Category: Ubiquity Insights

How the Downturn Can Turn You into a Bargain Hunter

Siân Killingsworth / 28 Sep 2022 / Ubiquity Insights

Guest post by Andrew Meadows, SVP of HR, Brand + Culture

The stock market has been something of a wild ride for the past few years, and many people are justifiably concerned about how the fluctuations might affect their retirement investments. Having been in the biz 18+ years, I’ve seen it all: the dot com bust of the early aughts, the ’08 recession – and our CEO lived through the 70s-80s stagflation/inflation situation. And we’re here to tell you that it’s going to be okay.

Remain Calm

Don’t panic. Seriously, panic can be one of your worst enemies when the market is headed south. The impulse to jump in and “fix” a lagging portfolio can feel irresistible. But resist! Making rash decisions often leads to big-time regrets.

The Wall Street Journal had a great article recently that reminded me—even in past periods of stagflation or high inflation, the market over those bearish periods still returned about 5-ish%. It’s not amazing, but it is a respectable return.

Although we’re going through some ups and downs, try to remember that you are in it for the long haul. Not just a few weeks or months, but in many cases, 30 years or more. This downturn will eventually come sunny side up again.

Stick to the plan!

First and foremost, don’t start changing things like your allocation or portfolio balance. Retirement plans are intentionally designed to stand up to fluctuations in the market.

History shows that those who are able to stay the course do much better in the long run. In the chart below, three different types of investor are described: the stalwart, who sticks to their plan; the waffler, who yanks money out and then puts it back in again and again; and the reactor, who just pulls their money out of their account.

You can see that the person who does the best over the lifetime of the investment is the stalwart. Obviously, pulling your money out will not earn you any interest, so the reactor does the worst. And the waffler is trying to time the market, but this tactic is well-known to be nearly impossible to get right.

Don’t Pause Your Contributions

I see a lot of people giving in to the temptation to press the hold button on their retirement contributions. They are betting they’ll avoid some pain if the market continues to head south. But again, this is an issue of timing. It’s much more likely that you’ll miss out on the recovery.

If you were comfortable with how your money was invested before this happened, just ignore the noise on the TV or newspaper and keep contributing.

There are other compelling reasons to keep contributing:

• If you have plenty of time until retirement. People in their 20s, 30s, 40s, and 50s have plenty of time to see a rebound and recoup any present losses.
• You like the idea of paying less in taxes this year. Remember, retirement savings lowers your tax liability. For most retirement plans, the money put in reduces the amount of income you’re taxed on, allowing your money to grow tax-free as well.

Go Shopping for Bargains!

My last piece of advice is to go shopping! I don’t like paying full price on anything else I have to buy; do you? Look at it this way: the things you need for retirement are cheaper now than they have been for a while—rejoice!

In fact, now might even be the perfect time to load up on quality investments at rock-bottom prices. Stocks are on sale. Shares are cheap. You may have had your eye on a few different investments, but the purchase price was too high. Now, many prices have come down—but for how long? It’s time to pounce. Hello discount shopping!

It’s like dollar cost averaging. That’s where you buy a security a little bit over a period of time instead of all at once. Since you can’t know in advance if the price of that stock today will be higher or lower in a month, you just buy small amounts. Over the course of a year, the average cost per share will actually tend to be lower than if you go all in from the beginning.

Just remember: no matter how nerve-wracking this feels, it is absolutely possible to get through this and still meet your retirement goals. Try to think about this moment as a bargain-hunter’s opportunity.

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice. Ubiquity Retirement + Savings is your designated service provider for administration and record keeping services.

The Looming Retirement Crisis–Explained

Siân Killingsworth / 25 Aug 2021 / Ubiquity Insights

Although cracks have been forming in the foundation of American retirement security for decades, the COVID-19 pandemic has only made them worse.

Even before the worldwide health crisis, many workers were recovering financially from previous economic downturns–along with facing the crumbling three-legged stool of retirement.

Now, according to a June 2021 survey, 15% of Americans say they’re postponing retirement because of the pandemic.

Let’s unpack how the “three-legged stool” of retirement—Social Security, employer pensions, and personal savings—has been slowly coming apart for decades–and what we can do to stop it.

Deconstructing the three-legged stool of retirement savings

The three-legged stool is a metaphor for how many retirement experts traditionally looked at planning for retirement. It was expected that the trio of Social Security, pensions, and savings together would provide a financial foundation for Americans’ golden years. None of these three were supposed to support retirees on its own–you need each one to build a strong retirement foundation.

As times have changed, so must retirement planning strategies. For many workers today, a nest egg built on the three-legged stool is no longer possible.

 Social Security

You may have heard that Social Security, the program created by FDR to prevent aging Americans from falling into poverty, is projected to be depleted by 2033.

