Category : planning

Don’t Sit: How to Rollover Your 401k

Congrats! You’ve landed a new job (never a doubt) and didn’t even have to list us as a reference (Oh, the accolades we would’ve thrown your way). While you’re busy getting acclimated to your new work digs, if you have a 401k with your previous employer, don’t forget to bring it with you, along with your trusty stapler. Here are a couple options on how to roll it over:    

Direct rollover to new company plan

If you plan on performing a direct rollover of your old account, first check to make sure your new employer’s retirement plan will accept 401k rollovers. If so, contact the 401k administrator at your new company for a new account address [Example: ABC 401k Plan FBO (for the benefit of) YOUR NAME]. Once you fill out all required paperwork, your 401k funds will either be transferred directly from your old plan to the new plan, or mailed to you as a check made out to the new account address. Just make sure to turn it over to your new company’s 401k administrator.

Rollover to an IRA

You can also roll over your 401k to a traditional IRA, either by transferring the funds to your existing traditional IRA, or by opening a new IRA to receive the funds. No dollar limit is required for either one. You can also roll over – or convert – your non-Roth 401k money to a Roth IRA. The taxable portion of your distribution from the 401k plan will be included in your income at the time of the rollover.

Leave it where it is.

Sometimes the best move you can make with your 401k is to not make any move at all. At least for the time being. For instance, If you’re happy with the investment alternatives your former job offers, or if you need some more time deciding your next move, or if your new company requires a certain amount of time before you can participate in their 401k plan, you may be able to simply leave your 401k where it is.  

Cash out.

Please advise, we only recommend this as a “last resort” option. After you leave your previous employer, you can choose to withdraw your 401k funds in a lump sum after leaving your previous employer. To do this, request that your 401k plan administrator cut you a check. While the check amount will look great in your hands, remember that cashing out could put a dent in your retirement savings, plus you may be faced with significant taxes and penalties in the short term, too.

Of course, not all 401k plans are created equal. So before you make a final decision, we’ll help you choose the best fit for your retirement goals. Hey, it’s what we’re here for, so let’s chat.  

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Before Booking Your Summer Getaway …

These Money Moves Can Keep You From Sweating the Details on Vacation 

In the heat of summer, it’s hard not to daydream about lounging on sandy beaches and sipping on your favorite frozen concoction. But is taking a summer vacation realistic for you? Before you start planning your escape, consider these vital financial moves first before spending on your next getaway. 

Pad that emergency fund.

Did you know four out of every ten Americans can’t afford a $400 emergency, according to a report from the Federal Reserve Board? Before you hit the road on that summer trip, make sure you’re saving cash to cover any unexpected injuries, illnesses or life-threatening home repairs. Once you have at least $1,000 saved, congratulations! You’re doing better than most. From there, commit to saving at least three to six months of living expenses to ensure you’re protected against any future emergencies.

Don’t be tardy paying down student debt.

Student loans are becoming more and more of a necessary evil for many Americans seeking higher education. The average student loan debt for a graduate in 2017 was $39,400, according to Student Loan Hero. Ensure you have a plan to pay back your debt that works within your budget before you start looking at vacation destinations.

Stay focused on future you.

We all know we should be saving as much as we can for retirement. But if you’re looking for a hard number, 10% to 15% of your income is a good rule of thumb. Once you’ve established the habit of saving for retirement, it’s important to save the right way – by investing in a mix of stocks and bonds in line with your age and risk tolerance. This is where blooom helps.

Save for vacay before spending on vacay.  

Taking a summer vacation is more of a luxury than a cultural norm, according to a recent survey from Bankrate. Forty-nine percent of Americans don’t plan to take a vacation this summer, and one in four survey respondents are not taking a summer vacation because they can’t afford it. Only 36% of respondents who get paid vacation days plan to use all of them this year. So how can you get that well-deserved R&R?

If you think you might have to stay home until next summer, consider changing your destination and/or accommodations to something more practical first. Check out the New York Times’ recent article about the 11 Ways to Save Money When Booking Travel for valuable tips and tricks to maximize your vacation budget.

