Ubiquity

Author: Andrew Answers

After five years of experience leading a TPA call center in North Carolina, Andrew decided to move west to explore parts unknown and follow his passion of helping others. Walking through the doors of Ubiquity Retirement + Savings, formerly The Online 401(k) for the first time, he knew he’d found something special. Continuing to delight clients and partners alike and 10 years later, Andrew has been able to develop new teams, co-found a non-profit of strategic alliances, co-produce a hard-hitting documentary about the looming retirement crisis, and still had time to spread the savings gospel far and wide. Using social media and actual media alike (Wall Street Journal, Fox Business, PlanSponsor, and more), you’ll find no one who likes talking retirement more than this guy!

Everyone is guilty of falling into bad habits, especially given the fast-paced world we live in. While juggling our careers, families and other personal responsibilities, it’s easy to forget to take care of ourselves and we frequently lose focus on long-term goals.

Oftentimes, that lifestyle negatively affects our finances, and before we know it, we’ve fallen into a pattern that threatens to derail our future.

No one is immune to becoming a victim of bad financial habits. Wondering if you are guilty? Here are three common ones that can affect anyone.

1. Ignoring the status of your finances

Whether your finances are stellar or unsatisfactory, it’s important to keep a pulse on them and consult with a professional so you stay in good financial shape. Too often, people bury their heads in the sand and try to enjoy blissful ignorance when it comes to their finances – but it never ends well.

This bad habit affects people on both ends of the spectrum: For example, someone can be in a tremendous amount of debt and may ignore seeking a solution to avoid confronting the realities of their situation. On the flip side, if someone is well off, they may miss the opportunity to save money that is already at their disposal.

The way to overcome this bad habit is to start paying closer attention to your finances. Regardless of whether you’re living paycheck-to-paycheck or if money is no object, you need to be keenly aware of your spending and saving patterns, and, if necessary, adjust them so you’re on the right course.

A big component of this bad habit is that people avoid talking about money with their spouses and families, but this is an extremely dangerous rut to fall into, especially for those who are in trouble financially – staying hush-hush won’t solve your problems.

While these conversations can be uncomfortable, it’s important to make them happen.

2. Believing you’re already maxing out your savings

Sometimes, when peoples’ finances are in a good spot, they get complacent and start to spend frivolously. It’s certainly important to reward yourself for your hard work, but you should also focus on saving extra money when you can.

You might be tempted to spend bonuses, tax returns and other windfalls on vacations or shopping sprees when you know you’re already allocating a certain amount to your nest egg. However, don’t get tricked into the mindset that extra cash should burn a hole in your pocket just because you are already contributing to retirement savings.

Find a balance between steadily contributing to savings and enjoying life. Know that you can always stash some extra cash away in a 401k (the max contribution limit is $18,500/year for people under 50 in 2018), in an IRA or in a rainy day fund. You never know when it will come in handy!

3. Not updating your retirement savings strategy

Have you recently moved, started a new job, got married or had children? These are examples of times when it is important to check in on your financial plan and make sure your retirement savings strategies are appropriate for how your life has changed. It’s your retirement and it’s up to you to take charge.

While some of these milestones in life can be overwhelming, it’s important to ask yourself: What can I afford to save? There is certainly a domino effect to outdated savings strategies that don’t reflect your current and future life and those in it. If you don’t take the opportunity to revise how you save now, you could be missing out on keeping hard-earned dollars down the road.

Download Ubiquity’s Definitive Guide to Small Business 401k

This week’s question comes from Casey who asked whether you need a spouse’s consent before taking a loan from your 401k.

While we always stress the importance of leaving your money in your retirement account, sometimes unforeseen expenses arise where you need to borrow or loan yourself money. Here, we answer Casey’s question and give some other great tips on the deal with taking a loan from your 401k!

