Putting off 401(k) Enrollment Could Cost You More Than You Think

Putting off 401(k) Enrollment Could Cost You More Than You Think

You just landed a new job, and there are so many things to do. You have to set up your new workspace (even if it’s at home), become acquainted with your boss and coworkers and get up to speed on your new responsibilities. And there’s the company-sponsored 401(k) you should sign up for.

It could be tempting to put off investment- and retirement-planning decisions until you settle in. But that’s an idea that could cost you more than you might expect, especially if you have a longer time horizon to retirement.

According to The Motley Fool, a 25-year-old employee making about $47,000 who saves 15% of their income and realizes a 7% annual rate of return would have almost $100,000 more at retirement than another worker with all the same parameters — except that they waited until age 26 to begin their contributions.


So, move signing up for your 401(k) to the top of your to-do list. If the options are a little overwhelming, sit down with a financial advisor who can help you determine your personal risk tolerance and recommend investments accordingly.


Another option to consider if you’re unsure about making investment decisions is electing to contribute to a target date fund (TDF), if your plan offers one. These funds create a mix of investments according to an estimated retirement date.


The fund automatically adjusts the mix and risk of investments to become more conservative as the target date approaches. A TDF handles much of the decision making for you. However, it’s still important to monitor the fund’s performance and periodically check in with your financial advisor to ensure you remain on track to meet your retirement goals.


You generally want to contribute as much as you can to your 401(k) plan. But at minimum, try to contribute at least enough to earn the maximum company match.


Companies that offer a what’s called a 401(k) “match” will match your retirement contributions either dollar for dollar, up to a certain amount — or according to a percentage or formula. You always want to aim for contributing at least enough to receive the maximum possible employer match or you’re leaving free money on the table.


What you may intend to be a small delay in contributing to your 401(k) can lead to months or years as life gets busy. If this should happen, you can easily miss upswings in the market and opportunities for growth to compound over time.


Choose to make retirement planning a priority and put yourself first. Your employer-provided financial advisor can be a tremendous resource whether it’s the first time you enroll in a 401(k) plan or your third or fourth time around. And if this isn’t your first experience with a 401(k), be sure to discuss the options for any funds remaining in 401(k) accounts from your previous employers as well.


Don’t delay this important decision set up an appointment with your financial advisor today.




Fast Track Your Retirement with These 6 Tips

Fast Track Your Retirement with These 6 Tips

If you hope to retire early, there’s a lot to think about. For example, if you stop working before you’re eligible for Social Security, you need to plan how you’ll draw from retirement accounts — assuming you can access those funds without penalty. On top of that, if you’re not Medicare eligible, you’ll need to consider healthcare costs. Orchestrating your early exit from the workforce can be empowering, but it also requires planning and preparation. Here are a few ideas that can help you retire early.


Be specific in your early retirement plan. The earlier you start, the more successful you’re likely to be. Begin your planning with well-defined goals in mind. Figure out your desired age for retirement and work out how much money you’ll need to achieve the lifestyle you want. In many cases, it’s about starting with your end point and working backward. A WellCents financial professional can help you review your goals and set a retirement timeline that’s realistic. With specific and measurable goals, it’s possible to retire sooner as long as you stay on track.


Downsize ahead of retirement. The single biggest expense most people have is housing according to data from the Bureau of Labor Statistics. Downsizing ahead of retirement can reduce your housing expenses, free up money for other costs and make your goals more attainable. Plus, if you own your home, selling and downsizing can provide you with additional capital to fund your retirement.


Cut back on large costs. In addition to reducing housing costs, look at other big-ticket items you spend money on. Transportation and food are significant costs for many households. Look for ways to reduce what you spend on these expenses, especially eating out, as they can compromise your ability to live comfortably in early retirement.


Make catch-up contributions. If you’re at least age 50, the IRS lets you make additional contributions to your tax-advantaged retirement accounts. The more funds you can set aside now, the earlier you can retire. Additionally, check if you might be eligible for a Health Savings Account. This is additional tax-advantaged money that you can use for healthcare costs before you’re able to enroll in Medicare.