How did this happen? Quite simply, there are fewer workers funding the program compared to the number of retirees benefiting from it. In 1950, there were 16.5 workers for every Social Security beneficiary. Today, there are less than 3 workers paying in for each recipient.

This ration shift is due to several factors including:

• Increasing lifespans in the population
• Decreases in fertility rates.
• No change in average retirement age

This doesn’t mean Social Security will disappear completely in 20 years. As of 2019, projections indicate that taxes still being paid by younger workers will be enough to fund about 79% of scheduled benefits.

 Pensions

If you’re a Gen X or Millenial worker, chances are you’ve never been offered a retirement benefit that doesn’t involve you contributing a portion of your paycheck.

Defined benefit plans–such as company-sponsored pensions–once guaranteed workers a steady stream of income after their working years. Throughout the 1980s and 1990s, pensions began rapidly disappearing and being replaced by workplace savings vehicles like 401(k) plans. Today less than 1 in 5 workers have access to a pension, shifting the primary responsibility for retirement security toward the individual.

Personal Savings

As the Social Security well dries up and pensions disappear, the third leg of the retirement stool–personal savings––is more important than ever before. According to 2020 data from the Bureau of Labor and Statistics, while 71% of the American workforce has access to a 401(k), only about 55% participate. When you look at small business retirement statistics, the number of access and participation shrinks even smaller.

To help ensure you have a large enough nest egg, it’s wise to create a plan early in life—or right now if you haven’t already done so. It’s also extremely important to take advantage of workplace savings plans like 401(k) (if you have one available) along with personal tax-advantaged retirement accounts such as an IRA.

Using tools like a retirement calculator can help you figure out if you’re saving enough for the future–or if you’ll need to increase your contributions to achieve financial security in your golden years.

What is being done to address the looming retirement crisis?

We know that no single program can address the challenges facing our current retirement system—it will take several programs and solutions to make progress.

SECURE Act

In 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed as the first major step toward enhancing American’s retirement security. Key changes from the bipartisan legislation included:

• Increased tax credits – when small business owners set up and run retirement plans.
• New incentives – for new plans with auto-enrollment.
• Greater scope – long-term, part-time workers can now participate in 401(k) plans.
• Expanded options – multiple, unrelated businesses can now partner under a SINGLE PLAN.

This congressional offering is an encouraging sign that politicians are realizing the gravity of the looming retirement crisis and are hopeful it will have a positive impact on the overall financial security of working Americans.

 State Mandates

While the Federal government has enacted some measures toward addressing the retirement crisis, many states have taken the lack of workplace access to savings into their own hands. As of August 2021, over 30 states have introduced some form of retirement legislation–and twelve states are implementing them.

[image credit: AARP]

These plans tend to target small to midsize businesses in the private sector, along with low-to-moderate income households. While the rules of these programs vary greatly from state to state, all attempt to bridge the retirement gap for American workers who otherwise would not have access to an employer-sponsored plan.

Want to learn more?

The 2013 documentary Broken Eggs: The Looming Retirement Crisis In America, looks at the financial insecurity today’s retirees and pre-retirees are finding. The film focuses on why Americans are failing to adequately save for the future and the deteriorating “3-legged stool” model of retirement.

Watch below as the film profiles a diverse group of everyday Americans confronting significant retirement planning challenges alongside interviews with economists, policymakers, and financial experts.

CARES Act: What Small Business Owners Need to Know

Siân Killingsworth / 6 Apr 2020 / Retirement News, Ubiquity Insights

Here at Ubiquity Retirement + Savings, our heart goes out to our fellow members of the small business community as we all deal with the impacts of the ongoing global health challenge and market volatility. As we navigate this challenging time together, we’re committed to providing you with information, resources, and support along the way.

On March 27th 2020, the U.S. government passed the “Coronavirus Aid, Relief, and Economic Security Act” (the CARES Act) to help businesses, families, and individuals make ends meet during the COVID-19 crisis.

The $2 trillion package is the largest financial assistance bill ever and sets aside $350 billion specifically to help small businesses affected by the pandemic.

We broke down the provisions that most impact small business owners, like you.

Paycheck Protection Program

One of the most emotionally and financially difficult challenges facing small business owners right now is retaining their employees. The Paycheck Protection Program (PPP) created by CARES was created to incentivize small businesses to not lay off workers and to rehire laid-off workers that lost jobs due to COVID-19 disruptions.

How does the Paycheck Protection Program (PPP) work?

Currently, the Small Business Association (SBA) guarantees small business loans that are given out by a network of more than 800 lenders across the U.S. The Paycheck Protection Program creates a special kind of emergency loan that can be forgiven when used to maintain payroll through June. This program also expands the lending network beyond just the SBA so that more banks, credit unions, and lenders can issue those loans.

