Latest news with #Secure2.0
Business Mayor
02-05-2025
- Business
- Business Mayor
There's a new 'super funding' limit for some 401(k) savers in 2025. Here's who qualifies
Richvintage | E+ | Getty Images If you're an older investor and eager to save more for retirement, there's a big 401(k) change for 2025 that could help boost your portfolio, experts say. Americans expect they will need $1.26 million to retire comfortably, and more than half expect to outlive their savings, according to a Northwestern Mutual survey, which polled more than 4,600 adults in January. But starting this year, some older workers can leverage a 401(k) 'super funding' opportunity to help them catch up, Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, previously told CNBC. Here's a look at other stories impacting the financial advisor business. Here's what investors need to know about this new 401(k) feature for 2025. Higher 'catch-up contributions' For 2025, you can defer up to $23,500 into your 401(k), plus an extra $7,500 if you're age 50 and older, known as 'catch-up contributions.' Thanks to Secure 2.0, the 401(k) catch-up limit has jumped to $11,250 for workers age 60 to 63 in 2025. That brings the max deferral limit to $34,750 for these investors. Here's the 2025 catch-up limit by age: 50-59: $7,500 60-63: $11,250 64-plus: $7,500 However, 3% of retirement plans haven't added the feature for 2025, according to Fidelity data. For those plans, catch-up contributions will automatically stop once deferrals reach $7,500, the company told CNBC. Of course, many workers can't afford to max out 401(k) employee deferrals or make catch-up contributions, experts say. For plans offering catch-up contributions, only 15% of employees participated in 2023, according to the latest data from Vanguard's How America Saves report. 'A great tool in the toolbox' The higher 401(k) catch-up is 'a great tool in the toolbox,' especially for higher earners looking for a tax deduction, said Dan Galli, a CFP and owner of Daniel J. Galli & Associates in Norwell, Massachusetts. While pretax 401(k) contributions offer an up-front tax break, you'll owe regular income taxes on withdrawals, depending on your future tax bracket. However, your eligibility for higher 401(k) catch-up contributions hinges what age you'll be on Dec. 31, Galli explained. For example, if you're age 59 early in 2025 and turn 60 in December, you can make the catch-up, he said. Conversely, you can't make the contribution if you're 63 now and will be 64 by year-end. On top of 401(k) catch-up contributions, big savers could also consider after-tax deferrals, which is another lesser-known feature. But only 22% of employer plans offered the feature in 2023, according to the Vanguard report. READ SOURCE
CNBC
02-05-2025
- Business
- CNBC
There's a new 'super funding' limit for some 401(k) savers in 2025. Here's who qualifies
If you're an older investor and eager to save more for retirement, there's a big 401(k) change for 2025 that could help boost your portfolio, experts say. Americans expect they will need $1.26 million to retire comfortably, and more than half expect to outlive their savings, according to a Northwestern Mutual survey, which polled more than 4,600 adults in January. But starting this year, some older workers can leverage a 401(k) "super funding" opportunity to help them catch up, Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, previously told CNBC. Here's a look at other stories impacting the financial advisor business. Here's what investors need to know about this new 401(k) feature for 2025. For 2025, you can defer up to $23,500 into your 401(k), plus an extra $7,500 if you're age 50 and older, known as "catch-up contributions." Thanks to Secure 2.0, the 401(k) catch-up limit has jumped to $11,250 for workers age 60 to 63 in 2025. That brings the max deferral limit to $34,750 for these investors. However, 3% of retirement plans haven't added the feature for 2025, according to Fidelity data. For those plans, catch-up contributions will automatically stop once deferrals reach $7,500, the company told CNBC. Of course, many workers can't afford to max out 401(k) employee deferrals or make catch-up contributions, experts say. For plans offering catch-up contributions, only 15% of employees participated in 2023, according to the latest data from Vanguard's How America Saves report. The higher 401(k) catch-up is "a great tool in the toolbox," especially for higher earners looking for a tax deduction, said Dan Galli, a CFP and owner of Daniel J. Galli & Associates in Norwell, Massachusetts. While pretax 401(k) contributions offer an up-front tax break, you'll owe regular income taxes on withdrawals, depending on your future tax bracket. However, your eligibility for higher 401(k) catch-up contributions hinges what age you'll be on Dec. 31, Galli explained. For example, if you're age 59 early in 2025 and turn 60 in December, you can make the catch-up, he said. Conversely, you can't make the contribution if you're 63 now and will be 64 by year-end. On top of 401(k) catch-up contributions, big savers could also consider after-tax deferrals, which is another lesser-known feature. But only 22% of employer plans offered the feature in 2023, according to the Vanguard report.
