Big Birthdays After 50 – And Why They Matter

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So, you know how kids hit that age where they proudly declare they’re “eleven and a half” or some such? Well, guess what? Once you’re past the big 5-0, those half-birthday vibes start making a comeback. And here’s the twist – these birthdays and “half-birthdays” are not just about adding candles to your cake. Nope, they can seriously shake things up when it comes to your retirement game plan.

Age 50

Alright, let’s kick things off at the big 5-0. If you’re part of certain retirement plans, this is your cue to start making those annual catch-up contributions. Picture this: if you’re rocking a 401(k), 403(b), or 457 plan, you can throw in an extra $7,500 per year in 2024. Got a Simple IRA or Simple 401(k)? You’re looking at a cool $3,500 catch-up contribution. And don’t forget the traditional or Roth IRAs – you can stash away an extra grand annually. Sweet, right?

Age 59½

Now, we’re talking about the age where you can start dipping into your retirement plans without Uncle Sam slapping you with a 10% penalty. Say hello to withdrawals from your IRAs and employer-sponsored plans like the 401(k) and 403(b). Just a heads-up – traditional IRAs, 401(k)s, and the gang are taxed as ordinary income. But hey, no penalties? That’s a win.

Age 62 

So, 62 is the magic number to start cashing in on those Social Security retirement benefits. But hold up – if you’re still grinding away at work, your benefits take a hit. The deal is, they deduct a buck for every two you earn over the annual limit, which is $22,320 in 2024. It’s like Social Security’s way of saying, “We got you, but not all the way.”

Age 65

Hit 65, and guess what’s on the table? Medicare. The folks at Social Security suggest you get on it three months before the big day. Oh, and if you’re already soaking up those Social Security benefits, you’re in for automatic enrollment in Medicare Part A and Part B. No extra paperwork – sounds good to us!

Age 65 to 67

Now, here’s the scoop between 65 and 67. This is when you can start cashing in on the full 100% of your Social Security benefits. But here’s the kicker: the exact age depends on when you blew out your birthday candles. Born in ’55? Full benefits at 66 years and 2 months. Born in ’60 or later? Hold on tight till you hit 67.

Age 73

Fast forward to 73, and it’s time to start taking those required minimum distributions from your traditional IRA and other plans. And get this – you can still contribute to that traditional IRA past 70½, as long as you’re bringing in the bacon.

So, why does all this matter? Well, understanding these milestone birthdays is like having a secret map to navigate your retirement. It’s not just about celebrating another trip around the sun; it’s about making sure you’re on top of things and dodging those pesky penalties. Cheers to knowing when to blow out the candles and when to cash in on the perks! 🎉

As you embark on this next chapter, let RWM Financial Group be your co-pilot. When it comes to preserving your financial future, having a knowledgeable guide makes all the difference.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own, separate from this educational material.

2024 Compliance Calendar

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Stay ahead of deadlines with help from our annual Compliance Calendar. If you have any questions about deadlines or the information requested, please get in touch with us to review today!

Download the 2024 Compliance Calendar

RWM Financial Group is committed to providing solutions and support for yours and your employees’ retirement. Here’s a handy checklist to keep your retirement plan running smoothly:

  • Review plan documents: Ensure all information is up to date and compliant with current regulations. Don’t let any outdated policies slip through the cracks!

  • Communicate with participants: Engage your employees by sharing important updates, educational resources, and reminders about upcoming deadlines. Let’s keep them informed and motivated!

  • Evaluate investment options: Take a close look at your plan’s investment lineup. Are there any adjustments needed to align with participants’ goals? Let’s ensure a diverse and appealing selection.

  • Assess plan fees: Scrutinize the fees associated with your plan. Can any be renegotiated or reduced? It’s time to optimize your plan’s cost-effectiveness!

  • Conduct plan audits: Regular audits are crucial to maintaining compliance and identifying any potential issues. Stay ahead of the game and ensure your plan is in tip-top shape.

  • Enhance financial education: Empower your employees with financial literacy tools and resources. Help them make informed decisions for a secure retirement future.

RWM Financial Group takes pride in our roles as your Plan Advisors; we are dedicated to you, your plan, and your employees. We are here to support you every step of the way.

Securities and advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC.

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

Getting Ready for the Upcoming Tax Season

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This information is not intended to be a substitute for specific individualized tax advice. We recommend discussing your specific tax situations with a qualified tax advisor.

Tax season is approaching and being prepared is the best way to make this tax season your easiest yet. In this document you will find important information and tools to help you get ready. As always, meeting with your financial professional early and often will ensure that all your questions are answered, so reach out to them today. 

Why are there different mailings for 1099-Consolidated Tax Statements?