If your business continues paying employees at normal levels during the eight weeks following the origination of the loan, then the amount they spent on payroll costs (excluding costs for any compensation above $100,000 annually), mortgage interest, rent payments and utility payments can be combined and that portion of the loan will be forgiven.

Ultimately, the goal of the PPP is to help more workers remain employed, affected small businesses stay afloat, and our economy snap-back quickly after the crisis.

This program would be retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls. Loans are available through June 30, 2020.

What types of businesses are eligible?

The Paycheck Protection Program offers loans for:

• Small businesses with fewer than 500 employees, including self-employed, sole proprietors, and freelance and gig economy workers
• 501(c)(3) non-profits with fewer than 500 workers
• Veteran organizations
• Small businesses (and other eligible entities) will be able to apply if they were harmed by COVID-19 between February 15, 2020 and June 30, 2020.

How much money can I borrow?

PPP loans can be up to 2.5 times monthly payroll expense for full-time employees with a salary cap of $10 million. Salaries capped at $100,000 per employee in the calculation.

Want to determine for your organization’s loan cap? Calculate your average total monthly payroll expense for full time employees over the last 12 months. Exclude individual salary amounts above the $100,000 cap, payroll and income taxes, and salaries of employees outside the U.S., and contractors. Your business or nonprofit is eligible for 2.5 times this amount, up to $10 million.

Will they check my credit score?

All loan terms will be the same for everyone. No personal guarantee or collateral is required for PPP loans. The lenders are expected to defer fees, principal and interest for no less than six months, and no more than one year.

What can I use a PPP loan for?

You should use the proceeds from these loans on your:

• Payroll costs, including benefits;
• Interest on mortgage obligations, incurred before February 15, 2020;
• Rent, under lease agreements in force before February 15, 2020; and
• Utilities, for which service began before February 15, 2020.

How can I apply?

• Contact your bank today to find out if they are an approved SBA lender. If they’re not, the SBA Lender Match tool will help you find one in your area.
• Applications for borrowers can be found here
• Starting April 3, 2020 small businesses can begin applying for PPP loans through existing SBA lenders.
• Starting April 10, 2020 independent contractors and self-employed individuals can begin applying for PPP loans through existing SBA lenders.

Economic Injury Disaster Loans and Emergency Economic Injury Grants

The Small Business Association’s Economic Injury Disaster Loan program provides small businesses with financial aid after major, detrimental events. The program provides low-interest loans of up to $2 million dollars to help businesses overcome temporary loss of revenue and get back on their feet.

CARES expanded this existing program to more types of small businesses, made it easier to apply and ensured that EIDLs smaller than $200,000 can be approved without a personal guarantee.

The expanded EIDL loan program also offers up to a $10,000 emergency cash advance that may not need to be paid back. Funds will be made available within three days of a successful application, and this loan advance will not have to be repaid.

Who is eligible?

• Small businesses with fewer than 500 employees, including self-employed, sole proprietors, and freelance and gig economy workers
• Non-profits, including 501(c)(6)s with fewer than 500 workers
• Tribal businesses, cooperatives, and Employee Stock Ownership Plans (ESOPs) with fewer than 500 employees.

How can I get an SBA disaster loan for COVID-19 related aid?

You can apply online directly with the SBA by clicking here.

Be prepared with some financial information and supporting documentation related to your business including: tax returns, last year’s financial statements, a year-to-date financial statement, property leases, and a working knowledge of your business and personal credit score. You can find the full list of supporting documentation at the bottom of your application form.

Can my business get an EIDL and a Paycheck Protection Program loan?

Yes, small businesses can get both an EIDL and a Paycheck Protection Program loan as long as they don’t pay for the same expenses. If you have questions about your specific situation or eligibility, be sure to check with your financial advisor or lender to address any questions you may have.

Small Business Tax Provisions

The CARES Act makes select changes to taxes and tax policies in order to ease the burden on businesses impacted by COVID-19.

Key changes tax changes effecting small business owners include:

Delayed Tax Date

Taxpayers now have an extra three months to both file and pay their taxes! The typical April 15th tax deadline, for both businesses and individuals, has been extended 90 days to July 15, 2020.

Employee Retention Credit

Eligible businesses can receive a refundable 50% tax credit on wages up to $10,000 per employee.

The credit can be obtained on wages paid from March 13, 2020 through December 31, 2020.
Businesses are eligible for an employee retention tax credit if:

1.  Your business operations were fully or partially suspended due to a COVID-19 shut-down order or
2. Your gross receipts declined by more than 50% compared to the same quarter in the prior year

The credit can be obtained on wages paid or incurred from March 13, 2020 through December 31, 2020.

Delayed Payroll Tax Payments

Businesses and self-employed individuals can delay their payroll tax payments. These payments, the employer share of Social Security tax owed for 2020, can instead be deferred and paid over the next two years. Fifty percent must be paid by the end of 2021 and 50% must be paid by the end of 2022.

