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We are driven by the belief that EVERY investor deserves to have the type of innovative and sophisticated portfolios typically reserved for the ultra-high net worth or institutional investors. Our clients gain clarity and transparency of their retirement through portfolios which are uniquely crafted to each individual. Hawks Financial is a boutique firm, specializing in innovative investment and retirement solutions not typically available to the traditional investor through a “big-box” investment firm.
AFFILIATE PARTNER OF 401(k) MANEUVER
Professional Account Management to help employees Grow and Protect their 401(k)
Risk Management And Financial Planning
Investment Management
You deserve a portfolio uniquely designed around you and your goals. Experience sophisticated strategies not typically found in a "big box" firm.
Learn about our Investment ManagementRetirement Income Planning
Is the possibility of outliving your savings a concern? Create peace of mind through a portfolio designed around sustaining income.
Learn about our Retirement Income PlanningEstate and Legacy Planning
The concept of estate planning is simple. The vehicles, planning, and implementation to make it happen is not. We help direct you in ways to make your legacy secure.
Learn about our Estate and Legacy PlanningWealth Management
Experience personalized guidance for 401(k) and IRA Rollovers, Roth Conversions, and Cash Management. Understand fully how to mitigate current portfolio fees and expenses and learn if tax-free growth is right for you.
Learn about our Wealth ManagementLong Term Care
Did you know the average Home Health Aide service in Iowa costs $5,577 per month? Create a strategy for funding Assisted Living or other long-term care needs without draining your retirement assets.
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Life insurance can be a cornerstone of retirement protection. From protecting loved ones to providing tax-advantaged assets and income, create a life insurance plan as unique as your goals.
Learn about our Life InsuranceWhether you’ve lost your job or plan on changing jobs in the near future, there are common 401(k) rollover mistakes you need to be aware of.
Ignore these, and a rollover could take a chunk out of your retirement savings, trigger a big tax bill, and impact the quality of your retirement.
Keep reading for the top 401(k) rollover mistakes and how to avoid them.
401(k) Options When Leaving a Job
Here are the options on what you can do with your 401(k) when you leave a job:
- Leave the money behind in your former employer’s 401(k) plan. You don’t have to, but you can (and we’d advise against this option unless you qualify for the 55 and Separated from Service Rule).
- Roll over your 401(k) into an individual retirement account (IRA). This option has many advantages, including consolidating more than one 401(k) account into an IRA. This works well for those with a string of old 401(k) accounts.
- Roll over the old 401(k) to your new 401(k), if permitted by your new employer. If you have at least $5,000 saved in your old 401(k), most companies allow you to roll it over.
- Cash out your 401(k). This is a costly option we advise against because you will face penalties and pay taxes for cashing out before age 59½.
Costly Rollover Mistakes
What seems like a simple misunderstanding could possibly turn into a costly 401(k) mistake that could take a chunk out of your retirement savings.
This costly mistake lies in understanding the 2 types of rollovers.
- Direct Rollover – With a 401(k) direct rollover, the transaction occurs directly between the custodian of your old 401(k) plan and the custodian of your new 401(k), IRA, Roth IRA, or annuity. There are no penalties or taxes that have to be paid with a direct 401(k) rollover because it’s a trustee-to-trustee transfer.
- Indirect Rollover – With an indirect 401(k) rollover, you receive a distribution check from your 401(k) plan, and, then, to complete the rollover transaction, you must make a deposit into the new retirement plan within a 60-day period. If you don’t, it’s treated as a distribution, and you will pay taxes on the amount.
Indirect rollovers may be a huge mistake if you don’t follow the rules.
But, it’s just one of many.
Keep reading for the most common mistakes so you can avoid them at all costs.
#1 Doing an Indirect Rollover Incorrectly
With an indirect 401(k) rollover, you receive a distribution check from your 401(k) plan, and then, to complete the rollover transaction, you must deposit the funds into the new retirement plan.
Unlike the direct rollover, 20% taxes are withheld from every indirect rollover – whether you plan to roll over the funds or use the money to pay off debt or make a purchase.
The IRS mandates that your 401(k) custodian withhold this amount – so you get a check mailed to you, minus the 20% taxes.
After you receive the check, you are required to put those funds—along with the missing 20% – in a new retirement account within 60 days.
You will be able to recover the withheld taxes when you file your tax return, but to complete the rollover, you need to produce that extra cash.