During the 2023/2024 tax season, LPL will mail 1099 consolidated tax statements in multiple waves (similar to other major financial firms) to meet all IRS deadlines, reduce errors, and cut down on the need to mail corrected forms. 

See important tax season mailing dates below for a full list of mailing dates. Your original 1099 consolidated tax statement will be mailed shortly after we receive final income reclassification announcements from all securities held in your account. Timing of receiving final income reclassification data may result in your tax statement not arriving on the anticipated February date. In these cases, your 1099 tax statement will be mailed between February 16 and March 15, 2024.  

If your 1099 consolidated tax statement is not available on or before February 16, 2024, you’ll have access to a Preliminary 1099-Consolidated Tax Statement. This is an advanced draft only. Data may be incomplete and is subject to change. The preliminary 1099 should not be considered final and should not be used for the purpose of filing a tax return with the IRS or with any state or other regulatory agency. The preliminary form will be available electronically and won’t be mailed. You can access a preliminary 1099-consolidated tax forms statement in Account View or by reaching out to your financial professional. 

Income reclassification: What is it and what do I need to know? 

Income reclassification (sometimes called income reallocation) is an annual process where security issuers change the tax characterization of distributions that were paid during the tax year. Often, the result of income reclassification is a more favorable tax treatment. The income reclassification process takes place after the end of the tax year, during the first quarter, when security issuers announce their income reclassification for the previous tax year. The income reclassification process affects income distributions you may have received during the previous tax year. The IRS requires final income reclassification to be reported to you on Form 1099.  

Please note: Reclassification is an industry-wide activity. All financial industry firms receive reclassified data from issuers. 

Should I file an extension?  

It is always a good idea for you to maintain an open line of communication with your financial professional and your tax advisor throughout the year to ensure the best tax strategy and outcomes for you. This dialogue will help you decide if filing an extension is the best course of action. There are many reasons why filing an extension might make sense for you. For example, the volume of data or complexity of certain transactions inside or outside your account may require additional time to address. In addition, if you are expecting to receive your 1099 in the final mailing waves in March, it may be reasonable to consider filing an extension to allow sufficient time for your tax advisor to accurately complete your tax return forms. If you are unsure about your holdings, be sure to discuss them with your financial or tax professional. 

Corrected Forms: What do I need to know if I receive a corrected tax form in the mail? 

After your original 1099 tax statement has been issued, delayed reporting and reclassification from security issuers can sometimes occur, which may result in you receiving corrected 1099 statement. The IRS requires that a corrected form be issued for any adjustments received from the security issuers after your original tax form is produced.   

Security types most likely to reclassify are: 

• Regulated investment companies (mutual funds)

• Unit investment trusts (UITs)

• Real estate investment trusts (REITs)

• Widely held fixed investment trusts (WHFITs)

There is not an IRS cutoff or deadline for providing corrected 1099 forms. If you need to file an amended tax return, it’s recommended that you discuss the situation with your tax advisor prior to refiling so they can determine the best course of action based on your individual circumstances.  

For help answering tax season questions and finding additional saving opportunities, contact your financial professional. 

How to go paperless in Account View 2.0 

There are several benefits to you for going paperless with your important documents. 

• Get faster access to your documents,including tax forms.

• Peace of mind.eDelivery is more secure.

• Get convenient access to important documents from one location, anytime, anywhere.

For directions on how to set your tax forms to be paperless, please see the below steps. It takes less than 5 minutes to get setup. 

1. Login to your account www.myaccountviewonline.com. If you don’t have an Account View profile, you can sign up for one at the link above.

2. Once you are logged into your Account View profile, click on your name in the upper right corner of the screen. Select “Preferences” to navigate to your paperless settings.

3. From there you can choose to either go 100% paperless for all eligible documents or pick and choose which documents you receive by mail delivery.

Authorized User access in Account View 2.0 

You can provide an authorized user access to your Account View profile. This is a view-only access to any user you authorize. Who would you want to give access? Perhaps a significant other to view account information or your accountant, so they can download tax statements.  You control this setting within your user profile preferences.  

Tax preparation software 

If you use TurboTax or H&R Block, you’ll be able to import the information shown on your original or corrected 1099 tax information statement directly into the software. To upload your tax data into the software, you’ll need your full 8-digit LPL 

account and 11-digit Document ID listed on your tax statement. Forms will be available for download once your tax statement is available. We recommend you wait to download your tax statements until you have received all tax statements in the mail.  

Important tax season mailing dates 

Becoming familiar with the mailing schedule is one of the most important ways to stay organized for tax season. During the 2023/2024 tax season, to meet all IRS deadlines, reduce errors, and reduce the need to mail corrected versions, LPL will mail the 1099 Consolidated Tax Statements in multiple phases. Keep this chart handy to see when your final forms for tax year 2023 will be ready. 

For more information on IRS tax filing or extension deadlines, see IRS.gov. 