Yahoo
26-04-2025
- Business
- Yahoo
Why your Roth 401(k) match from work doesn't go into a tax-free account yet
If you are all in on Roths, it might be a little vexing to you that your employer is not. More than 82% of large employers offer a Roth 401(k) option to employees, which means workers can pay tax now on their income and sock away their savings tax-free for the rest of their life. But only 0.1% of companies are buying into the new feature in the Secure 2.0 legislation that allows employers to put matching contributions into Roth accounts rather than traditional pretax 401(k) funds, according to a new report from Mercer. What a plunge in shipping traffic from China says about tariffs, stocks and the economy 'An argument ensued': My mother entrusted my inheritance to her second husband. It all went horribly wrong. S&P 500's rapid exit from correction territory hinged on Trump's walk-backs of tariffs and Fed fight 'She's kept him afloat': I'm 78 and leaving my daughter, 41, my life savings, but her partner is a mooch. How can I protect her? This strategist warned of a selloff in December. He's watching these two signals to confirm if stocks have bottomed. That means that if you are among the 17% of workers who contribute to a workplace Roth 401(k), according to Vanguard, you will still collect a small pile of pretax funds in a separate account at your employer's retirement custodian. If you look at your account statement, you'll likely see these as different line items, or buckets, labeled something like 'employee Roth contributions' and 'employer matching' or 'Safe Harbor match,' depending on the financial institution. The money is still yours — it's just separated for recordkeeping purposes. Workers only need to keep track in order to do tax planning for retirement. Employers aren't ignoring all the new features allowed by Secure 2.0. Some 74% are clamoring to increase the involuntary cash-out amount for employees, according to Mercer, so they can get more low-balance retirement accounts off their systems. And 10% of companies want to make it easier for employees to take out money before age 59½ to cover the costs of terminal illnesses without penalty — but only 6% want to make that benefit available to victims of domestic violence and only 1.2% want to make penalty-free withdrawals available for general emergencies. Employer Roth 401(k) matching may be one of those ideas that is better in theory than in practice. 'There are a few complexities on the back end that have made it administratively difficult for providers to roll out. So for the most part, this is in the no-go area still,' said Jamie Hopkins, chief wealth officer at Bryn Mawr Trust. The problems stem mostly from the tax considerations of a Roth account, which is easier to manage from the employee side than the company side. To make a Roth 401(k) contribution, an employee simply pays the tax on their income in the current year, and then the money grows tax free while it's in the Roth account. On the company side, however, that match counts as an expense to the company and as income for the employee, and it involves a lot of coordination to get all of it properly accounted for. 'This is a very complex optional provision,' said Holly Verdeyen, defined-contribution leader at Mercer, a workplace-benefit consulting firm. 'It requires coordination between different vendors — the plan, their trustee, their payroll provider and plan recordkeepers.' Rich Schainker, director of retirement and investments at WTW, another workplace-benefit consultant, said that the potential tax implications for employees is another reason for the slow adoption. 'Employers may be cautious about introducing features that require significant changes to plan administration and employee education,' he said. 'Overall, while Roth features continue to gain traction, the specific adoption of Roth matching contributions remains limited as employers weigh the benefits against the administrative and educational efforts required.' Still another hurdle Schainker mentioned is that employers are tied up at the moment implementing other Secure 2.0 provisions, specifically those that require high-income older earners to put catch-up contributions into Roth accounts and those that allow new 'super' catch-up contributions for people between the ages of 60 and 63, who can put away a total of $11,250 in 2025 on top of the regular employee deferral limit of $23,500. There comes a time for many highly compensated people when they realize they've saved too much — at least in tax-deferred accounts. Socking away money for retirement in a 401(k) is a fantastic benefit, but once you hit 73, you have to start taking money out and paying tax on it. Those required minimum distributions stress out a lot of people, especially when their account balances reach $1 million and the amount they must take out each year tips them into a higher tax bracket or forces them to pay IRMAA surcharges on their Medicare premiums. This is why people start to scramble in their early 60s to do Roth conversions, paying the tax in chunks ahead of time and shifting that money into these tax-free-forever accounts. If you figure out this math early enough, you can start diverting your retirement savings into a Roth 401(k) directly. It's a smart move, especially if you're above the income limit to contribute to a non-workplace Roth IRA — which is $150,000 for a single person in 2025 — and you want to contribute more than the $7,000 allowed. If you're a very high earner and you want to sock away even more than you're allowed to as an employee, at many companies you can make after-tax 401(k) contributions and then immediately roll them over into a Roth 401(k) account, up to the total annual limit for retirement savings set by the IRS (which in 2025 is $70,000 for those under 50, and $77,500 with catch-ups). 'In-plan Roth conversions allow employees to convert their traditional 401(k) balances to Roth balances, providing the same tax advantages without the need for immediate implementation of new matching features,' Schainker said. But that's still all about your money and what you contribute. For the time being, it seems that company matching funds will stay in the tax-deferred universe, and employees will pay tax on those funds when they withdraw them in retirement. 'Likely, we will see more plans open this up next year,' predicted Hopkins. But given that there are still tax considerations to work out, 'without likely guidance this year from the government, it could hinder the adviser and plan sponsor support of adoption for a few years.' Got a question about investing, how it fits into your overall financial plan and what strategies can help you make the most out of your money? You can write to me at . Please put 'Fix My Portfolio' in the subject line. You can also join the Retirement conversation in our . The buying opportunity of a lifetime is coming. But not before a 40% drop for the S&P 500, says this strategist. 10 'pure value' stocks favored by analysts to soar 20% to 96% over the next year I held power of attorney for my late brother. Can I withdraw money from his bank account to give to his favorite charity? 'I am suspicious': My father died, leaving me $250,000. My brother says it's all gone. What can I do? 'In their last days, our parents changed their will': They left me $250,000, but gave my sister $1 million. What should I do?
