Ubiquity

Category: Personal Finance

Find important information on Personal Finance from the experts at Ubiquity Retirement & Savings. Get important news that can affect your personal finances, along with tips and advice from our team of financial experts. Call Ubiquity today for a Free Consultation at 855.466.5825.

It’s no secret that the life of a small business owner is a lot of work. Especially in situations where you only have a few employees (or none at all), you have to act like the Swiss army knife of your business––ready for anything and prepared for any situation. So, why add the hassle of having to pay for and run a retirement plan along with everything else? You might even wonder, is my business too small to for a 401k plan?

Here’s the scoop: A 401k is no longer a benefit reserved exclusively for large businesses with budgets to match.

There are budget-friendly, easy-to-use 401k solutions designed specifically for small businesses. Small business owners can now take advantage of the business tax benefits of a 401k plan and offer competitive retirement plan benefits for employees.

Not too familiar with 401(k) plans? No problem.

What is a small business 401k?

First things first: A 401k plan is a type of company retirement plan under Section 401(k) of the Internal Revenue Code. That part isn’t so important — here’s what is: A 401k allows you to save for retirement by putting away money on a pre-tax basis, which helps you to lower your taxable income. What’s that mean to you? It means you’ll get less of a tax bite on your annual salary in the short term, while your long-term investments grow tax-free until you’re ready to retire. Some 401k plan providers (including Ubiquity) also offer an after-tax (Roth) option, which means you won’t be taxed at the time you withdraw that money because you’ve already paid taxes on it.

A small business 401k is defined as a 401k plan for a company with anywhere from one to 100 employees. Here at Ubiquity, we specialize in the retirement plan needs of small and growing businesses, including owner-only and start-up businesses.If your business only employs you, your spouse or partner, and employees who would not be eligible to participate in a plan, a Single(k)® plan would your best option.

Small business 401k plans offer unique benefits to both business owners and their employees who participate in the plan.

Busting 401k Myths

Myth #1: 401k plans are too expensive for small businesses.

It’s true that many 401k plans are designed to only suit larger businesses. But the growing trend is to offer efficient, Web-based 401(k) plans that are more affordable to businesses of all shapes and sizes. Plans cost less than a daily latte, and employers have options for splitting costs with their employees.

Myth #2: 401k plans require an employer match.

An employer match or profit-sharing contribution is entirely optional with a 401k. If you choose to offer this feature to your employees, it could help to boost participation. Keep in mind that employer contributions are also tax-deductible for your business.

Myth #3: Our employees won’t participate because they don’t make enough money.

There is no minimum contribution required with a 401k. Offering an employer match can provide additional incentive for your employees to participate in the plan.

Myth #4: It’s too complicated.

Starting a 401k plan doesn’t have to be convoluted. With the right plan, you can get a new plan running in just a few hours of your time. And it’s easy to manage, with tools and reports available right at your fingertips.

You’re contributing to your workplace retirement account–that’s great! But how are you dealing with the taxes of the money you can contribute. There are two ways you put money into your 401(k) retirement plan– pretax or Roth.

Pretax contributions are the traditional form of 401(k). This means contributions come out of your paycheck before taxes, and are your distributions in retirement are taxed. This is useful if you’re earning more now than you plan to in retirement. Plus, you lower your taxable income in the present!

Think of the Roth 401(k) as the rebellious little sister of the pretax 401(k). Introduced in the early 2000s, it takes the tax treatment of a Roth IRA and applies it to your employer-sponsored plan. That means contributions come out of your paycheck before taxes, and distributions in retirement are tax-free. That means you don’t pay taxes on your investment growth!

Let’s look at the similarities (and differences) between the two retirement contribution types.

The 401(k) contribution limit is $19,000 with an additional $6000 if you are 40 or older. The conribution limit is the same whether your 401k deferrals are made pretax, Roth, or a combination of the two.

Traditional 401(k) plans are pretax savings accounts. This means your contributions are made before they've been taxed. Roth 401(k) plans are post-tax savings accounts. This means your contributions are made after they've been taxed.

If you contribute to a 401(k) plan at work, your employer can choose to match a percentage of your contribution. Any employer match will be taxable in retirement.