(Note: The ability to defer these taxes does not apply to a business that has a Paycheck Protection loan forgiven.)

Where can I learn more?

• The Department of Treasury’s PPP Fact Sheet
• The Small Business Administration’s COVID-19 page
• IRS guidance to COVID-19 tax changes can be found here

As we continue to navigate these challenging times, Ubiquity is committed to helping you stay invested in a brighter future. We believe in the power of our small business community and we’re confident in our ability to be here for our clients, partners, and savers, every step of the way.

Relief Calculator

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please note that the IRS determines the official amount, for more information please visit the IRS FAQs page.

The Small Business Owner’s Guide to Financial Wellness

Siân Killingsworth / 3 Mar 2020 / 401(k) Resources, Business, Ubiquity Insights

Small business owners face unique financial challenges.

In addition to managing your own finances, you must also focus on your employee’s financial wellbeing to ensure team success. In fact, according to a 2019 John Hancock study, 55% of workers say they worry about their personal finances more than once a week at work.

A trending benefit in today’s workforce is to offer a financial wellness program as an employee benefit. These programs focus on financial education and help to create a culture of financial literacy and awareness. In turn, this builds a strong foundation for employee happiness and retention.

Focusing on financial wellness at your organization can benefit both employees and business owners in very different ways. Use these tips to help guide the areas you want to improve on and strategies that may make your business financially healthier.

Monitor Your Finances

Did you know nearly 1 in 4 of small businesses fail because of a lack of strength from the leadership team?

There are so many moving parts when operating a business that you can’t expect to do them all yourself. It’s easy to let your own personal financial health take a back seat while you’re focused on building your business.

Luckily, there are many options that make it convenient to manage personal finances. From personal banking to financial planning, apps are abundant.

Small business banking options reduce the pains and cost of financial management. You can better keep track of your spending and transactions. You can also keep your personal and business finances separate from each other.

As a business owner, you should know where your money is coming from and going. This clarity around your financial basics can strengthen your planning and strategy.

Don’t Neglect Your Salary

Running a small business is no walk in the park. It takes passion and dedication to get a business off the ground.

Unfortunately, small business owners tend to invest all their time and energy into their business. This can result in other areas of their personal life or business getting neglected.

Starting out, small business owners are prepared to work for free to support their growth. What most don’t realize is that they should determine their salary ahead of time. Then, once their business is profitable, they can start paying themselves the salary they deserve.

To determine your salary, take the following into consideration:

• Your mortgage payments
• Outstanding debt like student loans, car payments, credit cards, etc.
• Groceries
• And other fixed and variable expenses.

While no entrepreneur wants to dwell on it, it’s important to remember that roughly 20% of small businesses fail within their first year. 33% will fail within two years.

By including your salary in your business finances early on, you can protect yourself. Even if your business takes a downturn, your personal finances won’t be affected.

Conduct an ROI Analysis

Small business owners tend to struggle when calculating a return on investment (ROI). ROI is a key performance indicator. It helps measure success over time and to keep their finances in check. Using the right cash flow method is important when determining your profitability with expenditures.

Knowing your ROI, you can make smarter choices for your business. Investing too heavily or lightly can greatly affect your business trajectory.

Investing in technology like financial tools is a business expense. And it often gets pushed down the to-do list from small business owners. However, these tools can provide value and maximize your finances in many ways.

Invest Wisely

Speaking of investing—The best thing that you can do for your business is to invest in it.

The term “investment” often sparks fear in any startup, freelancer, or entrepreneur’s mind. This is because the first thought you’ll likely have is, “What if I fail or lose all my money?” This is especially true when your finances don’t match your business plan and goals. It’s important you do your research and find areas where investing makes sense.

Investing doesn’t only mean buying tools and equipment to help your business grow. It can also mean investing in financial tools and wellness products.

Financial wellness tools can help you make better sense of your own finances and your small business 401(k). They can also guide your employees to smarter financial decisions.

Financial Wellness for Employees

Your employees also need financial guidance. A majority of Americans are stressed about their personal finances. Financial wellness programs give employees financial guidance when they need it. This can help them make smarter, more confident financial decisions.

These platforms include education, strategies, and personalized guidance on a variety of financial topics. As you build your organization, keeping financial wellness top of mind is smart. A strong financial wellness can reduce stress and create a clearer path to success.

Want to learn more? Use Ubiquity Resources for yourself and your employees.

What You Need to Know About the SECURE Act

Siân Killingsworth / 17 Jan 2020 / Retirement News, Ubiquity Insights

The SECURE Act, which stands for the Setting Every Community Up for Retirement Enhancement Act, is the biggest piece of retirement legislation in over a decade. Provisions from the bill, which originally passed through the House in May 2019, were wrapped into a larger government spending package and signed into law on December 20, 2019.