Get more on 401k by downloading our Definitive Small Business 401k Guide

What comes to mind when you hear the word “retirement”? Perhaps you picture spending all of your days with family – playing daily rounds of golf, traveling the world or enjoying an endless stream of beachside cocktails. Ultimately, people equate retirement with relaxing – not with collecting a paycheck.

However, what if in between the leisurely activities you voluntarily chose to work throughout your retirement? There are actually some valid reasons for having a job throughout retirement, regardless of whether it’s part- or fulltime. Here are three:

1. You’ll stay active.

Sure, the idea of 24/7 relaxation and having no responsibilities sounds great in theory, but the reality is that many retirees are used to having a routine, and will get bored soon after retirement.

Having a job is a way to maintain your social structure. We’re not suggesting you have to continue working in the same field, especially if it was a high-stress career. Instead, choose something that allows you to be involved in your community and interact with others. Just because you retire, doesn’t mean your social life needs to as well.

2. You’ll receive a steady cash flow.

People who are about to retire, or have already retired, are very cognizant of their cash flow. If you’re no longer collecting a steady paycheck from a job, where will your money come from? Retirees rely on items such as rental properties, investments, patents, Social Security or any number of things, but the most reliable source of income is a job.

By working throughout retirement, you’ll maintain a steady cash flow. This is especially useful to retirees who are wholly dependent on Social Security, which unfortunately can’t always pay all the bills.

Even if you have cash flow sources outside of Social Security, the income generated by a job can help you pay for luxuries during your time off.

3. You can Influence what you leave behind.

No one wants to leave behind a legacy that includes outstanding debt, especially because your kin will become responsible for it. When you are about to retire or are in retirement, it’s really important to reflect what you’re leaving behind.

If you are entering retirement and still have outstanding debt, one way to whittle it down quickly is to work, especially if you choose a job that intersects with a hobby. You won’t have to worry about the debt going unpaid and will be doing something you enjoy at the same time.

Certainly, the decision to continue working throughout retirement is a very personal one. However, many retirees find it enjoyable due to the social interaction, continued responsibilities and financial advantages.

Have you ever heard of the three-legged stool of retirement? Back in our parents’ and grandparents’ time, this is how the sources of retirement income were explained: Social Security, pensions, and personal savings.

While this model may still be floating around in personal finance textbooks, it’s as outdated as a 1970s leisure suit. The truth of the matter is two of these three stool “legs” are not as supportive as they once were and most savers today cannot rely on them for their retirement success. To make matters worse, the remaining leg of the stool is failing people left and right because they don’t realize the other two legs don’t exist anymore.

So what happened to the stool to make it a pogo stick – and a very unstable one for many people, particularly Gen-X and Millennials?

1.     The future of Social Security is not in “our” hands

The first leg of the stool that is uncertain is Social Security.

Younger generations may think they can rely on Social Security based on what is taken out of their paychecks each pay period, but the system is looking sparse due to a large number of Baby Boomers filing for Social Security – in fact, 10,000 Boomers per day.

As it stands, Social Security is projected to be insolvent by 2034. Ultimately, the lifespan of a supportive Social Security system remains a political hot potato.

2.     Company Pensions won’t save you

Only a few lucky individuals can look forward to receiving a pension once they retire. In fact, only one in five private sector employees has access to a defined benefit pension plan. Even successful companies such as Boeing, Clorox, and Lockheed Martin have either frozen this benefit or trimmed it completely out of their budgets.

This leg has basically been nonexistent for years as more and more companies swap out a defined benefit plan in favor of a defined contribution plan – putting the onus of retirement income squarely on your shoulders.

3.    Personal savings are woefully inadequate

The last – and only somewhat-reliable – leg of the stool left are personal savings.

Unfortunately, many people don’t plan accordingly for this new reality. Unlike the other two legs on the stool – which, as we already covered, are pretty much non-existent anyway – personal savings is not something that another person or entity is responsible for providing. This is the leg of the stool that you alone must plan for.

