Category : savings

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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The Right Small Steps in the New Year Can Make a Big Impact

Have you ever noticed how a lot of financial blog headlines read like they’re introducing the latest diet trend?

“Ditch the Starbucks and Retire Ten Years Earlier!”

The premise of this kind of financial advice always boils down to the same basic principle: in order to grow your money, you need to spend the money you already have more wisely. Makes sense, right? Especially around this time of year, it may even sound like a pretty good New Year’s resolution. And yet,somehow, it is simultaneously unattainable.

“Abandon your morning latte fix and you’ll become rich”, they say.

“That’s easy! I can do that!”, we say. But for a lot of us, we can’t seem to make it work.

Starting in February, there might be an attainable way to save more without sacrificing anything. Some people will see their take home pay increase due to the new tax code. This could be money you can invest into your retirement and still keep drinking those lattes guilt-free.

Sidenote: Want to know how the tax rate will affect your paycheck? There are many options, but this is one we found that’s easy to use.

The problem with saving money, whether it’s on ditching lattes or getting a little more in your paycheck, is that unless you’re taking the money and putting it directly into your piggy bank, you’re likely just spending it on other things throughout your day or rest of your week, so none of it ever actually makes it back into your savings or retirement account. It’s all of the sacrifice with none of the reward.

How I learned to stop worrying and love automation

So what’s the solution? In today’s technologically-driven world, the trick may lie in automation. The old adage to ‘pay yourself first’ becomes surprisingly easy if you can set it up once and then forget it. There are a growing number of tools to help you do just that.

Many banks have round up programs to automatically save your change – i.e if you buy that latte for $3.81, your account rounds up to $4.00 and automatically saves $0.19 into your account. Or if you’d rather route your money to the market instead of bank account, you can sign up for a penny stock provider like Acorns. It may not seem like a lot, but think of how many purchases you make in a day, in a week, in a month. It adds up!

Let your paycheck do the work

Additionally, you might be surprised by the programs offered through your workplace. If you’re not already contributing to your employer-sponsored retirement plan (401k, 403b, or similar), start contributing a percentage of your paycheck. Most employers will match your contributions with some of their own. Some employers also offer other types of savings plans, or will allow you to split your paycheck among multiple accounts, so that a portion could be directly deposited into your savings account.

But maybe the most powerful automation you can make is the annual contribution increase in your retirement plan. The chart below illustrates the difference between steadily saving 5% of income, and starting at 5% but increasing contributions by 1% annually until the recommended goal of 15% of income. As you can see, the amount saved with small incremental savings is more than 2× that with no increase. While you may initially notice the difference in your wallet for the first couple of months (or if you’re lucky you won’t, depending on how the new tax code affects you), after that, it will just become the new normal.

So if your New Year’s resolution is for better financial health in the coming year, make sure you’re doing the things that will really make a difference. That way, you can buy your morning latte with a clear conscience (and maybe a little extra whipped cream), knowing you’ve already taken care of your savings goals.

 

Please note: Blooom does not provide tax advice. Consult a tax expert for tax-specific questions.

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A Penny And 401k Fees Both Overpriced

Penny for Your Thoughts: You Pay More For 401k Than You Think

The U.S. Government has recently engaged in serious talks to abandon the production of the penny. Why? Because each penny costs 1.4 cents to produce, resulting in a cost of more than $100 million per year to taxpayers. If you’re a 401k investor, does this sound familiar? How so, you ask? The answer lies in knowing how much you’re paying in the hidden investment fees associated with your 401k account. Based on NerdWallet research, nearly 92% of people have no idea what they’re paying in 401k fees.


Why Paying 401k Fees Can Be a Big Deal

Fees unnecessarily sap the potential long-term results of your 401k. The average American will pay $138,336 in 401k fees. That’s 2.5 years of earnings for the average U.S. household.

Want to see the fees you could strike from your life? Check out our hidden fee calculator to get an estimate. Or, evaluate your actual account for a truer picture.

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