How to Boost your Retirement Savings

For many of us, a trip to the grocery store is a constant reminder of how much inflation keeps creeping into our pocketbooks. Add taxes, market volatility, and the rising costs of healthcare and it’s no wonder nearly 75% of us are feeling anxious or even overwhelmed when we think about our retirement savings.* Fortunately, when it comes to taxes, you don’t have to feel powerless. By planning now, you can design a tax efficient plan and feel more confident about reaching your goals. There are basically three types of accounts in which you can grow your savings. Two types are specifically earmarked for retirement: Pre-tax retirement accounts: You contribute before taxes, then pay ordinary income taxes on withdrawals after retirement. These are typically business plans such as traditional 401(k)s, 403(b)s, and SIMPLE and SEP IRAs. If you’re in a high tax bracket and/or still working, you’ll generally want to save the most in these types of accounts. Read how to ask your employer for halal 401(K) investment options. Traditional IRAs can be established outside of work. However, depending on various circumstances, your contributions and withdrawals may not be before taxes. After-tax retirement accounts: You contribute after taxes, but withdrawals

March 6, 2023 No Comments

How to ask your employer for halal 401(K) investment options

One of the first decisions you’ll need to make after accepting a job offer is deciding how you’ll invest your employer plan. These plans are generally funded with pre-tax money and, in many cases, your employer will match your contributions. That’s essentially free money. But most plan providers will offer you a limited menu of investments. Some may have a few socially responsible options, but it’s highly unlikely you’ll find a halal mutual fund. So, what are your options? Ask your plan provider if your plan has a self-directed brokerage account. It’s essentially a sub-account within your 401(k). As employees demand more options from their employers, these types of accounts are becoming more common. A self-directed brokerage account can offer you access to investment choices beyond your plan’s investment menu. This includes access to halal mutual funds. You should, however, proceed with caution. Investments chosen through such an account are not monitored by your plan’s provider. It’s your responsibility to read a fund’s prospectus so you understand its investment strategy, fees, and risks before investing. Once your account is established, most plans require that you maintain a minimum investment in your 401(k) account. Also, make sure you understand your plan’s

March 3, 2023 No Comments

High income? You may still be unprepared for retirement.

Even if you are nearing retirement and have a large 401(k) or IRA balance, you may not have as much money as you think. Lots of people don’t realize that they owe taxes on their accumulations. You have benefited throughout your investing years by not having to pay taxes on contributions into traditional 401(k) plans and IRA accounts and on the investment returns on those contributions. Deferring taxes for decades has real value. We usually come out ahead, even after we pay taxes on the withdrawals. And higher income people benefit the most. The problem is that higher income investors tend not to take taxes into account when assessing how well prepared they are for retirement. For some, the tax bill will be quite high, as shown in the table below. The group under consideration is working households ages 55-64 with assets in a 401(k) plan in 2016 — the most recent year for the Federal Reserve’s Survey of Consumer Finances. The income levels that define the deciles in the first column are for all working households. The second column reports the median combined 401(k) and IRA balances for those households in each decile that have a 401(k). The third

July 29, 2019 No Comments

Have you heard of a Roth 401(k)?

You’re probably familiar with traditional 401(k) plans, and we hope you know about Roth IRAs as well. (If not, check out these 5 things you should know about Roth IRAs). But did you know there’s also a Roth 401(k)? Basically, a Roth 401(k) is a 401(k) account to which you can contribute either pre-tax dollars, like a regular 401(k), or post-tax dollars, like a Roth IRA. All your contributions grow tax-free, but your pre-tax contributions will be taxable when you withdraw them in retirement and your post-tax contributions will be tax-free. It’s technically called a “designated Roth” account, and it’s an option your employer can add to your company 401(k) plan. The same provision for a Roth option can also be added to other kinds of qualified retirement plans, such as 403(b) or 457 plans. If you own a business and sponsor a qualified retirement plan for yourself and your employees, you may want to consider adding a Roth option. And if you’re self-employed and have no employees except your spouse, you could establish a solo 401(k) plan that allows Roth contributions. So why would you need a Roth 401(k) if you already have a Roth IRA? Here are four ways

January 8, 2019 No Comments

Time to max out your 401(k)

Only 13% of retirement savers maxed out their 401(k) contributions last year. Were you one of them? One great thing about saving for retirement in a 401(k) compared to an IRA is that you can contribute much more to the 401(k) account, regardless of your age. This year, you can contribute up to $18,500 if you’re under age 50 or $24,500 if you’re 50 and over. Even though it’s a great way to help create a secure retirement, a recent report showed that only 13% of 401(k) plan participants maxed out their contributions last year. Of course, many people don’t have an income that would allow them to invest the maximum amount each year. Yet interestingly, even 60% of people with higher incomes still didn’t max out their allowed contributions. Perhaps those who have the means would be more motivated to save the maximum amount if they understood how much they can build for the future. Let’s take a look at the numbers: Another thing to keep in mind about these figures is that they’re based on this year’s annual contribution limits. If those thresholds increase in future years, which they’re likely to do, and you keep pace, you stand