2023/2024 Tax Season Mailing DatesDownload

Please reach out to us at RWM Financial Group. We look forward to the opportunity to extend our services and to help position your investment portfolio for long-term success.

Member FINRA/SIPC Tracking #507811

 

Outlook 2024: A Turning Point

LPL Research recently unveiled Outlook 2024: A Turning Point, which recaps where markets have been over the last half of 2023 to help position your portfolio through midyear of 2024. It’s with pleasure that we bring you a few of its key highlights today.

In 2024, we believe markets will make a definitive turn to a more recognizable place. Where the last two years had investors focused on inflation, market volatility, and striving for a sense of economic balance, we expect to see some return to the previous status quo, characterized by more familiar and steadier economic and market patterns. We’ve seen indications of this reset—receding inflation, rates stabilizing, more modest stock market performance, and go-forward economic forecasts that have been dwindling.

It doesn’t mean that 2024 won’t have its own surprises or potential challenges. Reflecting on 2023, we certainly experienced our fair share of unexpected events. There were positives, such as the strength of the U.S. economy and the stock market, despite the Federal Reserve (Fed) raising interest rates. On the downside, we faced a regional banking crisis driven by interest rate risk and saw escalating conflict in the Middle East, reminding us that markets are seemingly constantly overcoming obstacles.

So where does that leave us for the first half of 2024? We do expect the economy to soften mildly, which is what the Fed has been looking for over the past two years. The uncertainty surrounding a potential recession may limit stock gains as 2024 begins, but it could also provide a silver lining if the Fed eases rates as a result.

The rate and earnings cycles are likely to have a greater impact on stocks, as investors focus on the anticipated decline in interest rates and return of growth in earnings. With this in mind, we see growth opportunities in bonds, which should offer decent returns with lower risks compared to stocks. Ultimately, we expect both stocks and bonds to perform well and provide ample opportunities.

These are just some of the insights you’ll find in our Outlook 2024: A Turning Point. To get more, including considerations and potential action steps to discuss with your financial professional, visit go.lpl.com/investoroutlook.

The insights provided, combined with my guidance, will help you navigate this turning point and work toward achieving your goals. And at the end of the day, that’s what it’s all about.

READ THE FULL REPORT

Please reach out to us at RWM Financial Group. We look forward to the opportunity to extend our services and to help position your investment portfolio for long-term success.

Member FINRA/SIPC Tracking #513668 (exp. 12/24)

 

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of December 11, 2023.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Past performance does not guarantee future results.

Asset allocation does not ensure a profit or protect against a loss.

For a list of descriptions of the indexes and economic terms referenced, please visit our website at lplresearch.com/definitions.

Checking Under the Hood

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How to Perform a Six-Step Maintenance Checkup on Your Retirement Plan

Does your retirement plan make curious noises when it travels over a few market bumps? Are you getting enough mileage out of your savings rate? Is your diversification strategy as energy-efficient as it should be? Performing annual maintenance on your 401(k) can help make the road to retirement as smooth as possible. Here’s a six-step checkup that can be performed in just a couple of hours over a weekend.

STEP 1: Review Your Goals and Plans

Each year you should ask yourself if you’re on track to reach your retirement goals. Part of that process is imagining (in detail) what you would like to be doing during that stage of your life. Are your goals and plans realistic? Has your thinking changed at all — and why? The American Savings Education Council (www.asec.org) has a wealth of resources to help you review and adjust your goals and plans as needed, including their “Savings Goal Calculator” and other tools that can help you determine how much money you need to save for retirement.

STEP 2: Maximize Your Contributions

If you’re not contributing the maximum possible to your plan, increase your contributions by at least 1% each year, with a general goal of eventually reaching around 15% of your salary. Try to contribute at least enough right now to get the full employer match (if offered). It’s one thing to read this and say to yourself “yes, I can definitely increase by 1%.” But it’s only going to happen if you stop everything you’re doing right now, log into your account on your recordkeeper’s website and make the change!

STEP 3: Review Your Investment Strategy

Given all the market turmoil over the past few years, including inflation and economic events beyond our control, it’s smart to ask yourself each year if your asset allocation is still appropriate. Or, if your tolerance for risk has fundamentally changed. Your plan recordkeeper likely has a risk tolerance assessment exercise you can access on their website. In addition, consider working with a financial advisor to help you determine if your investment strategy is in sync with your current personal situation.

STEP 4: Rebalance

Rebalancing is the process of adjusting your portfolio’s investments so they match your original allocation. When your portfolio gets out of balance, you may stray from your original risk comfort zone. For example, due to ongoing market volatility, your portfolio may have drifted toward either a more aggressive or conservative allocation than you are comfortable with. Rebalancing keeps your portfolio risk within your tolerance limits.

