Reduce 401k Borrowing Temptation Through Financial Education

December 09, 2016

401k, Financial Wellness

Joel Manzer

401kWe’ve previously shared our thoughts regarding The Good, The Bad, and The Ugly of 401(k) Loans, and also shared some insight about the Charles Schwab survey this past August.[1]

It’s good to be able to help employees when life happens, and that’s one aspect of why FinFit is available to businesses.  But helping employees to be financially ready when life happens is our goal.

Let’s take the old phrase, “Give a man a fish, he’ll eat for a day… but teach a man to fish, he’ll eat for a lifetime.”

Now let’s rephrase it for Financial Wellness, “give an employee a paycheck and they’ll live paycheck to paycheck, but teach an employee about financial wellness and they’ll be ready for when life happens.”

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The 401k Study You'll Never Forget

November 18, 2016

401k, Financial Wellness

Joel Manzer

401kIn August 2016, Charles Schwab conducted a survey of 1,000 employees between the ages of 25-70 who currently contributed to their retirement plan.[1]

The survey revealed that an employee’s 401k is their primary source of retirement savings.  It is also apparent that they desire help as less than half of those asked know how much they should save for a comfortable retirement.[2] 

70% of those who participated wanted personalized investment advice for their 401(k), and 85% said they would use a financial wellness program that would provide them with education, tools and resources to improve their overall financial health.[3]

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401(k) Loans: The Good, The Bad and The Ugly

October 05, 2016

loan, 401k

Joel Manzer

3182161_l.jpgAs a business owner, there may be times when an employee may turn to you to ask for help, such as an advance in pay, in order to address a particular hardship.  Of course you want to help, but lending money to an employee should only be considered after all other options are pursued.  There are risks and rewards associated with helping an employee in times of need, many can be associated with being legally compliant, which we share here:  “Employer Lending: Exposing Risks and Rewards[1]

There are other options that are available without becoming a lender – such as a 401(k) loan.  

According to SBA.gov,  If the employee has an account in your 401(k) and the plan allows loans, the business doesn’t have to become a lender. Instead, the employee can borrow up to 50% of his/her account balance (up to a maximum of $50,000). The plan must charge a reasonable rate of interest and repayment must be made in level payments over a period of no more than five years (there’s an exception to this repayment period for loans to buy homes). But caution the employee that if he or she leaves the job—voluntarily or otherwise—the loan must be repaid in full (usually within 30 or 60 days). The failure to do this results in having the outstanding balance treated as a taxable distribution; if the employee is under age 59-1/2, the distribution is taxable and subject to a 10% penalty. Find details about plan loans from the IRS[2]

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Financial Education of 401K Plans are a Top Priority

Financial education of 401kTraditional pensions have mostly faded from the retirement landscape. American workers have been challenged to take on more responsibility for their financial future. Employer sponsored 401(K) plans with a company match have replaced pension plans as the primary retirement benefit.

A study by Pew Health Initiatives indicates that workers bear more investment risk and make more of their own decisions about their retirement savings. Some workers have thrived under this more individualized approach, amassing sizable balances in 401(K) plans. For others the 401(K) revolution has fallen short of its potential. Work, family and the immediate challenge of living paycheck to paycheck has distracted them from the need to save and invest in the future.

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