You can only control the controllable, and that starts with your personal savings strategies. Don’t wait for the Social Security system to fix itself and employee pensions to make a comeback (Spoiler alert: That’s never happening). Your future is in your hands!

5 Steps to 401k Rollover

Andrew Answers / 24 Sep 2017 / 401k Resources

Congrats! You’ve got a new job, your desk is packed, and you’re ready to fully embrace a new chapter in life. But are you leaving your 401k behind? Here is your step-by-step guide to 401k rollover:

1. Check if your new employer has a retirement plan.

Even if they’ve got one, there are a handful of plans that don’t allow you to rollover funds from an old plan. If your new job offers a 401k that accepts rollovers, you’re safe to move on to the next step!

2. Get documents from your old 401k plan and start contributing to the new!

Contact your previous employer and get the necessary documentation that says what you want to do with the money from your old plan, such as move it to your new plan, keep it in place, or roll it over into an Individual Retirement Account (IRA).

NOTE! If you rollover your funds directly to another plan, you won’t be taxed. If you take a direct distribution, taxes will be assessed and you’ll also be hit with a 10 percent penalty for withdrawing money prior to retirement.

Take your time to consider the implications of the move – oftentimes you’ll experience a lot of jargon such as plan sponsor, trustee, and tax implications, so make sure you understand everything before filling it out.

3. Keep an eye out for the check.

If you requested a rollover or direct distribution of your old 401k), a check will be mailed to you. Who the check is made out to is very important.

If you requested a rollover, the check should be made out to your new plan custodian (for example, Ubiquity uses Charles Schwab, Matrix, and TD Ameritrade). The custodian is the entity that holds your money until you retire. If the check is in your name and you requested a rollover, something went wrong and you need to contact your prior employer’s plan custodian immediately.

If you requested a direct distribution and receive the check in your name but are reconsidering rolling the money to the new plan, there’s good news! As long as you don’t deposit the check, you have time to decide if you’d rather it go toward another 401k instead of taking the direct distribution and incurring the fees and taxes associated with that decision.

NOTE! A retirement plan provider (like Ubiquity) is simply an intermediary during this process. The plan provider does not cut the check. While you can contact your plan provider for help during this process, including to ask about the status of the check, their role is limited to forwarding your inquiry along to the custodian.

4. Alert your new employer about the rollover.

After you have the check – and it’s made out to your new plan’s custodian – talk to your new employer and update the appropriate person about the status of the rollover. Your new plan provider needs to be notified by your employer that the rollover money will be hitting your account. If they don’t know, then the new plan won’t look for money and that deposit will not be approved.

NOTE! That check you received then needs to be mailed to the new custodian. You can either handle that yourself or ask your employer to take care of it.

5. Make changes to plan investments if you choose!

Your new rollover money is a fresh start – choose new funds, contributions, or discuss with a financial advisor your options.

Rolling over your 401k is important because you don’t want to lose momentum saving or jeopardize compound interest. As long as you follow this checklist, you’ll stay on track to achieve a healthy retirement.

Download Your Definitive Guide to Small Business 401k

Congrats! You graduated college and accepted your first full-time position. The transition from college life to “the real world” can be quite challenging and, at times, confusing. However, right before you rush through that HR paperwork, realize that those forms may hold the keys to your first retirement plan.

Namely, your first 401k plan. Even though retirement seems like the last thing a new college grad should be thinking about, your commitment to your future starts now. By enrolling in your new employer’s 401k right off the bat, you are taking a giant step toward complete financial independence.

You might be done with classes, but don’t give up on learning just yet, especially when the subject is your future! Check out this 401k 101:

Look into your enrollment options.

Despite when your first day of work was, your enrollment period might not begin for another few months or even a whole year. Every company operates on a different enrollment schedule.

If you can’t enroll immediately, check with HR on when you will become eligible. Set a reminder on your calendar to revisit the open enrollment discussion when it gets closer to that period.