Yahoo
08-04-2025
- Business
- Yahoo
KTRADE Partners with Dynamis and Finch to Revolutionize TPA Data Access with Payroll & Census Integration
PLYMOUTH, Ind., April 08, 2025--(BUSINESS WIRE)--KTRADE today announced its partnership with Dynamis, a 7 Simple Machines platform powered by Finch, to bring automated data access and insights to their Third-Party Administrators (TPAs) Alliance Members. This collaboration will provide seamless connectivity to plan sponsor census, payroll, and pay statement data, eliminating manual processes and improving efficiency for TPAs and retirement plan administrators. "Our mission has always been to simplify retirement plan administration while delivering best-in-class service to our TPAs and plan sponsors," said Trent Newcomb, Managing Director at KTRADE. "By leveraging the Dynamis platform with Finch's API, we're eliminating outdated processes and giving TPAs instant, seamless access to the critical data they need—boosting efficiency and driving better outcomes." From census to 3(16) to Secure 2.0, Dynamis supplies advanced data intelligence with standardized, automated reports that ensure confidence in compliance and enhanced efficiency. Powered by Finch's end-to-end data connectivity platform, Dynamis will provide KTRADE Alliance Members with direct access to standardized payroll and census data from plan sponsors' payroll systems with coverage that accounts for 80% of all US employers. This innovation will significantly reduce administrative burdens, increase accuracy, and streamline retirement plan management like never before. "We built Dynamis to support the business needs of TPAs. We knew the unbundled market needed a platform that could drive efficiency for administrators, open up new revenue streams and accommodate changes from Secure 2.0," said Karim Lessard, CEO of 7 Simple Machines. "The platform will enable TPAs in the KTRADE Alliance to modernize their service delivery. Rather than chasing census and payroll data, Dynamis will allow members to automatically collect vital sponsor data and spend more time on value-add activities for their clients." "Finch is transforming the retirement industry by enabling direct access to the source of truth for employer payroll and census data," said Finch Co-Founder Ansel Parikh. "TPAs and recordkeepers have been bogged down with inefficient, manual processes for too long. Our automated solutions will empower these administrators to streamline operations in order to focus on their primary mission: helping people plan for their financial futures." Key Benefits of the Partnership: Seamless Payroll & Census Data Access – KTRADE Alliance Members can now pull up-to-date employer data directly into the Dynamis platform via Finch, ensuring accuracy and compliance. Eliminating Manual Data Entry – Say goodbye to spreadsheets and manual uploads—this integration automates data syncing, saving valuable time. Data Intelligence and Scrubbing – Incoming payroll data is automatically scrubbed for errors, highlighting issues with payments and employee demographics and allowing for simplified plan funding and year-end census filing. Scalability & Efficiency – TPAs can serve more clients efficiently, focusing on strategic plan management rather than administrative tasks. With this partnership, KTRADE is setting a new standard for TPA and retirement plan administration, reinforcing its commitment to innovation, efficiency, and client success. For more information on this exciting development, visit KTRADE, Dynamis, and Finch. About KTRADE KTRADE is a leading provider of retirement plan recordkeeping solutions, offering cutting-edge technology and expert services to TPAs, plan sponsors, and advisors. KTRADE focuses on simplifying retirement plan management, while providing flexible, customized solutions. KTRADE empowers clients with innovative tools to drive efficiency and success. About Dynamis Built from the ground up, Dynamis is a premier technology provider delivering powerful automation tools that streamline census, payroll, and compliance processes for TPA and retirement professionals. About Finch Finch is the leading connectivity platform for employment systems, empowering applications to develop solutions for employers and employees through programmatic access to HR, payroll, and benefits data. Finch's ambition is to revolutionize employment by building the infrastructure that powers every facet of work — from retirement and health insurance to workers' compensation, employee engagement, and beyond. View source version on Contacts KTRADE Media Contact:Marta Bagleymbagley@ 888-954-9321KTRADE Dynamis Media Contact:Rachel Huffmanrachel@ 206-898-99377 Simple Machines Finch Media Contact:Kiera Blessingkiera@ 610-324-4957Finch Sign in to access your portfolio
Yahoo
30-03-2025
- Business
- Yahoo
A job-hopping slowdown could be a boon for retirement savings