All About Withdrawals: In a traditional 401(k) distributions in retirement are taxed, just like ordinary income. In a Roth 401(k) there are no taxes on qualified distributions in retirement.

 

Learn more

Curious about different types of retirement accounts? Learn the difference between an Individual Retirement Account (IRA) and a 401(k).

If you’re a small business owner and need a 401k plan for yourself and your company, only Ubiquity offers flat-fee plans plus free expert advice. We’ll fully customize your 401k to meet the specific needs of your small business.

Check out our cost-effective, plan solutions

How’s Your Financial Health?

Dylan Telerski / 15 Aug 2018 / Personal Finance

We all get check-ups to make sure our bodies are well and tune-ups to make sure our cars are running smoothly. But when was the last time you checked in on your financial health? If it’s been a while, we’ve got some tips to help you get started.

1. Dust Off Your Budget

If you haven’t been following a budget lately, now is the time to jumpstart the habit. A budget is your best tool for tackling any financial difficulties and achieving goals for future you! Budgeting lets you plan how you want to spend your money, while tracking your spending habits. When you track your spending consistently and stay on budget, you can start making things happen so that you reach your financial goals. Budget apps like Mint make it easy to connect to your bank account and see where your money goes. After you’ve done that, it’s up to you to split your income between bills, necessities, savings, and fun.

If you’ve already set up a budget, this step should be simple. Take a second look at where your money goes. It’s easy to overlook your gym membership getting more expensive or your car insurance going up a couple bucks. Those types of changes can add up quickly and have a big impact on your financial life.

No matter your starting point, once you’ve gone through your budget, it’s easier to search for places where you’re overspending. Are you really using all of your subscription services? Do you need to be celebrating Taco Tuesday that often (and did you need that extra margarita)? Can you stream a little less and get a smaller data plan? Try it! We believe in you.

2. Set it and Forget it!

Have trouble saving as much as you should? You’re not alone! Consider harnessing the power of automatic savings contributions. Having money taken out of your paycheck before you see it, streamlines the savings process and curbs temptation. It’s hard to spend money you don’t gain access to, whether by having money from each paycheck filter directly into a savings account or into your company’s 401(k). If you already have automatic deposits set up for your emergency fund and retirement accounts, nice work! Now consider increasing your contributions.

Once you automate your savings, take it a step further and automate your bill pay. You should always review your bills for accuracy, but paying at least some of them automatically will save you some hassle—and ensure your payments are always on time. To prevent any account-draining surprises, you may find it better to only automate bills that are the same every month (like your cable bill), rather than ones that vary every month (like your credit card bill).

3. Give Your Credit a Checkup

Credit Scores are often used as the barometer of your financial health. The higher your score, the more financially stable you seem. Knowing your credit score is essential—in the words of the old Schoolhouse Rock cartoons, “Knowledge is Power”. Even if the number isn’t as high as you’d like, your financial picture can’t get better until you have a picture of where you’re starting from.

Approximately 36 billion pieces of credit data are reported every year, so reporting mistakes are nearly inevitable. Since errors in your public records, personal information, and credit accounts can cause your credit score to tank, it’s important to keep a close eye on your credit. Any credit accounts listed that don’t belong to you could be a tip-off to identity theft or credit card fraud.

Luckily, you can request a free credit report every year from each of the three major consumer reporting companies (Equifax, Experian and TransUnion). Or do it our favorite way, which is to request one free report from a different bureau every four months and monitor your credit throughout the year.

 

So, what’s on your financial to-do list? If it’s learning about retirement options, we can help! Learn how you can get on the path toward a financially secure future with Ubiquity

 

4. Take a Peek at Your Debt

It’s really easy to put your head in the sand and not acknowledge the debt you have. Look at your credit card balances and other loans. Has your level of debt changed since the last time you checked? If it has decreased, way to go! You’re on your way. If it has increased, maybe it’s time to look at your budget again and find where you’re overspending. This is also a good time to check your interest rates,and see if you’re in a position to save by refinancing.