Why? Letting this slip off your radar will cause you to miss out on a tax break and compound interest (more about this below) — which is like flushing money down the toilet!

Find a happy medium in your involvement.

When it comes to your money, no questions should be off-limits, especially if you are new to your employer’s 401k plan. Take advantage of your plan provider’s representatives who are there to advise you on the nuances of your plan, investment choices and company match options during the open enrollment period.

Don’t discount the power of compound interest.

As you may have learned in your college economics class, those who begin saving earlier will wind up with more cash. This concept is called compound interest. Think about it this way: The earlier you save, the more vacations you will be able to go on in retirement (hello, world traveler)! It might seem like those first few dollars you save are entering a black hole, but your assets, or shall I say “vacation fund,” will build over time.

Don’t give up so easily.

Some companies, unfortunately, don’t have a way for you to save for retirement at work. While that’s a huge bummer, there are still options for you. Don’t shrug your shoulders and give up on your future – there are viable, easy solutions!

Turning to your local bank to begin an Individual Retirement Account (IRA) is likely your best bet. In an IRA, you still have the ability to invest pre-tax dollars. Not only do you give yourself the opportunity to save, but your bank may also be more likely to loan you money in the future because you are establishing positive financial habits from the get-go.

Hopefully you have a better idea of how to go about enrolling in and taking advantage of your first retirement plan. You not only passed college, but you just aced 401k 101.

Handling Heartfelt Hardships

Andrew Answers / 17 Jul 2017 / Personal Finance

When I think of summertime, hardships are not what immediately comes to mind. For many, it’s made for vacations, nice weather, and a more laid back time to celebrate. For others, it means hurricane season. Having grown up on the outer banks of North Carolina, I’ve lived through my share of storms. My grandmother had a magnetic map tracking the various hurricanes and tropical storm paths to plan out how affected we may be.

Sometimes, I look fondly back at the times where my family and I were holed up with candles and games. Unfortunately, this same experience can leave folks with property damage or homelessness, which we’ve seen so much of in the last year. 

Your 401k can come to your rescue if your plan has a hardship provision.

What is a hardship provision and how do you qualify? Here’s how:

  1. Medical expenses
  2. Purchase of a primary residence
  3. Ongoing education
  4. Prevention of eviction from primary residence
  5. Burial or funeral expenses
  6. Expenses for the repair of the damage to primary residence

While this access is great, it’s got its own rules around it. These distributions are taxable in the year money is received along with a 10% penalty for taking out prior to retirement. It’s also important to note that not all 401k plans contain this provision. Loans are much more preferred and come without 10% penalty while allowing you to pay yourself back.

Talk to your controller/HR person/plan sponsor for more information on what kind of access you have. While it’s great to maintain your savings, it’s nice to know it’s got your back when you need it!

What can you do if you need cash, don’t have adequate savings, and taking out a loan from a bank or friend isn’t an option? What if you are trying to buy your first home and are coming up short for the down payment? Many people turn to a 401k loan, that allows you to borrow the money you’ve already invested.

While it is your money, it is important to note it takes people about three weeks to receive their loan. Plus, before you can get a loan it has to be approved by both your 401k provider and your employer. So if you need money right away, this might not the best option for you.

Additionally, since this is a workplace benefit offered through your current employer, it’s not wise to take out a loan if you plan on leaving your job in the next few years. Here are some things to think about:

1. Personal vs. residential loans

A residential loan can be used for purchasing your first home or primary residence. Your employer and even the IRS may be more lenient with this type of loan and give you up to 15 years to pay it back.

A personal loan can be used for almost anything, including student debt, a new car, healthcare expenses, etc. You may only have five years to pay off a personal loan.

No matter what type of loan you take, the minimum you can withdraw from your 401k is $1,000, and the maximum is half of your current balance or $50,000.