July 10, 2018 No Comments

Rolling over your traditional 401(k) to a Roth IRA

Do you have a 401(k)? Ever wondered if you could roll over that account into a Roth IRA? You might be surprised to hear that it’s possible. You can make a direct or 60-day rollover from a 401(k) plan (or other qualified plan, 403(b) plan, or governmental 457(b) plan) to a Roth IRA, as long as you meet certain requirements.* First, you must be entitled to withdraw money from your plan. If you no longer work for the employer who sponsored that 401(k), then you would be eligible to do this rollover, and in some cases you may be able to withdraw your contributions or your employer’s contributions while you’re still working (for example, once you’ve reached age 59½). Second, your distribution must be an “eligible rollover distribution.” Distributions that cannot be rolled over include hardship withdrawals, certain periodic payments, and required minimum distributions (RMDs). Third, you must include the taxable portion of the distribution in your gross income in the year you make the rollover (“conversion”). But that’s the price you have to pay to potentially receive tax-free qualified distributions from your Roth IRA in the future. Fourth, if your distribution includes both after-tax and pre-tax dollars, you can

July 31, 2017 No Comments

3 common 401(k) mistakes employers and employees should avoid

For most people, saving in a 401(k) retirement plan is vital for their future financial health. Trying to save for retirement in a taxable account is not only challenging, but it’s nearly impossible to duplicate the same tax deferred compounding you get from a tax deferred (and often tax deductible) retirement account. Therefore, employers and their employees will want to avoid these 3 mistakes: The first mistake is not following an appropriate investment plan. Being equipped with an appropriate plan is essential to protecting yourself from acting irrationally in volatile markets. Instead of panicking and selling your portfolio when markets are down, stick to your plan and view such times as a buying opportunity. Don’t turn paper losses into real losses and consider this: if a security is down 50% it must rise 100% just to break even! Think about it in dollar terms: a stock that drops 50% from $10 to $5 ($5/$10 = 50%) must rise by $5, or 100% ($5/$5 = 100%), just to return to the original $10 purchase price.Of course, your plan needs to factor in your age and risk tolerance and be well diversified. For example: taking too much risk in volatile stocks when

February 8, 2016 No Comments

Three best practices for remitting 401(k) contributions

By Maha Ahmed Qualified Plan Financial Consultant Sponsoring a business retirement plan like a 401(k) can be a smart way to save big on taxes, maximize retirement savings, and attract and retain qualified employees. As sponsors, employers have certain responsibilities under the plan; the most important is properly managing plan contributions. Failure to comply with Department of Labor (DOL) rules may mean the employer will have to pay additional interest and earnings to plan participants. Take last year’s DOL case against a Pennsylvania-based dentist. The dentist was fined for the misuse of plan funds that were intended for the business’s 401(k) plan. According to the DOL, the employer failed to deposit employee and employer contributions into the plan in a timely manner from 2009 through 2012. A district judge ordered the defendant to repay nearly $45,000, including lost interest and earnings, to plan participants. Employers can avoid this type of litigation by following these 3 simple rules: Segregate your retirement plan assets from company assets. Never look at elective deferrals as if they are the company’s money. Elective deferrals come directly from an employee’s paycheck and are amounts they specified to go into their retirement plan. This money should never

January 11, 2016 No Comments

Top 5 mistakes employees make with 401(k)s

The results are in, and our advisors have agreed that these are the five most common mistakes employees make with their 401(k) plans: 1. Not participating: The biggest mistake you can make is not contributing to a 401(k) if you are eligible, especially if your employer matches your contributions. Start out with small contributions and increase them gradually, otherwise you are missing out on an effective pretax and tax-deferred investment. The only reason not to start contributing is if you have an outstanding debt, as paying off your debt should be a priority. 2. Not contributing enough: Contribute enough to receive your employer’s match. Many employers will match your contribution up to a certain percentage. Otherwise, you are basically walking away from free money. For 2013, you can contribute as much as 17,500 in addition to a catch up of $5500 for those 50 or older. For example, if your employer matches you dollar-for-dollar up to 5%, and you make $100,000 annually, then you should aim for a minimum contribution of $5,000 so that you will receive a match of $5,000 from your employer. 3. Forgetting to rollover or cashing out your 401(k) when switching jobs: In the hassle of

September 9, 2013 No Comments