 

5. Review Your Retirement Plan Contributions

There’s no question that saving consistently for retirement is an important step toward a more financial future.  By starting to save as much as you can now, you will have the freedom to choose how you want to live when you retire. And since your 401k contribution comes out of your check pre-tax, you lower your taxable income. In a way, it’s like paying for your 401k with money that you otherwise would have spent on your taxes. In 2018, you can contribute up to $18,500 to your 401(k) if you’re under 50 or $24,500 if you’re 50 or older.

At first glance, borrowing money from your 401(k) plan may seem the easiest, cheapest, and most sensible way to get the funds you need for a major purchase (like a new home or a car), to consolidate other debt, or for any other reason.

After all, it’s your money. You don’t need to fill out any lengthy forms or reveal personal credit information, the interest rate is usually lower than a bank or lending institution, repayment is easy, and you’d be paying the money, plus interest, back to yourself.

In some cases, this may be true if you really need the funds and don’t have any other suitable alternative. But there are drawbacks to borrowing from your retirement plan that can have a major impact on your future by limiting the amount available to you at retirement.

You lose the compounding advantage.

One of the major advantages to saving in a 401(k) plan is the ability of your money to compound on a tax-deferred basis. Over time this can be a powerful tool in building funds for your retirement. Borrowing from your account slows that compounding growth and you lose the time value of the money you borrow. The amount you borrow from your 401(k) account immediately stops earning whatever investment returns you would earn if it remained invested in the available funds.

Paying yourself interest isn’t that good a deal.

Your loan repayments are made with after-tax dollars. But that money is being paid into a tax-deferred plan account. When you are ready to retire your distribution (including your loan repayments) is considered a taxable event. This means your 401(k) loan payments are taxed twice. In addition, a loan from a retirement plan is considered a consumer loan and the interest is not tax-deductible, as it would be for a home equity loan.

The disaster of default.

Perhaps the most compelling reason not to borrow from your 401(k) plan is what can happen if you terminate your plan with an outstanding loan balance–or if you are simply unable to make your payments. If you terminate your plan for any reason while you have an outstanding loan, the remaining loan balance is due immediately. If you can’t afford to repay the loan in full, the entire outstanding principal becomes taxable and is deemed to be a distribution.

This can spell disaster.

Not only will you have to pay a tax on the distributed amount at your regular tax rate you will also be hit with a 10% non-deductible Federal tax penalty and a state penalty if the state you live in has one (if under age 59½). Depending on the amount it adds to your taxable income, the loan distribution may actually push you into a higher tax bracket–making costs even higher. The additional costs created by a loan default can be financially devastating.

Of course, it’s still comforting to know that if the need arises you do have access to your 401(k) funds. But if you consider taking a loan against your retirement, be sure to take all the consequences into consideration.

 

Want to learn more?

Check out this jargon-free glossary to 401(k) loan terms

Watch our retirement expert Andrew answer your 401(k) loan questions

As tongue and cheek as this may be, it’s easy to nickel and dime your way out of retirement without even knowing your doing it. Want to know how? Check out this infographic on how you can save hundreds of thousands of dollars in your retirement by eating a few less tacos.

This year’s tax time deadline is April 17, 2018. To help you prepare, our partner, TaxAct, compiled these effective time and money-saving tips.

1. File now rather than later! Rushing to finish your taxes at the last minute can easily lead to avoidable typos. If you’re waiting to file because you owe taxes, you can e-file now – just schedule your payment anytime before April 17. Filing earlier can reduce your chance of tax return identity theft. The sooner your return is filed, the less opportunity there is for someone to file a fraudulent tax return using your name and Social Security number.

Reminder: Calendar year S and C corporation returns are due March 15. Personal (form 1040) and partnership (form 1065) returns are due April 17.

2. Get organized. Gather all your tax forms, statements, and receipts you will need before you start your taxes. You’ll finish your taxes faster and more easily. A simple way to make sure you don’t forget anything this year is to use your 2016 return as a reference.

3. Don’t pay too much to do your taxes. In just a few minutes you can compare the top DIY brands but don’t forget to ask these questions. How much is their product? Does that include the forms you need for your tax situation? Does that price include your state income tax return? Remember, since you don’t typically pay until you’re ready to file, you can take most online products for a drive.