Pick up a side hustle. If you’re looking for a little extra cash to set aside for retirement or to make catch-up contributions, a side hustle can help a lot. Whether it’s Ubering on the weekends or freelancing on Fiverr, you can generate extra funds to help you retire early or provide you with enough income so that you don’t need to work full time.


Plan to live in a less-expensive area after retirement. Geoarbitrage can be a great way to reduce living expenses and retire sooner. In some cases, retiring outside the United States is one way to reduce costs to the point where early retirement becomes possible. Just do your homework about healthcare, taxes and other important financial aspects of being an expat wherever you plan to reside.


Call in the Pros

Early retirement can become a reality if you plan ahead and take steps toward reducing your cost of living. Contact your WellCents financial professional to discuss your timeline and goals for retirement. As you approach early retirement, more frequent check-ins can help ensure that you remain on track.




Money and Happiness

Money and Happiness

This thought has crossed the minds of many: “If only I could hit the lottery, then all my problems would be solved.” But the relationship between money and happiness isn’t as straightforward as you might think — at least according to those who study the issue closely.

What the Data Shows

Money is not a panacea for guaranteeing happiness. Researchers surveyed more than 3000 Swedish lottery winners five to 22 years after winning a prize of at least $100,000. Ultimately, they found that the winners’ happiness actually didn’t change much after hitting the jackpot. They weren’t significantly happier — or unhappier.

Another study of 1.7 million people across 164 countries, however, pointed to an income “sweet spot” an earnings range between $60,000 and $75,000 that correlates with improved levels of happiness. Other data points to $75,000 being an optimal income level for happiness.


The Why Behind the Data

Why doesn’t more money translate to greater degrees of happiness? One theory is that we’re all susceptible to a phenomenon called hedonic adaptation, otherwise known as the hedonic treadmill. This refers to our tendency to return to a happiness setpoint following both positive and negative events over time. In other words, we eventually adapt to our current circumstances — for better or worse.


Yet others suggest that the extent to which money means greater levels of happiness depends a great deal on how a person spends it. For example, money put toward purchasing experiences may be more beneficial for happiness than funds used to acquire possessions. Additionally, using money to foster meaningful connections with others or for altruistic purposes may also be a more effective way to promote happiness.

A Complex Issue

We can debate the extent to which money can “buy” happiness. But for those who struggle to meet basic needs, having sufficient funds to stay safe, sheltered and fed can provide a necessary sense of security. It’s also important to note that the study investigating the “ideal income” finds that the levels vary considerably depending by location. The cost-of-living ranges tremendously across the U.S., so the relationship between money and happiness can change significantly according to situation and context.


Financial wellness can be a significant part of overall wellness, but it takes its place among other areas of tremendous importance, including physical and mental health, personal relationships and sense of purpose. At the end of the day, the most meaningful question for each person may not be whether money can buy happiness in general — but rather how to maximize one’s own personal happiness using all available tools and resources, money included.


Gen Xers — Are You on Track for Retirement?

Gen Xers — Are You on Track for Retirement?

Did that AARP notification take you by surprise? If so, you’re not alone. Some members of Generation X — those born between the early 1960s and late 1970s — are feeling caught off guard by how quickly retirement is approaching

When it comes to preparing for retirement, 34 percent of Gen Xers are likely to say that they have no strategy planned according to the Transamerica Center for Retirement Studies. This is a higher percentage than both Baby Boomers and Millennials. The average Gen X household has about $64,000 in retirement savings, and it’s not surprising that many feel concerned about the prospect of their golden years.

Ok Xers, it’s time to put together a strategy and look for ways to align your timeline with your goals. Here are a few things that can help you get on track.