This piece of important retirement legislation includes policy changes to retirement plans, annuities, pension plans, and 529 college savings accounts.

Key changes from The SECURE Act include:

• Increasing tax credits for small business owners to set up and run retirement plans
• Introducing incentives for new plans with auto-enrollment
• Raising the required minimum distribution (RMD) age for retirement accounts to 72 (up from 70½)
• Allowing long-term, part-time workers to participate in 401(k) plans
• Expanding options for multiple, unrelated businesses to partner under a single retirement plan (MEPs)
• Permitting parents to withdraw up to $5,000 from retirement accounts penalty-free within a year of birth or adoption
• Allowing withdrawals from 529 plans to repay student loans

Most SECURE Act provisions went into effect on January 1, 2020. Let’s dive deeper into some of the biggest changes ahead for retirement savers and small business owners:

Small business owners can receive a tax credit for starting a retirement plan, up to $16,500

• Small business owners who haven’t established a retirement plan are in luck! The new law provides a start-up retirement plan credit for smaller employers of $250 per non-highly compensated employee eligible to participate in a workplace retirement plan at work. The minimum credit is $500 and the maximum credit is $5,000.
• This credit would apply to small businesses with up to 100 employees over a 3-year period beginning after December 31, 2019 and applies to 401(k), SIMPLE, SEP, and profit-sharing plans.
• If your retirement plan includes automatic enrollment to encourage participation, you may also receive an additional credit of up to $500 for the first three years of the plan. This new credit is also available to employers that convert an existing 401(k) plan to an automatic enrollment design.

Required minimum distributions (RMDs) now begin at age 72

• Americans are living and working longer than ever before, and this change reflects that shift. Savers will no longer be required to withdraw assets from IRAs and 401(k)s at age 70½.
• RMDs now begin at age 72 for individuals who turn 70½ in 2020.
• If you turned age 70½ in 2019 and have already begun taking your RMDs, we recommend speaking to your financial advisor regarding any 2020 distributions.

You can make IRA contributions beyond age 70½

• As with the new RMD rule, the SECURE Act addresses the increasing number of Americans working past traditional retirement age.
• As of the 2020 tax year, you can continue to contribute to your traditional IRA past age 70½, as long as you are still working.
• Savers can make their 2020 tax year contributions until April 15, 2021.

Small business owners will find it easier to pool together to offer retirement plans

• According to a 2018 study by the U.S. Bureau of Labor Statistics, nearly 40 million private-sector employees do not have access to a retirement plan through their workplace.
• In an attempt to increase retirement access, the new law allows unrelated businesses to join together under an open multiple employer program called a MEP.
• The new law, which goes into effect in 2021, eliminates the IRS’s “one bad apple” rule. This removes the risk of being penalized if one employer in your group fails to satisfy the tax qualification rules for the MEP.

Inherited IRA distributions must be taken within 10 years

• Previously, if you inherited an IRA or 401(k), you could “stretch” your distributions and tax payments out over your life expectancy. This allowed beneficiaries to use stretch IRAs as reliable income sources as they benefited from the tax-advantaged gains.
• Rules have changed for IRAs inherited from original owners who have passed away on or after January 1, 2020. Beneficiaries, generally, must withdraw all plan assets from an inherited retirement plan within 10 years following the death of the account holder.
• The 10-year rule does not apply to: a surviving spouse or a minor child; a disabled or chronically ill beneficiary; and beneficiaries who are less than 10 years younger than the original IRA owner or 401(k) participant.
• If you have an IRA that you planned to leave to beneficiaries, we recommend working with your estate planning attorney or financial advisor to address how might this change your strategy.
• If you’re a beneficiary who has inherited an IRA or 401(k) and the original owner passed away prior to January 1, 2020, you don’t need to make any changes.

You can withdraw money from your retirement account penalty-free upon the birth or adoption of a child

• Bringing a new member into the family can be expensive. The SECURE Act allows savers to take a “birth or adoption distribution” of up to $5,000 from a qualified retirement plan, such as a 401(k) or an IRA, without incurring an early withdrawal penalty.
• This distribution must be taken within one year of the date of birth or adoption finalization.
• If the parents have separate retirement accounts, they can each withdraw $5,000 to help defray the cost of a new child.

529 funds can now be used to pay down student loan debt

• Sometimes families have funds remaining in their college savings plans after their student graduates. Under the new law, you can now use a 529 savings account to pay up to $10,000 in student debt over the course of the student’s lifetime.
• To expand the benefit of tax-advantaged college plans to those who take vocational training, a 529 savings plan may now also be used to pay for qualified apprenticeship programs.