If you fail to do so by the 60-day deadline, your distribution will be taxed as ordinary income and subject to a 10% early withdrawal penalty if you are under the age of 59½.
This means, if you miss the 60-day deadline or decide to cash the check, you may be forced to pay a 10% penalty in addition to the 20% tax.
Here’s how costly this could get: Let’s say you do an indirect rollover of your $10,000 total 401(k) balance before age 59½ – and you miss the 60-day deadline to roll over your funds. You will have 20% withheld in taxes along with a 10% penalty for early withdrawal.
This means that you might only keep $7,000 of your original $10,000 401(k) balance – depending on your tax bracket.
See how quickly this could eat away at your hard-earned savings?
#2 Leaving Your Old 401(k) Behind
Leaving behind 401(k)s with past employers happens more often than it should.
According to Capitalize, “The number of forgotten 401(k)s increased by over 20% since May 2021 driven by a period of heightened job switching (“The Great Resignation”) with 3.8 million and 4.4 million accounts left behind in 2021 and 2022 respectively.”¹
Based on their findings, this equates to 1 in 5 job changers leaving a 401(k) account behind when changing jobs.²
It may seem easy and safe, but that’s not always the case.
It is your money – not your former employer’s.
And that means your past employer cannot manage your old 401(k) for you.
Leaving behind an old 401(k) means your account will remain subject to plan rules and you will continue to have limited investment options.
This often results in your retirement funds not suiting your risk tolerance and may lead you to miss out on potential gains or avoiding losses.
Bottom line: When you aren’t engaged with your 401(k), your money won’t work for you like it should.
[Related Read: The Danger of Forgetting to Roll Over Old 401(k)s]
#3 Rolling Over Your 401(k) Too Early
There is an IRS rule that – if you qualify – may help you have more money and avoid penalties that could eat into your retirement income.
It’s called the 55 and Separated from Service Rule. It’s also called the Rule of 55, or 55 Rule.
This IRS provision allows you to take penalty-free distributions on 401(k)s if you leave your job during or after the calendar year you turn 55.
If you want to retire early or lose your job and need cash flow to cover daily expenses while you look for another job, this rule allows you to take distributions sooner than is typically allowed.
You will still owe ordinary income tax on the amount you withdraw, but you can avoid the 10% IRS early withdrawal penalty.
[Related Read: When It May Not Make Sense to Roll Over Your 401(k)]
#4 Taking Company Stock with You
Does your 401(k) contain shares of your former employer’s stock?
If so, be careful!
Rolling over stock that has appreciated over the years may wind up costing you.
A special rule, the Net Unrealized Appreciation (NUA) rule, applies when you receive a tax distribution of employer stock from your plan.
According to this rule, you only pay ordinary income tax on the cost basis of the stock, which is the stock price at the time the plan purchased it for you.
Any appreciation in the stock will receive more favorable long-term capital gains treatment.
However, this rule does not apply if you roll over the stock to an IRA.
The NUA rules must be utilized as part of a full and final rollover from an employer plan.
Before You Roll Over Your 401(k)
Understanding all your rollover options before you make a move is crucial, and seeking professional help before you make your move is advisable.
Each investor’s situation is unique, and speaking with someone may help you avoid costly 401(k) rollover mistakes and may help you make the best decision possible for your financial future.
Have questions about rolling over your 401(k)? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.
Sources:
- https://www.hicapitalize.com/resources/the-true-cost-of-forgotten-401ks/
- https://www.hicapitalize.com/resources/the-true-cost-of-forgotten-401ks/
Graduation season is upon us. If you don’t have a gift for your grad yet, may we suggest something better than a gift card or cash?
It doesn’t matter if they are graduating high school or college – young adults need financial help.
A recent report from the Pew Research Center claims, “Fewer than half of young adults ages 18 to 34 (45%) say they’re completely financially independent from their parents. […] 44% of young adults say they received financial help from their parents in the past year. The top two areas in which they got help were household expenses and their cell phone bill or subscriptions to streaming services.”¹
Only 16% of those aged 18-24 say they are financially independent from their parents.²
Even if they have earned their diplomas, most don’t have their finances in order.
Instead of giving them a trinket with the graduation year on it or a gift card, give the gift of financial support.
Here are 8 financial gift ideas that will empower your grad’s financial independence.
#1 Stocks
Gift stocks can be risky, but they are a great educational opportunity for young grads.
Giving the gift of stocks teaches young adults the value of investing and how to manage their investments.