STEP 5: Check Beneficiaries

Your spouse is automatically the primary beneficiary of your 401k plan. But, if you are divorced, widowed or remarried, you should review your beneficiary designations to make sure the correct person is named. Also, if you want to name someone else (such as a child) as your primary beneficiary, and you are married, your spouse needs to sign a waiver of rights to your 401(k) benefits.

STEP 6: Check on Retirement Plan Changes

Does your retirement plan offer any new plan features, tools, or resources? What can you do to take advantage of these opportunities? Also, be sure you have a copy of the Summary Plan Description for your plan (available for free from Human Resources). The Summary Plan Description defines, in plain language, how your plan works and what its features are.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2023 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this newsletter are those of Kmotion. The articles and opinions are for general information only and are not intended to provide specific advice or recommendations for any individual. Nothing in this publication shall be construed as providing investment counseling or directing employees to participate in any investment program in any way. Please consult your financial advisor or other appropriate professional for further assistance with regard to your individual situation.

RP-840-0523 Tracking #1-05376250

Exciting Announcement: Introducing Our New Chief Investment Officer and Operations Team

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We have some thrilling news to share! Brahm Rossiter is stepping into the role of Chief Investment Officer (CIO). Brahm Rossiter will be overseeing all investment strategies and decision-making processes, ensuring the utmost level of expertise and attention to detail in managing your accounts. Brahm will be working with each team member behind the scenes. As always, Brahm is available by phone and in person.

To ensure a seamless transition and uninterrupted day-to-day operations, we’ve assembled a powerhouse team. They will be responsible for handling all administrative tasks, client inquiries, and operational aspects of your accounts. Allow us to introduce you to the members of our operations team:

Jake Taylor

Jake brings a wealth of experience in financial operations and client service. He will be a key point of contact for your account-related inquiries and will work diligently to ensure your needs are met promptly and efficiently.

Marcus Sasaki

Marcus is a seasoned professional with a strong background in investment management. He will play a crucial role in supporting the execution of investment strategies and monitoring market trends to optimize your portfolio.

Kirby Moreno

Kirby is a highly organized individual with a keen eye for detail. She will be responsible for the administrative aspects of your accounts and facilitating smooth operations.

Desiree Jacobs

Desiree is a dedicated professional with extensive experience in business operations. She will work closely with our team to ensure streamlined processes and effective communication, ultimately enhancing your overall client experience.

Rest assured, Brahm Rossiter will lead with unparalleled expertise, and our team will guide you toward financial success.

RWM Financial Group consultation
401K INVESTMENT ADVISORY SERVICES Brahm going over papers

Our team remains dedicated to understanding your unique financial goals and tailoring strategies to help you achieve them.

If you have any questions or concerns regarding this transition, or if you would like to schedule a meeting to discuss your portfolio, please do not hesitate to reach out to us. We are here to address any queries and provide you with the support you need.

We are thrilled about this positive change and the enhanced capabilities it brings to our firm. Thank you for entrusting us with your financial journey, and we look forward to continuing our partnership with you.

Addressing Common Employee Questions and Concerns about 401(k) Plans

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As an employer offering a 401(k) plan, it is important to provide your employees with the necessary information and support to help them make informed decisions about their retirement savings. In this blog, we will address common questions and concerns that employees often have regarding 401(k) plans. By proactively addressing these issues, you can promote employee engagement, boost participation rates, and enhance overall satisfaction with your retirement benefits program.

What is a 401(k) plan, and how does it work?

We’ll start by providing a clear and concise explanation of what a 401(k) plan is and how it functions. We’ll cover topics such as employee contributions, employer matching contributions, vesting schedules, investment options, and the tax advantages of participating in a 401(k) plan.

How much should I contribute to my 401(k) plan?

This section will guide employees on determining an appropriate contribution level based on their individual circumstances and financial goals. We’ll explain concepts like the power of compounding, maximizing employer matching contributions, and the potential long-term benefits of consistent contributions.

What investment options are available in a 401(k) plan?

Employees often have concerns about choosing the right investments within their 401(k) plan. We’ll provide an overview of common investment options such as mutual funds, target-date funds, and individual stocks. Additionally, we’ll emphasize the importance of diversification and the benefits of consulting with a financial advisor for personalized investment advice.

Can I access my 401(k) funds before retirement?

This section will address common questions about accessing 401(k) funds in case of financial emergencies or other unexpected circumstances. We’ll explain the rules and potential implications of early withdrawals, loans, and hardship distributions. It is crucial to educate employees about the potential impact on their long-term retirement savings and encourage them to explore alternative options before tapping into their 401(k) funds prematurely.

What happens to my 401(k) if I leave my job?

