Aug 31

401k Loans Not a Good Idea

Through this tough economy, about 18 million people have taken loans from their 401k plans.  Although most Americans know it’s essential to plan for retirement, many simply don’t have a choice but to borrow from their savings.  It seems like a smart move at the time considering there’s no application to fill out, you won’t be denied and the interest is fairly low (interest that you pay to yourself).

There is a serious downside to this idea: if you lose you’re job, you have 60 days to repay the loan or it becomes default.  According to Custodia Financial, about 10% of loans default because of unemployment.  Not only do the defaulted loans make a huge dent in your savings, but the IRS sees it as a distribution now so you have to pay taxes on it and pay the penalty if the distribution wasn’t allowed.

Custodia’s solution is to offer credit insurance if you default on a loan and repay the loan balance in event of death, disability or involuntary job loss.  Employers have been reluctant to offer this, however proposed Retirement Savings Security Act would give them the comfort they need to offer products like this.

In conclusion, if you don’t absolutely have to, avoid dipping into your 401k.  Read more about this here.

In need of advice?  The IRA Financial Group is here for you!

Aug 29

What is Vesting?

Do you know if you’re vested at your current job?  If you’re not, you could be losing thousands of dollars if you decide to leave.  There are countless reasons to leave your current employer (salary, working conditions, better offer elsewhere, etc.), but if you’re not vested and participate in your company’s 401k, you’ll be losing money that you rightfully deserve if you leave.

So, what is vesting exactly?  This is the time period or monetary commitment that you must make until the matching donations in your 401(k) are wholly considered yours.  Therefore, if you’re company matches any of your 401k contributions, that money is not completely yours until you’ve either worked at your job for a certain number of years or have contributed a certain amount of money in your 401k.  Check out this page for an example of vesting.

From that same article, “The Employee Retirement Income Security Act (ERISA) says that no matter what company you work for, your contributions — and employer matching contributions — are fully vested after three years. This applies only to defined contribution plans and the contributions made to them after 2006 when the law was passed. Employers must either fully vest employees in all defined benefit plans after five years or have a gradual vestment that terminates with full vestment after seven years.”

In conclusion, make sure you’re vested if you’re considering leaving your current job.  If you’re not, it’s beneficial to stay there until you are so you don’t lose out on the money you deserve.

If you need advice or have a question about vesting, contact the ERISA experts at the IRA Financial Group today.

Aug 28

Give a Roth 401k a 2nd Look

A Roth 401k is a combination of your traditional 401k plan and a Roth IRA.  From Business Management Daily: “The Roth 401(k) concept was created in 2001 by the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), but it wasn’t available until 2006. As with your regular 401(k) plan, contributions to a Roth 401(k) plan grow on a tax-deferred basis. However, unlike a regular 401(k), elective deferrals aren’t made with pretax dollars. The amounts you contribute are subject to current tax.”

Just like a Roth IRA, withdrawals are tax-free assuming you meet the qualifications.  To qualify, you must be at least 59 1/2 years of age or on account of death or disability.  The contribution limits are the same as a traditional 401k ($17,000 for 2012 and $5,500 more if you are 50 or older).  There is also no income restrictions on a Roth 401k.

Check out our website for more info at IRAFinancialGroup.com.

Aug 27

Post Retirement Ideas For Your 401k

After you leave your job you need to figure out the best course of action for your 401k Plan.  Here are a few options with the pros and cons for each…

You can leave your 401k with your former employer.  This is the easiest choice and you should be completely familiar with all the options that the plan offers.  The plan remains tax-deferred and usually there’s no fee to rebalance or change your asset allocation.  You may also be able to take a loan out if need be.  The downsides include limited investment choices, having stock in a company you no longer work for and not being aware of changes made to the plan right away.

You can also roll it into an IRA.  This give you more control over your plan with a wider range of investments such as low-fee mutual funds and ETFs.  An IRA can also be used to consolidate multiple 401k plans.  There are also several instances where you may withdraw funds without paying the 10% penalty such as disability, first home and medical insurance.  However, you may have to pay commissions on trades you make which makes rebalancing costlier.  Finally, you have more responsibilities with an IRA and finding a good fit with a financial may be tough.

Lastly, you can simply cash out your 401k.  The major pro here is that you’ll have a lot of money to do as you please with, but there are several cons going this route.  If you’re before the age of 59 1/2, you have to pay a 10% early withdrawal penalty on top of the income tax.  Speaking of which, you’ll pay more tax on a large withdrawal as well.  Finally, you will not be seeing tax-deferred growth anymore.

It’s best to speak with an expert before deciding.  The pros over at the IRA Financial Group will help you decide which path is more prudent for your situation.  Call us today at 1.800.472.0646.

Aug 24

Looking for 401k Recordkeeping Services?

401(k) Administration.com is a new and exciting venture for the IRA Financial Group that focuses on all your 401(k) Plan record keeping and administration.

Most small retirement plans appoint the employer as plan administrator. Management of the entity may designate an individual or an entity to perform these functions. Due to the complexity and timing involved, most small employers appoint an independent third-party to assist with the plan administration and record keeping services.

Our IRS approved 401(k) plan and bundled record keeping services are specifically customized to small businesses with less than 50 employees, which allows us to better understand their specific needs and concerns.

