Boost Office Morale by Providing a 401(k)

Several reasons exist with regards to why any business with employees should set up a 401(k) plan. It doesn’t only benefit staff members; it can also be beneficial to company owners in that it could help reduce payroll taxes and result in subsequent tax credits being provided. Along with this, setting up a subsidized 401(k) can also go a long way to help boost workplace morale – which will in turn enhance productivity and profits. 


How does a 401(k) work?

Regardless whether you’re in a business partnership, are self-employed, part of a corporation or operating as a sole proprietor, it’s possible to set up a 401(k) plan. A 401(k) is a retirement plan that is federally insured and it enables employers and employees to contribute to it. If you’re an employer, you will be able to establish a unique investing schedule that will determine have much of an employees’ contribution you’ll be willing to match and up to an amount you choose. 


How these Plans Benefit Employees

When providing one of these plans to employees, all contributions they make are withheld before tax is applied, meaning that they are fully invested in their own contributions. While penalties are imposed on anyone who withdraws funds from their 401(k) before reaching retirement or age 55, anyone who retires during the calendar year in which they reach age 55 (or older) won’t fall prey to them. In some cases, exceptions can be made for hardship withdrawals and loans based on an employee’s contributions.  


Why it’s Essential to Contribute

Although you may not be mandated by law to contribute to a 401(k) if you’re an employer, you will benefit by doing so. Any employees who make contributions will also enjoy the benefit of having their taxable income reduced accordingly. This results in overall payroll taxes being reduced, which will in turn offset the contributions you make as an employer. For example, you might decide to match the first 4% of an employee’s contributions at 100%, and the next 1% to 4% by as much as 50%. In fact, this schedule can be set up in any way you choose.


How a 401(k) will Improve Morale

These days, many employees feel completely unappreciated in their workplaces. Even those with above average levels of education and who work harder than normal can struggle to survive because of personal circumstances. 

Taking the time and making the effort to introduce a 401(k) fund to your employees will show them that you care about their long-term needs and you want to ensure that they succeed financially. To many employees, being introduced to a subsidized 401(k) plan will make them feel as though they’ve received some form of raise – despite the fact that these funds will only be accessed many years down the line. 

Not only is a 401(k) plan a benefit that most employees want to be rewarded with; it is something that makes most of them feel more appreciated than usual. If you’re an employer who is keen to establish a 401(k) for your employees, chat with us today about getting one established. 

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Essential Facts about Retirement Saving

Although most individuals will reach retirement age, not nearly enough of them will get to enjoy much of this time of their lives due to financial constraints. Consequently, it’s essential for everyone to implement a practical savings plan so that they will not have to stress about how they are going to meet their financial needs during this time of their lives. The facts below will provide you with a clearer understanding of how to plan for – and achieve – this.


Traditional Pension Plans are Disappearing

In years gone by, employers routinely provided corporate pension and retirement plans. However, data compiled by USA Today that was provided by the Employee Benefit Research Institute has revealed that fewer companies and employers are now providing these than ever before. In fact, only just over 10% of private sector employees are currently contributing to dedicated company pension plans – a sharp decrease from almost 40% during the late 70s. 

Economists have noted that very few employees have any access to a company-sponsored 401(k) or other similar pension or retirement account. It has also been revealed that only 30% of lower-income households have access to funds like these in comparison to more than 80% of higher income households.


Age Is a Crucial Consideration

Most women who are able to retire at age 65 will need enough retirement funds to last for approximately 21 years, whereas men will generally require sufficient funds to see them through for around 18 years after stopping work. 

Owing to the fact that full retirement age will be increased to 67 for anyone who was born in 1960 or later, most of the millennial generation may not have to stretch their retirement savings as much. However, this doesn’t mean that they should delay starting to save towards this time of their lives.

Retirees will also need to account for additional healthcare expenses, regardless of when they start withdrawing funds or how healthy they may currently be. Research has revealed that the average retired couple should count on spending almost $300,000 on age-related healthcare – and this does not even take the cost of any type of nursing home or long-term care facility into consideration. 


Maintaining More than One Source of Income

More retirees than ever before are no longer relying entirely on an income from Social Security. In fact, more than a third of them either remains formally employed or own businesses that they are still actively managing. A further 20% of them are drawing down from their savings or dedicated pension plans, while a further 10% are in possession of assets from income. 

Many financial experts advise their clients to replace up to 45% of their pretax income with funds from their savings plans. If done in conjunction with obtaining a Social Security benefit, it should be enough for anyone who earns between the $50,000 and $300,000 threshold to live on each year. For retirees to maintain the lifestyle they had while employed, it’s usually only necessary to replace between 55% and 85% of the income they received while they were still employed. 

If you haven’t yet done so, now is the best time to start planning financially for your golden years. Contact us today to find out how to ensure that you will be able to retire without having to worry about finances. Our team looks forward to working with you.