Employees often express concerns about their 401(k) funds when changing jobs. We’ll explain the available options, such as leaving the funds in the current plan, rolling them over to a new employer’s plan, or transferring them to an individual retirement account (IRA). By providing clear guidance, employees can navigate these transitions and make informed decisions regarding their retirement savings.

​​What is the difference between a traditional 401(k) and a Roth 401(k)?

Employees may have questions about the distinction between these two types of 401(k) plans. In response, explain that a traditional 401(k) allows pre-tax contributions, reducing taxable income in the year of contribution, while a Roth 401(k) allows after-tax contributions, with tax-free withdrawals during retirement. Discuss the advantages and considerations of each option to help employees determine which is more suitable for their needs.

How can I monitor and track the performance of my 401(k) investments?

Employees may express concerns about tracking the performance of their 401(k) investments. Provide guidance on accessing online portals or tools offered by the plan provider for monitoring account balances, investment performance, and contribution history. Explain the importance of regularly reviewing investment performance and making adjustments as needed to align with long-term goals.

What are the penalties for early withdrawals from a 401(k) plan?

Discuss the penalties associated with early withdrawals from a 401(k) plan. Explain that if funds are withdrawn before the age of 59 ½, they are generally subject to income tax and a 10% early withdrawal penalty. Emphasize the long-term impact of early withdrawals on retirement savings and encourage employees to explore other options, such as loans or hardship distributions, only as a last resort.

Are there any limits on annual contributions to a 401(k) plan?

Inform employees about the annual contribution limits set by the IRS. Explain that for 2023, the limit for employee elective contributions is $19,500, with an additional catch-up contribution of $6,500 for individuals aged 50 and older. Discuss the benefits of maximizing contributions up to these limits to take full advantage of the tax benefits and potential employer matching contributions.

Can I roll over funds from a previous employer’s retirement plan into my current 401(k) plan?

Explain the process of rolling over funds from a previous employer’s retirement plan into the current 401(k) plan. Discuss the benefits of consolidation, such as simplified account management and potential access to a broader range of investment options. Encourage employees to consult with their plan administrator or a financial advisor for guidance on the rollover process.

Final Notes

Addressing common employee questions and concerns about 401(k) plans is essential for fostering a sense of financial security and well-being among your workforce. By providing clear and accessible information, you empower your employees to make informed decisions about their retirement savings. Remember to encourage employees to seek professional guidance from financial advisors and periodically review their retirement strategies to ensure they stay on track towards a financially secure future.

By proactively addressing these questions and concerns, you can create a positive and supportive retirement benefits program that helps your employees achieve their long-term financial goals.

Learn More About RWM

There are many moving parts when designing, implementing, and administering a retirement plan. However, when you focus on the key areas in your initial design or partner with a professional specializing in retirement plans and administration, you can strive to avoid the common challenges and unnecessary costs while helping your employees succeed.

At RWM Financial Group, we help commercial businesses and governmental agencies design and oversee well-managed retirement plans in non-tribal and tribal organizations. Learn more about building a custom, cost-effective strategy that is compliant and promotes success for you and your employees.

This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does the advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

The Inflation Reduction Act’s Impact on 401(k) Plans

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The Inflation Reduction Act (IRA) was signed into law by President Joe Biden on August 16, 2022. It addresses various important topics like healthcare, climate change, corporate taxation, and retirement plans. This blog specifically focuses on how the IRA affects 401(k) plans, providing an overview of the key provisions and offering insights for employers to ensure they comply with the new rules.

Understanding the Inflation Reduction Act:

The IRA was created to deal with the increasing inflation rates and minimize their negative impact on the economy and individuals’ financial well-being. The Act includes specific measures that directly affect retirement savings plans, such as 401(k) plans. It recognizes the importance of retirement planning, especially in an environment with rising prices.

In simpler terms, the Inflation Reduction Act was passed to address inflation’s effects and how it impacts people’s ability to save for retirement. It introduces changes to retirement plans, including 401(k) plans, to help individuals cope with inflation and secure their financial future.

Impact on 401(k) Contributions:

One notable effect of the IRA on 401(k) plans is the adjustment in contribution limits. To preserve the purchasing power of retirement savings, the legislation introduces changes that align with the effects of inflation on the economy. Typically, these changes result in an increase in contribution limits, allowing individuals to save more for retirement and protect their financial security from erosion due to inflationary pressures.

Tax Advantages and Withdrawals:

The IRA maintains the tax advantages of 401(k) plans while introducing adjustments to align with changing economic conditions. Individuals can continue to enjoy tax-deferred growth on their contributions, and the benefits of pre-tax contributions and potential tax-free growth remain intact. However, the Act may introduce changes to the tax treatment of withdrawals to strike a balance between preserving retirement savings and addressing inflationary pressures. This may include penalties for early withdrawals and the potential expansion of options such as Roth 401(k) plans, which offer tax-free withdrawals.