When it comes to boosting your salary, it pays to ... stay? That's the newest finding from wage growth data out of the Federal Reserve Bank of Atlanta, which tracks the three-month rolling average of median wage growth for "job switchers" and "job stayers." A tight labor market in recent years helped drive wage growth for job switchers far above what workers who stayed in their current positions saw. That gap hit a multi-decade high in August 2022, when job switchers saw their median wage growth hit 8.4%, 2.8 percentage points higher than wage growth for job stayers during that time. Wage growth for the two groups has been converging over recent years, with job stayers now seeing higher median wage growth. In February, workers who switched jobs saw 0.2 percentage points less wage growth than those who stayed. That's the most that job switcher wage growth has lagged job stayers in over six years. Slowing wage growth is hardly ideal for workers looking to boost their income, but financial advisors say the shift could offer a silver lining for long-term retirement savings. "Job-hopping can no doubt be detrimental to retirement savings," said Carla Adams, founder of Ametrine Wealth in Lake Orion, Michigan. READ MORE: Social Security call wait times soar — what advisors need to know Recent research from Vanguard supports that claim. Researchers looking at earnings from over 50,000 job switchers found that a worker starting with a $60,000 salary who changes jobs eight times throughout their career could forfeit an estimated $300,000 in total retirement savings. "The typical (median) job switcher experienced a 10% pay increase in our income sample," the authors wrote. "Despite this notable increase, the median job switcher saw a 0.7 percentage point drop in their saving rate." Adams said that drop is likely due to low auto-enrollment rates in employee-sponsored retirement accounts. Under Secure 2.0, companies must auto-enroll employees in most 401(k) and 403(b) plans. Doing so can help boost retirement savings participation, but advisors say the standard contribution rates aren't high enough to adequately save for retirement. Auto-enrollment plans typically set employee contributions at between 3% to 6% of their pay. Many plans now include an "auto-escalation" feature that increases the employee's contribution rate by 1% annually until it reaches a maximum of 10%. That feature helps, but it can take years to reach its escalation cap, Adams said. For someone who was contributing 10% at their previous job, starting a new role where they are auto-enrolled at only 3% can significantly reduce their contribution rate. READ MORE: A checklist for advisors assisting federal employees "Employees can, of course, override the auto-enroll contribution rate and opt for a higher rate from the get-go, a great solution to this issue," Adams said. "However, many people neglect to do this. Starting a new job is overwhelming enough and new employees have plenty of forms from HR to fill out in addition to learning their new job, so overriding auto-enrollment contribution rates often gets overlooked." Theoretically, job switchers who receive large salary boosts could see their retirement contributions increase in dollar terms even as their savings rate decreases. In Vanguard's study, job switchers who saw more than a 10% increase in their wages managed to save more in terms of absolute dollars, even while contributing a lower percentage of their total wages. Still, such significant wage jumps are outside the norm. That's especially true when looking at wage boosts for job switchers now. Data used in Vanguard's research ranged from 2014 to 2022, when job switchers saw greater wage growth compared to job stayers. For advisors working with clients considering a job switch, it's important to remind them to set their contribution rates to a suitable level for their retirement goals, usually above the default rate. Frequent job-hoppers can also lose out on retirement savings due to restrictions on vesting periods of employer-matched contributions. "Employer matching and profit sharing contributions can be a great employee benefit; however, they can be fully or partially lost for employees who job-hop," Adams said. READ MORE: Women face unique retirement challenges — but advisors can help The Employee Retirement Income Security Act (ERISA) requires employer contributions to become fully vested through one of two schedules. Under the three-year cliff vesting schedule, employer contributions become entirely the employee's after three full years of service, with no vesting before the three-year mark. Alternatively, under the six-year graded vesting schedule, employer contributions vest incrementally: 20% after two years, 40% after three years, 60% after four years, 80% after five years and 100% after six years of service. Some companies might offer immediate vesting for their employer contributions, but doing so is not required under the law. It's crucial that advisors check with their clients to see what the vesting schedule is for their employer-sponsored retirement plans before making the switch to another job. "If an employee leaves a job prior to their employer matches being fully vested, they lose some or all of the employer contributions that were made to their plan, decreasing their 401k balance," Adams said. Watching out for these common pitfalls can help avoid some of the drawbacks to job switching, but such strategies may be moot if the new wage growth trend continues. As long as job switcher wage growth lags that of job stayers, advisors might be better off telling their clients to stay where they're at for the moment.
