation.

*Don't forget to be human.

It's one thing to keep your retirement plans under wraps to make sure you don't get shuffled aside too soon, and companies' virtual retirement programs may help keep things confidential, but don't forget you still have to notify your supervisor that you plan to retire, Hogg said.

"I don't think this is widespread, but some employers are wanting us to communicate to employees that just because they've initiated retirement online, [that] doesn't mean their departments are being notified automatically," she said.

You won't do yourself any favors by getting carried away with virtual retirement and e-mailing the boss goodbye on your last day. Ending on a good note is preferable, if for no other reason than it increases the likelihood of a good reference for a second career.

Janet Kidd Stewart writes for Tribune Media Services.

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