Additional Minimum Tax on Corporate “Book Income”:

The Act introduces an additional minimum tax of 15% on corporate “book income” for companies with income exceeding $1 billion. To determine if a company meets the “book income test,” its average annual adjusted financial statement income (AFSI) for the past three taxable years must exceed $1 billion. Corporations must exclude qualified retirement plan asset and income changes when calculating AFSI. Employer retirement plan deductions for 401(k) contributions and plan-related expenses should be subtracted, but if 401(k) assets revert back to the employer, they must be included in the AFSI calculation.

Additional Tax on Corporate Stock Repurchases:

The Act imposes a 1% excise tax on the fair market value of corporate stock repurchases that are not contributed to a 401(k) plan. When a company repurchases its stock from shareholders for cash, the excise tax applies. However, if the repurchased stock is contributed to an employer-sponsored retirement plan like a 401(k), the excise tax does not apply.

Compliance Considerations for Employers:

Employers, particularly large corporations, need to understand how to calculate “book income” and exclude relevant 401(k) plan expenses and deductions to ensure compliance with the additional minimum tax provisions. It is crucial to accurately calculate AFSI and evaluate potential tax consequences. Employers engaging in stock repurchases should be aware of the excise tax implications and carefully assess their strategies.

Financial Planning Considerations:

The IRA’s impact on 401(k) plans highlights the importance of thoughtful financial planning. Individuals should reassess their retirement savings strategies considering the adjustments to contribution limits, tax treatment, and potential penalties. Maximizing savings potential and taking advantage of tax benefits require collaboration with financial advisors to determine appropriate contribution levels aligned with long-term financial goals. Retirees must understand potential changes in withdrawal rules and engage in comprehensive retirement planning to navigate complexities and make informed choices.

Final Notes

The Inflation Reduction Act’s impact on 401(k) plans represents a significant development for retirement savings in an inflationary economic environment. By adjusting contribution limits, preserving tax advantages, and addressing withdrawal rules, the legislation seeks to protect individuals’ long-term financial security. As with any major policy change, it is vital for individuals to stay informed, evaluate their financial strategies, and seek guidance from professionals to optimize their retirement planning in light of the IRA’s provisions. By staying proactive and adaptable, individuals can navigate the evolving landscape and ensure a solid foundation for their future retirement.

Learn More About RWM

There are many moving parts when designing, implementing, and administering a retirement plan. However, when you focus on the key areas in your initial design or partner with a professional specializing in retirement plans and administration, you can strive to avoid the common challenges and unnecessary costs while helping your employees succeed.

At RWM Financial Group, we help commercial businesses and governmental agencies design and oversee well-managed retirement plans in non-tribal and tribal organizations. Learn more about building a custom, cost-effective strategy that is compliant and promotes success for you and your employees.

This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does the advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

Retirement Planning: Q&A For Employers

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Ah, retirement. It’s that magical time in life where you can finally kick up your feet and relax after years of hard work. But let’s face it, retirement planning can be a bit overwhelming, especially for employers who want to ensure their employees are taken care of.

Retirement planning, in a nutshell, is the art of squirreling away some of your hard-earned cash into investments that will provide financial security when you decide to call it quits. It may not sound like the most exciting thing in the world, but trust us, it’s important!

As an employer, offering retirement benefits is not only a way to attract and retain top talent, but it also shows that you care about the financial well-being of your employees. Plus, it’s a win-win situation since it can also have tax benefits for you as the employer.

So, whether you’re an employee dreaming of the day you can retire to a beach somewhere, or an employer wanting to do right by your staff, understanding retirement planning is key. Let’s dive in and learn more about retirement plans, obligations, and all the fun stuff that goes along with it!

Types of Retirement Plans

Retirement plans come in all shapes and sizes, but don’t worry, we’ll break them down for you in a fun and easy-to-understand way!

Defined Benefit Plans

First up, we have defined benefit plans. These are the granddaddy of retirement plans and have been around for ages. They’re typically offered by government entities or large corporations and provide a fixed, monthly benefit to retirees based on a formula that takes into account factors like salary and years of service.

Defined Contribution Plans

Next, we have defined contribution plans, which are a bit more common these days. These plans allow employees to contribute a portion of their paycheck into an account that is then invested in a variety of options. The two most popular defined contribution plans are the 401(k) and the IRA.

401(k) Retirement Savings Plan

The 401(k) is a retirement savings plan that is offered by employers. Employees can contribute a portion of their pre-tax income into the plan, and in some cases, employers will match a portion of those contributions. The funds in a 401(k) plan are invested in a variety of investment options, such as stocks, bonds, and mutual funds.