2. Interest

You may be thinking, why do I have to pay interest on a loan I took from myself? The IRS wants you to pay interest to mimic the gains your 401k could have made if the money had stayed invested. Your interest rate is calculated by taking the prime rate – the interest rate that banks charge to their most credit-worthy customers – and adding 1 to 2 percent, depending on your provider.

3. Fees

In addition to paying your interest, you will pay some hefty fees. If you are taking a five-year loan, you could pay upward of $500 in fees on top of what you initially borrowed. Why?

First, there is likely an administration fee (sometimes called an “origination fee”) that goes toward drawing up your paperwork, writing the check and transferring your money. After that, there is an annual administration fee to cover the maintenance of your loan.

4. Repayment schedule

Loans are repaid the same way you contribute to your 401k – automatically and through your paycheck. Since this is a workplace benefit and not built to be easily accessible, most providers will only let you have one active loan at a time. This means you need to completely pay off one loan before taking out another from your 401k.

5. Defaulting

Defaulting is when you can’t make your loan payment when it’s due. Like any default, this can have serious financial implications. How can you default if your repayments come directly from your paycheck? One way is if your employment is terminated and you are no longer receiving a paycheck. If that happens, you are required to pay back the full amount of your loan within 60 days, and on top of that, your balance will be taxed and you could even face an early withdrawal penalty if you are under the age of 59 ½.

6. Loan modeling tools

This resource from Bankrate allows you to see how a 401k loan will impact your paycheck and retirement plan. Most importantly, make sure you are prepared for a lower monthly income so you can stay on track to meet any long-term financial goals.

Download Ubiquity’s Definitive Guide to Small Business 401k

Millennials and boomers are constantly being compared to in the media as generations with conflicting goals, challenges, and lifestyles – including their retirement savings habits. We were intrigued by the results of this T. Rowe Price study, which found the two generations’ are saving about the same while their budgeting habits differ. The study compared their retirement plan contributions, budgeting practices, and auto-enrollment preferences.

After checking out the study, we compiled the most compelling statistics for you into an infographic.

ubiquity-millennial-boomer-infographic

Hey, graduates, you may be thinking to yourself how much of what you just endured will actually be used IRL (in real life). If you’ve just graduated from High School, you’re thinking Algebra will NEVER come in handy. In college, it’s likely you barely remember what class you got up for, but probably remember the first beer you legally purchased. Those of you finishing your masters or doctorate, you’re free to brag that you remember every detail of your education (yeah, right).

We all took economics in our High School years. We may have even taken something like that in college somewhere along the way. It’s during this course when you likely spent at least one period talking about 401ks. It’s so buried in all the other things you need to remember that it’s difficult to actually recall when you need to. This is where real life education and what’s actually taught in school start to diverge.

You actually know more than you give yourself credit for. For all our new hires, I teach a class on Intro to 401ks. I begin by finding out how much my students actually know. Turns out, all the basics are normally covered.

• It’s a retirement account provided at work.
• Money is taken from your paycheck pre-tax.
• Sometimes there’s a match.
• Your money goes into mutual funds you can manage.

There you have it. It’s the simple basics that are easy to understand and true in most circumstances. Are there differences? Yes. Are these overgeneralizations? Probably. However, there’s one unmistakable truth: Saving at work provides more benefits than your savings account and could result in free money.

As you’re out there entering the workforce, get to know your benefits. Much of our economy comes from small businesses. If your new job doesn’t have a 401k, ask them to start one up. This is the benefit that keeps on giving directly to you.

Roth and Your 401k

Andrew Answers / 11 Dec 2016 / 401k Resources

Pre-tax, and post-tax, and provisions! Confused by the retirement industry’s financial jargon? You are not alone. This episode of Andrew Answers defines what Roth means and how it affects your 401k plan.

Read the Definitive Guide to Small Business 401k
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San Francisco, CA 94104
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© 2019 Ubiquity Retirement + Savings
Privacy Policy
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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