Tag Archives: 401(k)

Never Rollover If You Can Transfer

You might have heard the IRS is limiting the frequency with which you can rollover IRA accounts in 2015. Starting January 1st the IRS will limit you to only one IRA rollover per calendar year. You will now face steep penalties if you attempt more than one rollover  per year. However most people don’t realize there exists a superior alternative called an ACATS or electronic transfer. You will still be allowed unlimited transfers per year, but not all investment firms will accept an electronic transfer. A Rollover is Very Different From a Transfer Most investors think a rollover is the only way to transfer an IRA to another brokerage firm. When you request a retirement account rollover, your account’s current […]

14 Things to Consider for Your Year-End Financial Checklist

The last few weeks of the year are always a mad rush to wrap up loose ends, often in a frantic fashion. In the spirit of the season, we thought it a good time to share a checklist of important items to consider before the calendar year ends, all related to your investments and finances. We also wanted to reiterate some key topics we’ve already discussed, but that are especially important to review by end-of-year. Here are some brief pieces of financial advice on several fronts that could benefit you and yours in multiple ways, and that could ultimately add to your long-term bottom line, not to mention peace of mind. 1. Establish or Tune Up Your Emergency Fund If you […]

Introducing Wealthfront for the Workplace

Financial benefits in the workplace have become a hot topic with leading professionals in human resources, and for good reason. Increasingly, companies that focus on attracting and retaining top talent have spent significant time and resources to deeply understand all aspects of their employees’ workplace experience. Simply put, financially healthy employees are more productive, engaged employees. Today, we’re pleased to announce the launch of  Wealthfront for the Workplace, which we’re piloting with several of the fastest growing companies that are focused on attracting and retaining millennial talent. Wealthfront for the Workplace offers employees of participating companies the benefit of a Wealthfront account with up to $100,000 managed for free to encourage saving and investing. As part of the pilot, Wealthfront […]

A Good ESPP Is a No-Brainer

Ask These 12 Questions About Your Options

An often overlooked and potentially valuable employee benefit is the Employee Stock Purchase Plan (ESPP). If your employer offers an ESPP we recommend you   1) participate at the level you can comfortably afford  and then  2) sell the shares as soon as you can. This strategy should allow you to lock in a generous return on your contributions while avoiding additional risk on your company stock, which may already represent an outsized percentage of your net worth. To appreciate why this strategy makes sense let’s cover some basic questions: What is an ESPP? How does an ESPP work? Should you participate? How are ESPP gains taxed? When should you sell the stock you purchase through an ESPP? What is an […]

When Do You Use a Traditional vs. Roth IRA?

If you’re like most people you’re not quite sure when you should open a Traditional vs. a Roth IRA. Unfortunately the answer is not straightforward due to all the arcane income limitations and tax treatments associated with each. With this post we attempt to explain the differences between the two types of retirement accounts, why they were created and when each might be preferable. Similarities Both types of IRA allow individuals younger than 50 to contribute $5,500 each year and individuals 50 and older to contribute $6,500. Returns generated in both IRAs compound tax-free over their entire life. Each allows you to withdraw money without penalty for various reasons including qualified higher education expenses, certain medical expenses, and a limited […]

7702 Retirement Plan? There’s No Such Thing

A growing number of insurance companies and independent financial advisors have been selling “7702 Plans,” sometimes referred to as a “7702 Private Plan,” for retirement. On Google alone, a query for “7702 plan” results in almost 1.5 million pages of matches. This is fascinating, largely because there is no such thing as a 7702 plan. A vehicle for selling life insurance If you go to one of the thousands of websites, you’ll find a description of something that sounds like a 401(k) or IRA, but is based on life insurance. The page will explain that unlike traditional retirement plans like 401(k) and IRA accounts, “life insurance retirement plans” have no limit on contributions or size, and no requirements for withdrawals […]

High Income? Here’s How You Open A Roth

First made available to investors in 1998, Roth IRAs introduced a whole new structure for tax-deferred saving. Until then, investors could make tax-deductible contributions to traditional IRAs and 401(k)s. Roth accounts allowed tax-free distributions. Many of our clients want to take advantage of both ways of saving for retirement. The problem: Roth accounts have income limits. In 2013, single filers making more than $127,000 in adjusted gross income, and married couples making more than $188,000, are not allowed to contribute to Roth IRAs. The question: If I – or my spouse and I – are above the income limits for Roth IRAs this year, can I still Roth? The answer, fortunately, is yes…if you know how. Option 1: A Roth […]

The Case Against Maxing Out Your 401(k)

2012 IPOs: High Expectations, No Assurances

Most every personal finance blog I have ever read recommends maxing out your 401(k) contribution. They tell you to “just do it” – contribute as much as you can, as early as you can. I couldn’t disagree more. Forced savings I believe most bloggers (and many financial planners and low-quality investment advisors) recommend maximizing 401(k) contributions as a way to enforce a savings discipline. They believe that without automatic deductions, people won’t save at all. Our readership tends to be pretty disciplined and intelligent in their approach toward their finances, so I don’t think they need such a brute force recommendation. For our clients and readers, we emphasize transparency, rational decision-making and the use of mathematical tools. We recognize how […]

When A Roth 401(k) Trumps A Traditional 401(k)

The New Year’s Day tax deal (also known as the fiscal cliff legislation) made headlines in the retirement world because it included new rules to make it easier for employees to convert existing traditional 401(k) plans to Roth 401(k) plans. Over the past six years, an increasing number of companies have begun to roll out Roth 401(k) options for their employees. Many people now have the simple question: “When does it make sense to choose a Roth 401(k)?” Before we answer that question, you should understand the key difference between a Roth 401(k) and a traditional 401(k). With a Roth, you’ll pay taxes on the money you invest now, but no taxes when you withdraw the money at retirement. In […]

Why Your 401(k) Plan Sucks

A recent study found that the average fee on a 401(k) retirement plan was an appalling .93% of assets. The fees in the most expensive 10% of plans were even more shocking: 1.72% of assets.  That’s huge in an environment where most people hope to earn annual returns of 6% before fees. The average 401(k), meanwhile, offers 15-20 choices of funds, which have higher expense ratios than those you would find if you were buying through a brokerage for your IRA. A typical lineup: Many actively managed mutual funds, a handful of passively managed index funds, and very few ETFs. If you’re an educated investor, this sounds familiar. You always suspected you were paying a lot in fees, even though […]