IRA

An IRA, or individual retirement account, is a personal retirement savings account that individuals can set up on their own. There are two types of IRAs – traditional and Roth. Traditional IRAs allow individuals to contribute pre-tax income, while Roth IRAs allow individuals to contribute after-tax income. Both types of IRAs provide tax benefits and offer a range of investment options.

Others

Last but not least, there are other retirement plans that employers may offer, such as profit-sharing plans, employee stock ownership plans, and cash balance plans. These plans are a bit more specialized, but can be a great option for some employers.

Understanding Employer Retirement Plan Obligations

Employers have certain obligations when it comes to offering retirement plans to their employees. Let’s dive into these obligations and break them down into four sections:

Eligibility and Participation

Employers must establish eligibility requirements for their retirement plans, such as age and length of service. Once an employee meets the eligibility requirements, they must be allowed to participate in the plan.

Vesting

Vesting refers to the amount of time an employee must work for an employer before they are entitled to the employer’s contributions to their retirement plan. Vesting can be immediate, where an employee is immediately entitled to all employer contributions, or it can be graded, where an employee becomes increasingly vested over time.

Contribution Limits

Contributions to retirement plans are subject to limits set by the IRS, and employers must ensure that they are adhering to these limits. Exceeding contribution limits can result in penalties for both the employer and employee, so it’s important to stay on top of this.

Fiduciary Responsibilities

Employers who offer retirement plans are considered fiduciaries and have a legal obligation to act in the best interests of plan participants. This means employers must carefully choose investment options, monitor plan fees, and provide regular communication about the plan to participants.

By understanding these obligations, employers can ensure they are providing their employees with a valuable benefit while avoiding any potential legal issues. It may seem like a lot to handle, but with proper planning and management, offering a retirement plan can be a win-win for both employers and employees.

Common Retirement Planning Questions for Employers: What Employers Need to Know

As an employer, you play a key role in helping your employees plan for retirement. Here are some common retirement planning questions that employers should be aware of.

What retirement plans should I offer my employees?

The retirement plans you offer will depend on your business and budget. Common options include 401(k) plans, pension plans, and SIMPLE IRAs. It’s important to do your research and choose the plan(s) that work best for your employees.

How do I encourage my employees to save for retirement?

One way to encourage retirement savings is to offer an employer match. This means that you contribute a certain percentage of your employee’s salary to their retirement plan, which can incentivize them to save more. You can also provide education and resources about retirement planning to help your employees make informed decisions.

What are my obligations as a retirement plan sponsor?

Employers who offer retirement plans are considered plan sponsors and have certain obligations under ERISA (Employee Retirement Income Security Act). These obligations include providing plan information to employees, adhering to contribution limits, and acting in the best interests of plan participants.

How do I monitor the performance of our retirement plan?

It’s important to regularly review and evaluate the performance of your retirement plan. This includes monitoring fees, investment options, and participation rates. You can work with a third-party administrator or investment advisor to help with this process.

What happens if our retirement plan is not compliant?

If your retirement plan is not compliant, it can result in penalties and legal issues. It’s important to stay up-to-date on any regulatory changes and to work with a professional to ensure your plan is in compliance.

How do I handle employee turnover and their retirement accounts?

When an employee leaves your company, they may have vested funds in their retirement account. As an employer, it’s important to have a process in place for handling these funds, such as allowing the employee to keep the funds in the plan, rolling them over into a new retirement account, or distributing the funds.

How can I help employees who are behind on retirement savings?

Some employees may be behind on their retirement savings, which can lead to financial stress and uncertainty. As an employer, you can provide education and resources on catch-up contributions, encourage them to meet with a financial advisor, and explore offering financial wellness programs.

Can I make changes to my retirement plan?

Yes, employers can make changes to their retirement plan, but it’s important to follow certain guidelines and procedures. Changes should be communicated to employees in advance and should not violate any legal requirements or affect employees’ accrued benefits.

Should I offer a Roth option in my retirement plan?

A Roth option allows employees to contribute after-tax dollars to their retirement account, which can be withdrawn tax-free in retirement. It’s a good option for employees who expect to be in a higher tax bracket in retirement. Employers should consider whether a Roth option would benefit their employees and be feasible for the business.

By understanding these common retirement planning questions, employers can help their employees save for their future while also meeting their obligations as plan sponsors. It’s important to stay informed and seek professional guidance when needed to ensure your retirement plan is a success.

Learn More About RWM

There are many moving parts when designing, implementing, and administering a retirement plan. However, when you focus on the key areas in your initial design or partner with a professional specializing in retirement plans and administration, you can strive to avoid the common challenges and unnecessary costs while helping your employees succeed.

At RWM Financial Group, we help commercial businesses and governmental agencies design and oversee well-managed retirement plans in non-tribal and tribal organizations. Learn more about building a custom, cost-effective strategy that is compliant and promotes success for you and your employees.

