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!

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 401(k) 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 401(k) 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 401(k) 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 401(k) 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 401(k) 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 401(k) 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 401(k) – 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 401(k).

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 401(k) 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 401(k)

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 401(k)s. 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 401(k)s. 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 401(k), ask them to start one up. This is the benefit that keeps on giving directly to you.

Mom. Dad. Pack Your Bags.

Andrew Answers / 21 Jan 2017 / Personal Finance

I was talking with my Mom the other day. The conversation went something like this:

“I talked with my financial planner, and I am going to be able to retire by 66,” she said. “And when I asked him, how long I could live, taking the amount I need to survive, he said ‘forever.’

That may seem pretty wonderful, but like a whole lot of people, she is one dramatic health event away from ZERO retirement dollars. ONE! Well, she’d have social security, but that wouldn’t be enough to live on.

My sweet 79-year old Dad’s an artist and is collecting Social Security now. His income is super fixed—obviously, people don’t typically become artists for the money, even though he has work in museums. Death makes artists rich, not life. Typically.

The good news is that their house is paid off. The bad news is that they have a three-story house on a whole lot of acres that require a whole lot of maintenance and it’s out in the middle of Nowheresville. All I can think about is one of them falling down the steps with no one to hear their screams except wildlife that has no opposable thumbs or 911 dialing capabilities.

America? You could learn a thing or two.

I think a lot of people are in a similar boat. You know, the boat that is one petite iceberg away from busting in half and sinking to the bottom of the ocean? Americans could learn a lot from other cultures. For instance, how they live in multigenerational households and support one another.

Welcome to my Retirement Community! Now accepting Mom(s) and Dad(s).

So, when it comes down to it, I am not putting my parents in a retirement home. I am making them come live with me. Why? They did it for me! Plus, elderly people live longer when they are surrounded by things or people or pets that engage them and LOVE them.

I can be that loving thing/people/pet! And of course they are going to tick me off (and vice-versa), and likely on a frequent basis, but that’s what family is about, right? And the America we live in now is not one of huge wealth, pension plans, and lavish, resort-style assisted-living (unless you have one gazillion dollars.) And if you do, I doubt you are reading this blog.

How do you feel about the multigenerational household? What are you going to do differently, given the current (and sad) economic outlook?

It’s time to wake up! There’s a looming retirement crisis in America, and it’s going to take more than our government to fix these broken eggs. Let’s put it this way. We’re going to get scary, then we’re going to discuss what the heck we’re going to do about the mess.

Did you know?

  • 46% of Americans have less than $10,000 saved for their retirement
  • 29% have less than $1,000 saved
  • $6.6 TRILLION SHORT, American workers are falling drastically short of what they need to retire
  • 20% of all bankruptcies happen to those age 55 and older
  • 74% of us believe that we are going to need to work until we’re dead

Now if those statistics aren’t startling, you obviously don’t fall into any of those categories. However, if that startled the stuffing out of you, it’s time to really start considering how we’re going to get out of this mess.

Broken Eggs: The Looming Retirement Crisis in America is a hard-hitting and feature-length documentary film covering everything from the Pension crisis to Social Security insolvency, and more. It’s a multi-generation film, covering the stories of real people who are struggling with saving, are retired and aren’t making it, along with the policy makers and shakers in Washington D.C.

The thing is, we need to promote this conversation and get people really thinking about the issues. We all owe it to ourselves, our future selves, and everyone we share this country with to get involved.

That means you, your friends and family, me, everyone.

 

Welcome to the farm otherwise known as the stock market.

So what the heck does Bull vs. Bear market mean? It’s actually quite simple:

  • Bull: Everything is fabulous, the economy is booming, stocks are rising, and unemployment? What unemployment?
  • Bear: Market is hibernating! It’s bad, the recession is looming.

So, you think that playing the market all the time with your retirement is a good plan?

Actually, over time, it all equals out. There are stocks in the bear market that do well, and conversely, there are those in the bull market that tank. Depending on how you invest—conservative, moderate, or aggressive—and where you are in your life—whether you are just starting to invest, are are a late bloomer like me, or are sitting at the gates of freedom—these things could alter or modify your course of action.