Bonus for our blog reader: Save on TaxAct’s individual, partnership and corporate tax filing solutions now at www.taxact.com/ubiquity.

4. Double check your return for typos. Before you e-file, make sure this important information is correct on your return:

  1. Birth dates
  2. Social Security numbers
  3. Names, especially of dependents – must be identical to what’s on Social Security cards
  4. Bank routing and account numbers

5. Choose the fastest path to your refund. E-file and choose direct deposit to get your refund the fastest way possible. The IRS issues more than nine out of 10 refunds in less than 21 days.

Learn how you can lower your taxes in 2018 with a small business or solo 401k plan from Ubiquity

The New Year is is a great time to check in on your financial plan, make sure you are on track to meet your goals and get a head start on the path to your retirement security.

To do this, it’s crucial to consult great financial resources. That’s why we compiled a list of our favorite recurring TweetChats that offer tips and success stories from some of the best minds in finance.

1. Experian #CreditChat

Every Wednesday at noon PST/ 3 p.m. EST, use #CreditChat to follow a panel-led discussion hosted by @Experian about all things personal finance. Ask questions and learn smart strategies to manage student debt, credit scores, retirement savings and other timely topics.

2. Wise Bread Chat

Looking for creative or DIY ways to save money? Follow #WBChat on Thursdays at noon PST/ 3 p.m. EST to learn how you can take back control of your resources to reach, and even exceed, your financial goals.

3. MoneyChat

Led by personal finance expert and coach @DorethiaKelly, this biweekly chat takes place every first and third Monday of the month at 5 p.m. PST/ 8 p.m. EST. Follow #MoneyChat for the latest in business trends and personal finance advice.

4. BizHeroes

If you’re an entrepreneur interested in starting or running your own business, tune into this weekly chat on Tuesdays at 11 a.m. PST/ 2 p.m. EST. #BizHeroes covers a wide variety of small business topics, such as tips for running a business on a tight budget. This chat’s objective – help small business owners succeed!

5. #CashChat

Brush up on how to maintain healthy relationships with your money and credit by tuning into #CashChat. Tarra Jackson, aka “Madam Money” hosts this chat every Friday at 9 a.m. PST/ 12 p.m. EST.

Have you participated in any other TweetChats that propelled you or your business to the next level? We’d love to hear about them! Tweet the chat name and the lesson you took away from it to @UbiquitySavings.

Learn everything you need to know about 401k and retirement with Ubiquity 

Preparing for the unexpected with emergency savings can be difficult, particularly if you don’t have that safety net to rely on. Some of life’s most exciting and scariest moments come from surprises we never see coming. An unexpected expense ­– hospital bills, losing your job, etc. ­– can seriously impact your financial well-being in the moment, and in the future.

To better prepare for an unexpected emergency, we’ve assembled tools to help you build a sturdy financial plan that protects you. Setting up an emergency fund, stepping up your budgeting skills and giving up on bad financial habits are all crucial steps to avoid an unexpected financial disaster.

1. 6 emergency fund myths you should stop believing

It’s easy to make excuses not to save money for a rainy day or emergency fund. Maybe you feel like you’re buried in too much debt, don’t make enough money or saving for retirement is hard enough! But according to this WiseBread article, you are never too young, old, poor or rich to stash away some extra money to prepare for life’s unpredictable twists and turns.

2. Survey: How Americans contend with unexpected expenses

According to this Bankrate study, 43 percent of respondents were forced to reevaluate their financial plans due to an unexpected expense. While you can’t predict the future, you can prepare for all the uncertainties it can bring. Should you dip into your savings, take out a loan, tighten your budget or utilize your credit? Check out this survey to find out what method is best for you.

3. Create a “life happens” fund in addition to your emergency fund

Have you mastered your savings and feel ready to take a break? Not so fast! This Lifehacker article suggests that in addition to an emergency fund, you should have a “life happens” fund for expenses that don’t necessarily qualify as emergencies, such as routine health care costs, car repairs or veterinary bills. That way, you avoid depleting your emergency stash and have the reassurance that you are covered for any minor snags.

 

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

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

© 2019 Ubiquity Retirement + Savings
Privacy Policy
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357