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Practical Tips for Downsizing after Retirement

For most individuals, images of retirement tend to involve world travel, spending copious amounts of time with grandkids or other family members or even being able to enter gardening contests all year round. However, one of the best ways to ensure that you’ll be able to make the most of your golden years is to downsize various aspects of your life once you stop working. The advice below will not only help you to lessen your current responsibilities; it can help stretch your retirement funds as much as possible at the same time. 


Think about Moving House

Many individuals who have had kids still live in fairly large homes – even after the youngest may have flown the coop. This means that you may be spending more on property taxes, utility bills and general maintenance than you need to, which will in turn erode your retirement funds. Moving to a smaller house, apartment or condo will not only enable you to save a lot of money over the long term; it will also enable you to enjoy more free time because of having far less maintenance and cleaning to deal with.


Don’t be Too Extreme

While most individuals usually need to downsize their homes once they’ve stopped working, it’s important to not be too extreme. For instance, if you’ve lived in a 2,500 sq. ft. home, chances are that you won’t be happy resorting to tiny house living (think 600 sq. ft. or less). When downsizing, you should also take your interests and hobbies and those of your spouse into account so that each of you will still have enough space to enjoy these activities without getting underfoot of each other. 


Assess your Current forms of Transportation

While still employed, many couples find that differing work schedules render it absolutely necessary to each own a vehicle. Once retired though, you and your spouse may no longer need to pay for repairs and maintenance on two vehicles because your schedules will be far less stressful. Selling your second vehicle will not only reduce your monthly maintenance bill; you will be able to reduce the burden of additional vehicle payments as well.


Don’t Cut Friends and Family Off

Although it’s usually necessary to downsize after you retire, there’s no need to always move out of town or cross-country. Many retirees find that they can even relocate within their current neighborhood or relatively close to it, enabling to keep in easy contact with close friends and family. Relocating to a smaller property in your neighborhood also means that you won’t have to give up any regular activities you might be taking part in, such as gym classes, book clubs and other community events.

If you plan accordingly, you and your spouse won’t need to be living miserably in a tiny, cramped apartment. In fact, many retirees who have downsized in a practical way have said that it has allowed them to take advantage of some of the best years of their lives. Contact us today if you’d like to learn more about practical retirement planning.

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Want to Retire by 50? Here’s how Much you’ll Need to Save

Many individuals find the idea of retiring from the workforce at age 65 so overwhelming that they haven’t even given a second thought to the possibility of being able to retire when reaching the age of 50. However, this does not mean that it will be impossible to retire at this age – especially if you plan accordingly. If you would like to retire a decade and a half sooner than anticipated, the advice below can help you achieve this goal in a practical manner.


Aim to Save Approximately $1,000,000 

The average employee will require approximately $1,000,000 in savings if they intend retiring by the time they reach 50. This means that the earlier you compile a practical savings plan and put it into action, the sooner you can achieve this financial milestone. While it’s strongly recommended that you start saving for your golden years in your 20s, you can still make a plan if you’re older. Financial experts recommend that your savings be invested in such a way that they will be able to provide you with a return rate of at least 6%.

If you follow this advice, you’ll need to save approximately 35% of your earnings if you make $40,000 annually. However, I you’re earning $60,000 a year, you will need to set aside a little less than 25% of your paycheck. If you’re fortunate enough to earn six figures, you will only need to save a little less than 15% of your earnings.


Practical Ways to Save

Just the thought of having to try and save $1,000,000 in a 25 to 30 year timeframe can seem like an impossible undertaking, but it is quite possible to achieve this goal. Some individuals have even been able to achieve this savings figure before they reached 40. Below are some ways that early retirees were able to reach their savings goals:

  • Automating savings. When a specific amount of money is deducted and placed into savings each week or month, the chance of you saving regularly is increased substantially. In most cases, savings in this way will also mean that you won’t miss those funds
  • Wait as long as possible before moving out of your starter home into a larger property, and pay as much extra into your mortgage as possible during this time
  • Eat at home more than you visit restaurants or drive-through lines. This will benefit your wallet and your waistline over time
  • Reduce transport expenses wherever you can. If your car is paid off, keep it as long as it’s safe to do so. Walking, cycling or even using public transport wherever possible can help cut your gas and maintenance bill substantially over time. Combining as many errands as possible into a single trip will not only save money, you will save a lot of time as well
  • Eliminate, or at best, drastically reduce junk food consumption and trips to the mall as a form of entertainment. Your wallet and retirement fund will thank you

Keeping track of everything you spend your money on will help you determine where it’s possible to make budget cutbacks. The best way to do this is to keep a dedicated spending journal, where even the smallest expense is noted. Taking action by implementing the advice above will help get you on your way towards saving for a comfortable retirement.

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