The plan record keeper is the person or entity responsible for the general day-to-day plan operations and administration. Record keeping services include the following:

  • Determining when an employee becomes eligible to participate in the plan
  • Providing complete, accurate and timely information and approvals in the manner and within the time frames reasonably requested by the Company
  • Providing all necessary employee census information for new employees and census updates for existing employees
  • Computing plan contribution amounts
  • Maintaining plan records
  • Preparing and filing plan tax forms
  • Preparing IRS Form 5500
  • Performing actual deferral percentage (ADP) test (IRC Sec 401(k)(3) )
  • Performing actual contribution percentage (ACP) (IRC Sec. 401(m) quarterly), if applicable
  • Performing minimum coverage test (URC Sec. 410(b)(1)(A) and (B)) annually, if applicable
  • Performing top-heavy test (IRC Sec. 416) annually, if applicable
  • Monitoring elective deferrals limit (IRC Sec. 401(g)), if applicable
  • Providing employee notices, information, and reports

401(k) Administration Services is pleased to offer services in partnership with several providers who consistently meet and exceed these standards. Additionally, we continually actively observe the quality of services and their ability to meet plan sponsor needs and expectations. We have a very close working relationship with Fidelity, TD Ameritrade and Scottrade who have provided our clients with an individualized well balanced and diversified investment platform.

Let us take care of your Retirement Plan so that you can take care of your business!

Contact one of our Retirement Experts today at 1(800) 401-5762 to learn more or let us contact you.

Aug 23

Custom Target-Date Funds Growing

According to “The Cerulli Report: State of Large and Mega Defined Contribution Plans: Investment Innovation and the Plan Sponsor Perspective”, custom target-date funds will account for 22% of 401k target-date assets in 2016.  The value of these assets are expected to jump 370% to $218 billion from just $46.4 billion in 2011.

There research also shows that custom target-date funds “open the door for alternatives in DC plans” as alternative asset classes have typically not been included in DC plan portfolios.

“We believe that plans will add custom target-dates at a rate of 2% per year for the next two years,” says Kevin Chisholm, a Cerulli senior analyst and lead author of the study. “The use of custom target-date funds provides access for DCIO asset managers to the growing pool of DC assets.”

Source

 

Aug 21

ERISA 404(a)(5) to go in Effect 8/30

On August 30, the Department of Labor’s Employee Benefits Security Administration participant fee disclosure rule, dubbed ERISA 404(a)(5), will go into effect.  The approximately 72 million 401k Plan participants will get a look at all the fees charged directly against their expenses, annual operating expenses and an explanation of any fees and expenses that may be charged to or deducted from their individual accounts based on the actions taken by that participant, such as taking out loans against their holdings.

Participants must also receive a statement, at least quarterly, that shows plan-related fees and expenses that were charged or deducted from their individual accounts.  “Over the ten-year period 2012-2021, Employee Benefits Security Administration estimates that the present value of the benefits provided by the final rule will be approximately $14.9 billion and the present value of the costs will be approximately $2.7 billion,” noted the Labor Department in its Fact Sheet dated February 2012.

Get the whole scoop over here.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.  Contact us today to see how the new rule affects you!

Aug 19

Self-Employed…a 401k For You

More people than ever are self-employed, especially men aged 55 to 64 years old.  There are options for retirement that are perfect for you.  Even if you have a regular job, but do freelance work on the side, you can get in on the action.  There are two main plans for you: Solo 401k and SEP IRA.  Like your traditional 401k, these plans are tax-deferred and lessen your taxable income right now.

The Solo 401k, also known as individual or one participant 401k plans, is the most flexible and allows you to make the largest contributions.  This option is available to independent contractors, freelancers and business owners with no employees (other than a spouse).  You can contribute 100% of your compensation up to the $17,000 limit for 2012 ($22,500 if you’re aged 50 or older).  Moreover, as an employer, you can contribute up to 20% more.

SEP IRAs, or simplified employee pension individual retirement accounts, allow up to 25% of your net self-employment income, up to a maximum of $50,000 in 2012. Contributions are deductible as a business expense.

Check out this article in The Wall Street Journal for more info.  To set up your own Solo 401k, contact one of the experts at the IRA Financial Group, who are the leaders of solo 401k plans.

Aug 16

Bergman 401k Report Featured on WMCTV

WMCTV.com, the website for Action News 5 out of Memphis, TN picked up the press release about the launch of this brand new site.  Here’s a bit of the story:

Adam Bergman, Esq., a tax attorney with the IRA Financial Group and tax partner with the Bergman Law Group LLC announces the launch of http://www.Bergman401KReport.com which will be a free news site specifically focusing on all tax and ERISA aspects on the 401(k) plan and qualified retirement profit sharing plan. The website will have a sizable research staff that will be delivering current news reports and updates in the law on the topic of 401(k) plans. “With over 2 million 401(k) plans in the United States, there is an enormous demand for current and in-depth information on the 401(k) plan and the various tax and investment rules,” stated Adam Bergman, Esq. “Bergman401KReport.com will provide updated news reports and commentaries on all news, proposed laws, regulations, investment trends, and much more on the area of 401(k) and profit sharing plans, “ stated Mr. Bergman.

Adam Bergman is a senior tax attorney at the IRA Financial Group, LLC, the only attorney owned and operated Self Directed IRA LLC and Solo 401(k) facilitator. Mr. Bergman is also the managing partner of the law firm The Bergman Law Group, LLC. Mr. Bergman has been quoted in a number of major publications on the area of self-directed retirement plans. Mr. Bergman is also a frequent contributor to Forbes magazine and Forbes.com on the subject of retirement funds and tax law.

To read the whole release, head over here.