Get Specific, Really Specific

First of all, you need to determine your timeline for retirement and the lifestyle you want. Think about your expectations for things like housing, travel, entertainment and hobbies along with their associated costs. Once you have an idea of the monthly income you’ll need to support your desired retirement, you can work backward to see what you should set aside now, as well as what other tools and strategies can help you reach your goals.

Manage Sandwich Obligations

People call Gen X the “sandwich generation” for good reason. You’re dealing with aging parents at the same time your kids are going to college. There’s a good chance that you have some monetary obligations causing additional stress as you prepare for retirement. Put together a plan that prioritizes retirement savings and look for other ways to support your parents and children. You might not be able to help financially as much as you’d like, but now is the time to make sure you’re taking care of your needs. You can’t help others if you fall too far behind yourself.

Get Debt Under Control

If you have debt, start to address it immediately. Tackle high-interest debt first, getting rid of the most expensive obligations, and work your way down from there. Negotiate with creditors for lower interest rates. You don’t have to be completely debt free by the time you retire. But the less you have, the better your position will be.

Consider Long-term Care

Custodial care can quickly eat up a lifetime of retirement savings. But the right long-term care policy can help defray costs during this time. Most policies take your age into account when determining price. The earlier you sign up, the more affordable it’s likely to be. This is one area in particular where procrastination can be costly.

Make Catch-up Contributions

Once you turn 50, IRS rules allow you to set aside more money in tax-advantaged retirement accounts. This is a good time to ramp up your retirement savings and bolster your portfolio. If you need to beef up your retirement accounts, start doing so now. If you’re lucky enough to get a yearly bonus, this is a good use for it.

Think About Social Security

Those born in 1960 or later can begin collecting benefits at age 62, but they’ll receive less each month than if they wait until their full retirement age at age 67. Consider your timeline and lifestyle preferences as well as your tax-advantaged retirement accounts. Work with a WellCents financial professional to help you weigh when you should start collecting Social Security and balancing it with withdrawals from other accounts.

Bottom Line

Gen Xers are known for their independence. But you don’t need to go it alone when it comes to your retirement. Take advantage of the resources available to you to make sure you’re on track to the retirement you want. Contact your WellCents financial professional today.


Understanding Your Retirement Summary Plan Description

Understanding Your Retirement Summary Plan Description

Investing in an employer-sponsored Retirement plan is a powerful tool to boost your retirement readiness. But did you know that all Retirement plans are not created equal?

While they all share certain features, such as the ability to lower your taxable income by deferring and investing pretax dollars to save for retirement, plans can differ in terms of how quickly you become fully vested, whether you’re able to take a loan against your Retirement balance and whether your company will match some of your contributions.


The “Retirement plan” derives its name from the section of the IRS tax code that applies to it, and the official plan documents are quite complex for the average investor to understand. Luckily, your employer is also required to provide you with a document called a Summary Plan Description, which details many important features of your Retirement in plain English so that they’re easier to understand.


If you don’t have this document in your possession, simply contact your HR department or benefits manager to request a copy. You can find very helpful information inside it, including:


How to qualify for the plan. This might include an age requirement as well as a minimum duration of service within your organization.


Employer match. Your employer may match a certain percentage of your Retirement contributions up to a certain amount. For example, they might match 100% of your first 3% of contributions and then 50% of the next 3%. If you have this benefit, your Summary Plan Description will specify the details.


How long it will take to be vested. Each Retirement plan has a specific vesting schedule, and this refers to how long it takes you to own a percentage of your employer’s contributions.


Whether you can take a loan against the money in your Retirement. If loans are permitted, you’ll be required to pay back the loan with interest to your account. The terms and conditions of these loans, if available, will be outlined.


How to access your account balance and make changes to your investments. You can look up how to access your Retirement information online or by phone — and learn who your point of contact for your Retirement is within your organization.


The Summary Plan Description is a great starting point for understanding the features and benefits of your Retirement plan. But if you have additional questions, set up an appointment to meet with your financial adviser, who can explain the plan in greater detail an answer your questions.

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