Increased penalty for failure to file federal returns

• Failed to file your tax returns? You may now face a steeper punishment. The Secure Act increases the penalty for failure to file affected federal tax returns to the lesser of: (1) $400 or (2) 100% of the amount of tax due.

• There are also increased penalties for failure to file retirement plan returns, including a higher IRS Form 5500 non-filer penalty.

How else could The SECURE Act impact your retirement?

• Raising the cap on auto enrollment contributions from 10% to 15% in employer-sponsored retirement plans

If you were automatically enrolled in your retirement plan at work, your plan also may have an automatic escalation feature that increases your retirement contributions each year. Under the new law, the amount withheld for your retirement account could go up every year until you are contributing 15% of your income to your retirement savings plan.

The bottom line on the SECURE Act

Changes in life, the tax code, and your own financial circumstances are common–and are a good reminder to update your retirement and estate planning strategies every few years. As the SECURE Act brings changes to retirement, take some time (and work with your financial advisor, if you have one) to help set personal and financial goals.

And if you’re a small business owner not opening a retirement plan, there’s never been a better time to take advantage of the tax benefits of a 401(k). Connect to one of our retirement experts today to learn more.

Are your IRA and 401(k) protected from future long-term care needs?

Siân Killingsworth / 10 Dec 2019 / IRA Resources, Ubiquity Insights

Medical advancements have greatly improved our quality of health and have allowed us to live longer, extending our retirement years and related costs. Diligent savings combined with the many tools and resources available – such as individual retirement accounts (IRAs) and company-sponsored 401(k)’s, make it possible to protect today’s otherwise taxable earnings and save for our future. However, one very real and often overlooked threat to our hard-earned savings is the unexpected cost of long-term care and home health care. Are your IRA and 401(k) protected?

Many of us depend on the following for the security of our retirement savings:

• Health Insurance
• Social Security
• Medicare
• Personal savings

It’s important to realize that all of these do not ensure the protection of your hard-earned IRA and 401(k) savings from the potential costs of long-term care.  Hidden out-of-pocket costs for which can drastically impact these savings.

Our lifespan is now projected to extend up to 30+ years after retirement – 65 by traditional standards.

70% of us can anticipate needing some form of long-term care, according to the U.S Department of Health and Human Services.  As older models of retirement planning are based on a shorter life expectancy, we now must consider how long-term care costs–and the tax burden of IRA and 401(k) withdrawals–can deplete your savings quickly and ruthlessly.

According to Genworth’s Cost of Care Survey, the projected annual cost for a senior living nursing home facility can easily reach $100,000/year, or over $8,000/month.

While this number should give most Americans a bit of anxiety, some still believe that they have nothing to fear if they have planned carefully with IRA and 401(k) savings. The catch is in the hidden details: taxes and penalties from taking funds out of your IRA and 401(k) sooner than your withdrawal schedule.  Paying for long-term care costs can quickly make your money disappear into thin air.

5 tips to avoid drawing funds from your IRA or 401(k) for long-term care costs.

1. Have a Plan

Avoid being overly confident about your control over the future of your health. In order to save money, many people skip planning for future long-term care costs, thinking: “I won’t need long-term care because my family will take care of me”, or, “IF something happens…my IRA and 401(k) is my insurance policy.”  This is a setup for potential disaster.

Certainly, we have control over making good lifestyle choices to maintain optimal health, but none of us truly has total control over the course of our health and aging. Furthermore, don’t be misled into thinking that losing your independent living is limited to the elderly–health issues may arise anytime and could require a period of long-term care even before retirement.

Did you know that sizable withdrawals from your IRA or 401(k) within a single year can double or triple your tax rate? In some cases, this also means penalty fees if you need this money before age 65. Poor planning can have shattering consequences. Read more information on the downsides of using your IRA or 401(k) to cover out-of-pocket health care costs.

2. Take Preventative Measures

Take advantage of preventive medical tests available to you through your health and life insurance policies.  Early detection of illness can make a life changing difference in treatment outcomes and maintaining independent living – both of which could have a direct impact on your IRA and 401(k) resources.

As you prepare to enroll in Medicare Part B (around age 65), make yourself aware of and plan to use preventative doctor visits that are covered with no copay for the first 12 months of enrollment. Read more information on what Medicare covers for preventative services.

3. Educate Yourself

Use resources online and in your community to educate yourself on the details of long-term care costs – it’s expensive! Learn everything you can about your entitlement to free and affordable Medicare and Medicaid health plans. Some are optional and require a premium with some copay, but these supplemental plans are far less expensive and could serve you well in saving money down the road.