Talking with a financial advisor is your best bet. They’ll help determine where you are and what your financial goals should be. The fact is, the majority of people under-save! Things to consider:

  • When do you want to retire? Have you thought about the fact that people are living longer? If you retire at 65 and live to be 100 (I plan to live to 102), that’s a significant nest egg you’re going to need.
  • What does retirement look like for you? Are you going to live at the same level as you are today? Are you downsizing? Do you have adequate health insurances in order to not exhaust your savings in the event of an unforeseen crisis?
  • How much time do you have and how much do you have saved? I’ve just turned 43 and have enough to get me through about… a year of life? I have been paying into Social Security if I am fortunate to have it exist when I retire, but that is essentially a future flying autonomous car payment and solar charging station refill fee. I need to be incredibly aggressive at saving and my financial adviser had no problem saying so.

You don’t have to be a financial genius in order to start. There are people who do this for a living—your goals and your success are theirs as well.

There is only one mistake you can make right now. ONE! That is NOT getting started, NOT saving enough, and robbing yourself of comfort and happiness when you stop punching a clock. Ok, maybe that’s three, but they are all connected!l

PS. Want to know more about the looming retirement crisis that is affecting every single one of us? Get involved and join the conversation with this must-see documentary, Broken Eggs: The Looming Retirement Crisis in America. Bonus! It’s free. You just need to bring the popcorn.

Roth and Your 401(k)

Andrew Answers / 11 Dec 2016 / 401(k) 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 a Roth 401(k) means and how it affects your 401(k) plan.

In this week’s Andrew Answers, we hear from Bob, an entrepreneur looking to do right by his employees. Bob wants to open a small business 401(k). Bob needs help getting started.

Get a short rundown on what to do before the year-end as you’re opening that shiny new retirement plan. I touch on timing, plan features, and what to look out for.

If you are a small business owner who wants to start a 401(k) plan by 2014, or an employee of a small business in need of the option to save for retirement at work, this episode is for you!

Oh, and I’ve got a mustache. Here’s why.

You asked I answered!

Rolling over all your old 401(k) and retirement accounts into one sounds like a huge hassle, but one (like saving) is worth the trouble. While every provider has a slightly different process, the same things basically happen. Take a few minutes today to find out what those are and get moving on simplifying your life. After all, managing one account is far better than managing many!

Each year, EBA names an adviser of the year that exemplifies nimble management and engagement in the ever-shifting waters of employee benefits. Dr. Gregory Kasten, the founder, and CEO of Unified Trust Company, took home the honor of Retirement Adviser of the Year. Dr. Kasten took some time after the recent award to speak with us about retirement, the move from medical to financial, and provide some advice to small businesses and their employees.

 

Andrew: Let’s just jump back into things and go a bit back to basics. What would you say is the largest challenge as a retirement plan advisor?

Dr. Kasten: The biggest challenge, I think for the modern retirement plan advisor, is to get clients to focus on the right metrics. The major metric is whether or not participants will be able to retire with an adequate benefit. Most plan sponsors focus on simplistic metrics such as participation rates or what type of mutual funds are in the plan. When plan sponsors start thinking of 401(k) plans as actual retirement plans, they will focus more and more on whether or not the participants will retire with an adequate benefit. That’s the only metric that counts.

Andrew: What advice would you give small companies looking for a retirement account? What would you say to their employees?

Dr. Kasten: I would encourage the company looking to have a successful 401(k) plan to think of it as a retirement plan. That means they need to work with an advisor, third-party administrator and a discretionary trustee that is focused on participant outcomes and can reliably demonstrate how they can have an impact on that metric. Plan sponsors and advisors should be satisfied with nothing less [than improvement in outcomes].

Employees should understand that this retirement income decision they face is the largest financial transaction they will likely deal with in their life. For most employees, the purchase of retirement income is 2-3 times larger than the value of their home. But yet they generally spend less than 10-20 minutes a year thinking about their 401(k) plan. So, it’s no wonder that they fail. They would do well to partner with an entity that is focused on their outcome, receive communications that are clear-cut, can be trusted, have faith in the process, and let the expert engineer a successful outcome for them.

Andrew: Anyone not willing to think about and take that advice to heart should rethink their retirement goals! Thank you so much, Dr. Kasten, on your thoughts and advice. It’s been a real pleasure.

For folks wanting more information about Dr. Kasten, please visit Unified Trust. For folks still interested in learning the basics, be sure to tune in to our weekly Andrew Answers video blog to take your retirement to the next level!

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Privacy Policy
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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