What is a 401k?
A 401(k) is an employer sponsored benefit that your Operator generously set up that allows you to save money, invest, save on taxes, and have the chance to receive a matching employer contribution. You have the ability to defer money directly from your own paycheck to save towards retirement and your Operator is able to come alongside you to provide a company contribution.
Benefits of a 401k?
Please feel free to read the information below or watch this video on the benefits of a 401(k) plan.
- It is easy! Your 401(k) contribution is pulled directly from your paycheck, in an amount you specify, automatically and before you can spend that money elsewhere. Putting retirement savings aside before it hits your bank account is a behavioral guardrail helping you prioritize preparation for retirement.
- Your money can work for you! Instead of saving your money in a bank account, you have the ability to invest in professionally managed investment options that will grow over time.
- Your Operator generously pays for all the administrative fees to help your money grow faster. This is a smart way to set yourself up for financial success.
- There are some great tax advantages to leveraging the 401(k). You can choose to put your own money in either pre-tax (saving taxes now) or Roth (saving taxes later). Your money can grow tax-deferred, meaning you won’t be paying taxes year-to-year while your money is invested in the 401(k).
Am I eligible?
18 years of age, 1 yr of service, and 1000 hours of service
There are 3 areas of eligibility in order to participate in this 401K plan.
- Age: You must be 18 years of age.
- Years of Service: You must have worked for at least 1 year from your date of hire.
- Hours of Service: You must have worked at least 1000 hours in that year of service.
If you meet the above criteria - You’re eligible!
If you’re not, don’t worry, you have something to look forward to.
I am eligible, but not registered?
Vestwell invites all eligible employees to register for their account by sending an email to the work email address provided by their employer. The email is entitled "Register for Your Retirement Plan!”. However, the email is no longer required to register for the platform successfully. To learn more about the registration process and begin your enrollment, please click this link.
FREE Money from your Operator to help you grow your retirement savings faster! You will get a $ for $ (100%) match on the first 3% you contribute of your own money. Then you will get a 50% match on the amounts you contribute up to 5% of your income. Examples:
- If you contribute 2% of your own money, you will receive 2% from your Operator for a total of 4% of your compensation.
- If you contribute 3% of your own money, you will receive 3% from your Operator for a total of 6%.
- If you contribute 5% (or more) of your own money, you will receive 4% from your Operator for a total of 9%.What a generous benefit, one you'd be smart to take advantage of.
How much can I contribute?
The most you can contribute towards your 401k account in 2022 are the following:
- Up to $20,500 for ages 49 and below
- Up to $27,000 for ages 50 and above
This does NOT include what your Operator put in on your behalf. Usually, you will select either a percentage of your pay or a specific dollar amount you want to contribute each payroll cycle.
What is auto enrollment?
How much should I save?
The sooner you start saving/investing, the easier it is to reach your financial goals. Being able to retire someday starts with your decisions today. If possible, aim to save in the range of 10-15% of your income. Your Operator's generous employer match will help you reach this goal. Always aim to max out the employer match because that's FREE money! Make sure to contribute at least 5% of your paycheck in order to get the full 4% employer match. Together, these 2 amounts would equal 9% and get you a head start on your retirement journey.
Roth 401k vs. Pre-tax 401k contributions?
Preparing for retirement is a major step; often this can be confusing and you may be unsure about where to put your Contributions. There are different ways that participants can contribute to their retirement plan.
There are two types of contributions you can choose from, these are Roth and Pre-tax. It's important to know that these contribution types are the most commonly associated with 401(k) or to other retirement plans and these are sometimes referred to as a ‘salary deferral’. Read below or watch this video to learn more about your different contribution options.
Differences between Roth and Pre-Tax
- The differences between Roth and Pre-Tax is pretty simple as the major difference is the tax treatment.
- Pre-tax: The strategy with Pre-tax is “don't tax me on it now, tax me on it later”. You’ll put money in without paying taxes on it, and you’ll pay taxes when you withdraw the funds after you retire. Your income tax burden for your current year will be reduced, but you’ll be on the hook for taxes later.
- Roth: The strategy with Roth is “pay now, don't pay tax on it later”. You’ll pay income taxes now, and then put that taxed money into the retirement account to invest. Your current year income tax burden won’t change, but you’ll never pay taxes on this money again.
What should I invest in?
You have a few options when it comes to how to invest your 401k account:
- Choose one of the available risk-based models.
- Blend multiple risk-based models together.
- Create your own investment model by selecting specific funds from the available 15-20 that make up the risk-based models.
The risk-based models vary from risk-averse/conservative to moderate to very aggressive. There are pros and cons to each one. The more aggressive models have higher risk, but also higher potential reward or increase in value. Meaning, your account value may experience significant positive and negative movements over time. Think of it like an adult roller coaster ride! Typically, employees far from retirement invest more aggressively, because they can afford to make up for those up and down movements. The more conservative models have lower risk but also lower potential reward or increase in value. However, your account value will stay more steady over time. Meaning less fluctuation or more like a kids roller coaster ride! Those closer to retirement often invest more conservatively, because they can’t afford for their account value to experience sharp increases or decreases. The default investment selection if you make no changes is the appropriate Target-Date Fund. Check out this Vestwell Article that can help guide you to choose the right investment elections. Use this site to reach out to us at Pandowea
When am I vested?
What are my next steps?
For questions regarding your account:
For investment related questions:
For example, how much to save, Roth vs. Pre-tax, or which investments are right for you.