While these plans do not cover long-term care costs, they will help protect your IRA and 401(k) by covering many other medical and prescription costs, including preventative and medical treatments:

• Medicare (required)
• Medicare Supplemental Insurance (optional/supplements Medicare enrollment)
• Medicaid (for qualifying low-income only)
• Medigap (optional/supplements Medicare)
• Medicare Advantage plans (optional/supplements Medicare)

Make it a priority to be in close touch with these plans’ enrollment deadlines since they all differ, and missing their deadlines can have significant consequences on your access and coverage.  These plans can help protect you from having to draw funds from your IRA or 401(k) savings. Make a calendar to help you remember deadlines for when the time comes. Click to learn more about enrollment deadlines.

4. Consider Supplemental Insurance

In order to be truly well prepared for unexpected long-term care costs, look into a supplemental “back-up plan” that’s right for you. A private long-term care insurance policy covers much of what traditional health insurance does not, including: care coordination, home modification, adult day-care, assisted living facilities, and even nursing home care.

However, it is fairly expensive and there is no guarantee that your application will be accepted due to preexisting conditions. You’ll want to consult with an independent insurance broker while you’re still fairly healthy (ages 50-60) to determine if this option is right for you and your budget.

Fortunately, there is now a growing marketplace for more affordable supplemental alternatives that are well worth looking into as well:

• Friends and Family Care
• Short-term Care (Convalescent) insurance
• Critical Care and Critical Illness insurance
• Life Insurance with a LTC Rider
• Annuities with Long-Term Care Riders
• Deferred Annuities for after Retirement
• Medical Savings Account

For more information on insurance alternatives, visit https://www.investopedia.com/articles/personal-finance/100515/4-best-alternatives-longterm-care-insurance.asp

https://www.dummies.com/health/long-term-care-provided-by-family-or-friends/

5. Take Accountability

When you consider the reality of what needing long-term care means, think about the possibility that you may become quite disabled and unable to be accountable for making sound decisions. The responsibility often falls upon your family.

This could be in a variety of ways: tending to your daily care, taking on your financial burdens, and making difficult decisions related to everything from your medical care to the management of your personal finances. Having plans laid out in advance can offer peace of mind for everyone.

A living will (which can assign things like advance directives and power of attorney) is one of the ways to help the family protect you, and your IRA or 401(k), when you aren’t able to yourself. Click here to learn more information on drawing up legally binding online wills that circumvent expensive attorney fees.

Year-End Retirement Savings Resources: From the Horse’s Mouth

Siân Killingsworth / 4 Dec 2019 / Ubiquity Insights

As we prepare to close out 2019, it’s important to stay focused on your financial goals during this very busy time of year. 

Our team of experts spoke with some of the country’s leading financial news sources to share how retirement savers can get in shape for a strong start to 2020. Here are our top suggestions: 

If You Aren’t Participating In Your Company’s Retirement Savings Plan, Enroll.

When it comes to saving for retirement, the hardest but most important step is getting started, according to our Founder and CEO Chad Parks. 

Chad spoke with Grow, a personal finance site affiliated with CNBC, to explain why it’s critical to reconsider taking advantage of your workplace retirement benefits during open enrollment season, which typically occurs during the last few months of the year. Chad also explained the benefits of contributing to a 401(k) and why, even if your company isn’t offering a match, it pays to participate and take advantage of tax savings.  

Increase Contributions to Your Retirement Savings Account.

Every fall, the IRS announces new contribution limits for retirement savings accounts for the upcoming year. These guidelines are incredibly important for savers as new restrictions, or lack thereof, can have a big impact on your nest egg over time. 

In the new year, 401(k) participants will be able to contribute an extra $500 to their accounts for a total annual limit of $19,500, while the annual contribution limit for IRA accounts remains unchanged at $6,000.

FoxBusiness.com and Bankrate sought expert insight from our Senior Vice President, Andrew Meadows, on these new contribution limits for 2020. He explained why that extra $500 of wiggle room might not seem like a lot for 401(k) savers, but it will make a big difference over time thanks to the magic of compound interest. 

Calculate Your Anticipated Rate of Return for Retirement. 

While it’s critical to consider your savings rate for the upcoming calendar year, it’s equally important to start thinking about how much income you’ll need in retirement. Have you taken into account recurring expenses, such as car payments, in addition to surprise expenses like medical bills? 

Chad recently spoke with MarketWatch to explain why neglecting future expenses is one of the biggest oversights for savers and how you can structure your savings strategy now to properly account for this. 

Pay Yourself First and Prioritize Retirement Savings. 

Let’s face it. With pensions nearly extinct and Social Security funding at risk, we have to rely on ourselves to establish and fortify our nest eggs. Thankfully, millennial savers have already accepted this reality according to a recent study from Wells Fargo. 

Chad joined Yahoo! Finance live and on-set to urge all savers to keep these realities in mind as we move into the new decade. He explained why putting retirement savings as a top-line item on your budget can set you up for success in the new year and beyond.

For more timely retirement savings tips and guidance from our team, please follow us on Twitter, Facebook, LinkedIn and YouTube. 