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Pig playing soccer goalkeeper

Kick in More Now for Retirement: That’s the GOOOOOAAAALLLLL

Right now, in the thick of the FIFA World Cup, teams from across the globe are vying for the coveted gold trophy with the World Cup Final match taking place on July 15th. While these world-class soccer players aren’t likely focused on making any (ahem) BIG saves for retirement right now, they should be. According to the Telegraph, the average soccer career lasts only eight years with a standard retirement age of 35.

A More Offensive Game Plan

Considering the average World Cup player right now is in their mid-to-late 20s, according to Statista, these professional athletes need to be kicking in as much savings as they can to set themselves up for a successful financial life and a sustainable retirement. There’s only one Ronaldo, one Messi, one Beckham, so establishing the financial security needed to retire after a less-than-a-decade career can feel too far out of reach for most others.

Off the pitch, the savings a typical 35 year old should’ve netted at this point has received a lot of attention lately. A study published from Fidelity recommended having twice your annual salary saved for retirement by age 35. Considering the weight of student debt and the outsized cost of housing plaguing millennials, this number feels very out of reach for most of the population in or nearing their 30s.

While the amount you save is vital, what isn’t gameplanned enough is how you’re saving. You can argue that you can save all you want, but if you’re simply holding your savings in cash, it won’t be in the position to grow enough to enable you to retire. After you establish the habit of saving, you must maximize your ability to grow your investments.

More Coaching Required

Two big determinants of investment growth are derived from minimizing fees and maximizing returns, and Americans need help with both. Data from the Census Bureau suggests that 79 percent of Americans work for an employer that sponsors a 401k-style retirement plan, but only 27 percent know how much they’re paying in fees on their 401k accounts, according to a study by TD Ameritrade.

Fortunately, by hiring blooom as your trusted advisor, you can rest assured that we’re working on your behalf to reduce investment fees wherever we can. We make managing your 401k simple, smart and affordable by leveraging the right funds for your goals with lower fees to optimize your retirement savings, no matter what age you are. That’s our GOOOOAAAALLLLL.

Not a blooom member? Here’s your best shot … join now.

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Springtime and Student Loans

Springtime also means graduation time for millions of high school students. This is often a time of mixed emotions for those students’ parents. On one hand, you celebrate the accomplishment of your child. On the other hand, you feel a bit nostalgic about how fast the time has gone. It feels like just yesterday that you tearfully walked your son or daughter into their first day of kindergarten.

Student Loans are the Norm

This can also be a time of great financial stress for parents. Especially for the those Americans who aren’t able financially to simply stroke a check for their child’s college education. For a few, there are academic, athletic, or need-based scholarships and grants. But overall, those are still few and far between. More and more, we see college graduates leave school with a load of student debt. According to debt.org, the average college graduate in 2017 had $38,000 of student loan debt.¹ The number of graduates (undergrad or post-grad) with over $100,000 of student loan debt continues to climb at an alarming rate.

The Changing Cost of College Over Time

In fact, over just the last decade we have seen the cost of college growing at a rate of almost 5%.² This is twice the rate of inflation in this country over the same period. Long gone are the days of paying for your entire college education through a summer job. The average cost of a 4-year in-state college education is $39,880 (4 years at Private college average will run you nearly $138,960)³. I certainly am not aware of any summer jobs that are paying this much! So it’s no surprise that student loan debts are approaching epidemic proportions (over $1.49 trillion in total outstanding student loan debt in the US as of December 20174).

The Impact of Student Loans on Jobs

For graduates leaving college with lots of debt, there will absolutely be unintended negative consequences. For example, we see a decline in the number of graduates going into badly needed social services like teaching, nursing, and social work. It is clear to me that a lot of this is due to the burden of debt. If you have $100,000 of student loan debt, the attraction of a higher paying job in finance or consulting can easily sway your decision away from what could be your passion—be it teaching or social work.