This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does the advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

How Not to Get Sued 101: Fiduciary Responsibility For Business Owners

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As a business owner, you’re the captain of your ship, and fiduciary responsibility is like the lighthouse that guides you through the treacherous waters of legal liabilities.

Just like how a captain must always act in the best interest of their ship and crew, you have a duty to always act in the best interest of your company and its stakeholders.

If you fail to uphold your fiduciary responsibility, you could face legal action and criminal charges. That’s like running your ship aground on a reef – not a good situation!

So, make sure you understand and practice fiduciary responsibility like a seasoned sailor navigating the high seas. It’ll keep your business sailing smoothly and your stakeholders happy!

In this blog, we’ll discuss some of the key concepts related to fiduciary responsibility and provide some tips on managing it effectively. By the end, you should have a solid understanding of the basics of fiduciary responsibility and how to navigate it in the world of business. So let’s get started!

What is Fiduciary Responsibility for Business Owners?

A fiduciary is someone who has been given the authority to act on behalf of another person or entity. This person or entity has a legal obligation to act in the best interests of the person or entity they represent and to avoid any situation where their personal interests might conflict with the interests of the person or entity they represent. They must make decisions with great care, loyalty, and honesty when acting on behalf of the person or entity they represent.

In simple terms, a fiduciary is a person or entity that is trusted to act in someone else’s best interests.

The Three Main Duties of Fiduciary Responsibility

Duty of Care: The fiduciary has a duty to exercise reasonable care, skill, and diligence when managing their client’s finances and investments. This includes developing an investment strategy that aligns with the client’s goals and risk tolerance, selecting appropriate investments, monitoring performance, and making adjustments as needed. 

The fiduciary must also be aware of any potential conflicts of interest and take steps to avoid them. This means disclosing any conflicts of interest and ensuring that all investment decisions are made solely in the client’s best interests.

Duty of Loyalty: The fiduciary must remain loyal to their client, always acting in their best interests. This means putting the client’s interests before their own and avoiding any actions that could benefit themselves or others at the expense of the client. For example, a fiduciary cannot recommend investments that provide them with a higher commission or fees if those investments are not in the client’s best interests.

Duty of Good Faith: The fiduciary must act with honesty, integrity, and transparency when making decisions on behalf of their client. This means disclosing all material information that could affect investment decisions and avoiding any misrepresentations or omissions of material facts. The fiduciary must also act in a timely manner, keeping the client informed of any changes or updates. Finally, the fiduciary must be accountable for their actions, keeping accurate records and promptly addressing any concerns or complaints raised by the client.

Overall, these duties of fiduciary responsibility are designed to ensure that the fiduciary always acts in the client’s best interests, with care, skill, loyalty, and good faith. By following these duties, the fiduciary can help their client achieve their investment goals and build trust and confidence in their relationship.

How Can Business Owners Practice Fiduciary Responsibility?

To practice fiduciary responsibility as a business owner, it is important to prioritize the best interests of the company and its stakeholders. This involves maintaining high ethical standards and making decisions that align with the company’s mission and values.

One way to do this is by minimizing financial risks through responsible financial management. This includes being mindful of expenses, budgeting effectively, and seeking out potential opportunities for growth while weighing the associated risks.

Transparency is also key to practicing fiduciary responsibility. Business owners should make financial information readily available to stakeholders, including employees, investors, and customers. This includes being transparent about decision-making processes, financial reporting, and any potential conflicts of interest.

To protect the company from legal liabilities, business owners should consult with legal and financial experts when making important decisions. They should also educate themselves on relevant laws and regulations that apply to their industry.

In addition to personal responsibilities, business owners should ensure that their employees understand their own fiduciary duties and have the necessary resources to make informed decisions. This can include training programs, access to financial experts, and clear guidelines on how to handle financial matters.

By prioritizing fiduciary responsibility, business owners can build trust with stakeholders, ensure the long-term success of their company, and contribute to a healthier business ecosystem.

In Summary

Overall, understanding and practicing fiduciary responsibility as a business owner is of the utmost importance. Fiduciary responsibility is a legal obligation that must be taken seriously, and a breach of fiduciary responsibility can lead to legal action. By understanding and practicing the duties of care, loyalty, and good faith, business owners can protect themselves and their businesses from potential legal action.

There are many moving parts when designing, implementing, and administering a retirement plan. However, when you focus on the key areas in your initial design or partner with a professional specializing in retirement plans and administration, you can strive to avoid the common challenges and unnecessary costs while helping your employees succeed.

At RWM Financial Group, we help commercial businesses and governmental agencies design and oversee well-managed retirement plans in non-tribal and tribal organizations. Learn more about building a custom, cost-effective strategy that is compliant and promotes success for you and your employees.

This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does the advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.