Market Shifts + Your 401(k) Plan

Siân Killingsworth / 2 Oct 2019 / Personal Finance, Ubiquity Insights

We spoke our partners, the investment professionals at Kaye Captial Management, to deep dive into retirement savings strategies for surviving the market’s ups and downs.

In general, how do market downturns impact 401(k) accounts?

Investing in the stock market comes with inherent risks, including market volatility. One key to mitigating these risks is to take a long-term approach to investing. Retirement plans, like 401(k)s, should be seen as long-term investments that can handle market downturns, especially for younger participants. Think about the mountain of a stock market graph—although there are fluctuations downward, the general trend is positive. As such, sit tight with market downturns, because a well-diversified portfolio should net a positive return over the long term.

For individuals closer to retirement, choose assets with less risk to maintain principal. Because you have a shorter time horizon, selecting lower risk assets may not generate a high yield, but should help you retire comfortably by preserving principal.

How should 401(k) investors react to market volatility?

Market fluctuations are part of the game when it comes to investing. If you are properly diversified and you are able to stomach the volatility, you will be better off in the long-term.

Participants who are not in target-date funds or models should rebalance their portfolios during market volatility to make sure their accounts have appropriate risk parameters.

How does market volatility impact retirement savers over 50, or those close to retirement?

Market volatility is more impactful for those over 50 because they have a shorter time horizon for investment than younger participants. However, those over 50 tend to know what it’s like to go through market fluctuations, so they understand that although the market can be is volatile short-term, investing for the long-term can contribute to the growth of your nest egg. A participant over 50 is better served to invest in less-risky assets to preserve their principal. By doing so, they mitigate the potential for a major crash just before retirement.

People close to retirement do not have the luxury of waiting out volatility. Older savers should look at their total portfolio risk exposure and decide if they are comfortable with the risks they are taking in their portfolios.

What steps should retirement savers take now to prepare for a potential market downturn?

Rebalance your portfolios, or ensure your investment third party accommodates automatic rebalancing, to ensure proper diversification to mitigate short-term market downturns. Modern portfolio theory dictates that diversifying your portfolio among asset classes allows for a much more consistent and stable return on investment. Rebalancing annually also ensures the participant that they are properly diversified.

Savers should consistently monitor their portfolios and rebalance them to the correct risk tolerance they believe is right for them. You cannot predict a market turndown, but you can prepare by ensuring your portfolio has the appropriate amount of risk for the return you expect.

Generally, how important a consideration is age when planning for retirement as part of a couple? Is this something couples tend to overlook?

Investing early, and often as a couple, can dramatically impact your success for retirement and is often overlooked at a young age. Compounding interest generated over time benefits those who save early and can put you well ahead of your peers, helping you retire on time.

More important than age is creating a financial plan and sticking to it. Understanding where your money is going on a daily basis and creating a plan for the future is necessary for success. Each person is different; some want to work until they are 70 while others want to retire at 60. Creating a plan and sticking to it will help couples identify the best time to retire.

This blog serves as information material from Kaye Capital Management (“KCM”) and does not serve as investment advice or recommendations by KCM or Ubiquity Retirement + Savings (“KCM”). Please remember that past investment performance is not be indicative of future results.  Different types of investments are associated with varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Kaye Capital Management (“KCM”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from KCM or Ubiquity.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Both Ubiquity and KCM are neither law firms nor certified public accounting firms and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the KCM’s current written disclosure Brochure discussing their independent advisory services and fees is available upon request. Ubiquity is not affiliated with any independent services you may solicit from KCM.

Revealed: Millennial vs. Baby Boomer Retirement

Siân Killingsworth / 6 Nov 2018 / Ubiquity Insights

For as different as Millennials and Baby Boomers are, they have one major thing in common. They both dream of a secure retirement someday.

There has been a lot of talk from retirement experts that millennials won’t be able to retire on time. But when you look at the statistics, the message isn’t as doom and gloom. Millennials are actually saving almost as much for their futures as baby boomers are. Boomers currently save, on average, 9% of their survey, while millennial are saving 8%. Their contributions also increase at a much higher rate than boomers. (Though it’s easy to attribute the discrepancy to the rapid change in salary at the beginning of your career.)

According to The 18th Annual TransAmerica survey, about three in 10 workers have dipped into a retirement account for an early withdrawal or loan from a 401(K) or similar account. Boomers are far more likely to have done so than their younger counterparts. About 36% of Boomers have taken a loan, while the same is true for only 28% of Millennials.

Procrastination is, unsurprisingly, a trend most prevalent among young workers. About 54% of Millennials prefer not to think about retirement investing until they get closer to their retirement date. Among Baby Boomers, significantly closer to their magic retirement age, that number is about 25%.

Want to learn more? See our roundup below!