Additionally, we see a decline in entrepreneurship from our college graduates. Starting your own business is incredibly hard as it is. Tack on six figures of student loan debt, and the allure of a salary can be too tempting to pass up. I shudder to think of the entrepreneur that could have found the cure for cancer but ended up working on Wall Street so they could pay off their student loans.

Consider This When Your Child Applies for College

My advice to parents of high school students today: If you are unable to pay for a significant portion of the cost of college, help your son or daughter carefully weigh this decision. This is most important if they are considering a private or out-of-state college. I would not expect the majority of 18-year-olds to understand the financial implications of their college choice. I often hear stories where people carry student loan debt well into their 40s and even 50s. Therefore, if we burden generations of students with debt that might take decades to pay off, we also limit how much they can save for their retirement. We owe it to our kids to help them understand the expense of college before they take on an obligation that could affect them financially for the rest of their life.

 

Chris Costello
Chairman & Co-Founder


1 https://www.debt.org/students/
2 https://www.savingforcollege.com/tutorial101/the_real_cost_of_higher_education.php
3 https://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10064
4 https://www.federalreserve.gov/releases/g19/current/default.htm


Optimizing your retirement savings not only helps you, but indirectly also your child. Not a blooom member yet? Get started with a free analysis to see how we could optimize your savings.

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Updating your beneficiaries is important.

Estate Planning 101

It’s always a little uncomfortable to talk about death, since we all like to think we have lots of time left. In Paul Bowles’ words, we tend to “think of life as an inexhaustible well.” However, none of us are going to be around forever, and it’s a good idea to be prepared. Family members have enough to deal with when someone passes away, so a kindness you can do them today is to make sure your estate planning is in order.

Fortunately, it’s not that cumbersome. Nor is it something that only the wealthy should concern themselves with. Here are a list of mission-critical tasks that everyone can complete.

1. Designate Beneficiaries

Who should receive the money in your retirement account, if you pass away? Designate them as beneficiaries on 401k, 403b or any other retirement accounts (IRAs, Roth IRAs). This should be pretty easy to do—usually on a website, or paper form.

Not sure if you designated beneficiaries?

If you have a 401k, 403b, or TSP: ask your HR person at your company where you can locate this information.

If you have an IRA or Roth IRA: Contact the institution that holds your money and ask them.

It’s a good idea to set yourself a reminder to review this each year. Make sure that
a) all beneficiaries are still alive
b) you still want them as a beneficiary
c) their contact information is correct.
If you don’t name or update beneficiaries, it might cause problems for the person in charge of your estate. In extreme cases, the money might even go to the state. 😕

2. Draft a Will

This is the document that lays out your wishes for how you want your estate handled upon your demise. You pick the person who will act as your executor: the person who deals with the probate court if necessary, and the person that settles your debts and distributes your property to your beneficiaries. Since this is no small task, you will definitely want to appoint someone that you trust, who is task oriented and willing to handle this process.
Most importantly, if you have minor children, the will outlines and specifies who will become guardian (raise) your kids after you (and your spouse) are gone. You should keep a copy of the will in a safe place and be sure to send a copy to the person you named as your executor.
You can hire an attorney to help with your will. We also recommend online services such as legalzoom or rocketlawyer.

3. Draft a Living Will

This document is often called healthcare directive, advance directive, or healthcare power of attorney. It contains your wishes regarding your care, should you be incapacitated or in a situation where you cannot speak or make decisions for yourself. Being in a coma is a good example of this. You’ll designate a person who can instruct the doctors and make healthcare decisions for you and on your behalf. Clearly this person needs to be someone you trust and who is capable of making difficult decisions. A living will is a document you need to keep handy. Additionally, you should give a copy to the person you named as your healthcare power of attorney.

We recommend reviewing your will and beneficiaries once a year. Life changes quickly: People have kids, relationships end, your beneficiaries might move, and so on. It shouldn’t take more than a few minutes to update this, and it might save your family members a lot of trouble.

Now, after this serious memento mori… go hug your loved ones!

 

Blooom and its representatives do not provide legal or tax advice. This information is meant to be general in nature. You should seek the advice and counsel of a qualified attorney and/or tax expert for your own estate planning.
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