Don’t just give them the stock certificates – take time to discuss which stocks you bought and why. Show them how online brokerage accounts work. Teach them about how the market works.
If they aren’t thrilled with this gift now, they will be years down the road.
#2 Individual Retirement Accounts
For the graduate who is already earning money (even if it’s just a part-time job), a Roth IRA makes a great gift idea.
While it may not seem beneficial today, they will appreciate it more than they know 40-plus years down the road.
Keep in mind that there are specific rules to opening and contributing to a Roth IRA:
- The individual must be working and bringing home earned income.
- You can contribute the amount of their earned income, up to the $7,000 contribution limit.
- No money can be withdrawn until the individual is 59½ years old – without penalty.
Before opening a Roth IRA for a graduate, make sure they don’t already have one set up.
If they don’t, we recommend seeking third-party advice beforehand.
#3 Fund an Emergency Savings Account
The Lend EDU College Students and Personal Finance Study found that “81 percent of students do not have an emergency fund.”³
It will only take one unexpected emergency for young adults to understand the importance of having savings.
Help them avoid this jolt of reality and help them start an emergency fund. If they already have a savings account set up, contribute to it.
If you want to really drive home how important it is to have cash on the sidelines for emergencies, show them receipts or bank statements that show exactly what past emergencies have cost you.
Showing, not telling will be more impactful – and, hopefully, set them up for financial success in life.
#4 Pay Down Student Debt
The average cost of tuition and fees for the 2023 – 2024 school year is $42,162 at private colleges, $23,630 for out-of-state students at public universities, and $10,662 for in-state students at public colleges according to U.S. News & World Report.⁴
With tuition costs soaring, many college graduates enter the workforce with debt up to their eyeballs.
Two-thirds of college students take on debt to earn their degrees.⁵
But it isn’t just student loans they are taking out.
In addition to student loans, 33.1% of students carry personal loan debt, and 64.8% of college students have credit card debt.⁶
For the college graduate in your life, consider helping them with some of their debt.
Just make sure the money you give actually goes toward paying down the debt.
[Related Read: Reality Check – Why You Need to Talk to Your Child about Paying for College]
#5 Cover the Cost of College Essentials
If you are celebrating a high school graduation, one of the best financial gift ideas is covering the cost of essentials – items college students cannot do without, such as textbooks and laptops.
Ask them for a list of their courses and order their books for them online.
#6 Give the Gift of Knowledge
Unfortunately, American schools don’t always do a great job when it comes to teaching financial literacy.
A Nitro survey of 1000 millennials’ perceptions of the public school system found that 84% of respondents feel high school did not prepare them to handle their personal finances.⁷
Lend EDU College Students and Personal Finance Study revealed the following:
- 43% of students surveyed could not name one major difference between a credit card and a debit card.
- 23% of students surveyed could not name one major difference between a checking account and a savings account.
- 68% of students surveyed did not know what a 401(k) or IRA is used for.⁸
Instead of giving a card with cash, consider signing the graduate up for a financial literacy course or giving them a book about finances that has made a difference in your life.
[Related Read: 10 Financial Lessons for Young Adults Before They Leave the Nest]
#7 Subscription to a Budgeting App
When young adults get their first “real” jobs, it can feel like a windfall (even if it isn’t).
That’s why it is important for them to learn how to budget.
As much as we can tell young adults to budget, it’ll be much more likely that they will budget if we give them budgeting tools.
One of our favorite financial gift ideas is buying the graduate a subscription to a budgeting app, such as You Need A Budget (YNAB), which costs up to $14.99 a month.
#8 Set Them Up with a Financial Advisor
If the graduate is entering the “real world” and earning “adult money,” it is a good idea to set them up with a financial advisor.
Especially if they won’t listen to your sound advice.
This is a wonderful way to get them started on the right financial path at an early age.
Better Prepare for a Life of Abundance in Retirement. Check us out on YouTube.
SOURCES
- https://www.pewresearch.org/social-trends/2024/01/25/financial-help-and-independence-in-young-adulthood/
- https://www.pewresearch.org/social-trends/2024/01/25/financial-help-and-independence-in-young-adulthood/
- https://lendedu.com/blog/college-students-and-personal-finance-study
- https://www.nasdaq.com/articles/how-much-does-it-cost-to-attend-one-of-2024s-best-colleges
- https://blog.suny.edu/41271/more-than-student-loans-understanding-other-forms-of-debt-as-a-college-student/
- https://blog.suny.edu/41271/more-than-student-loans-understanding-other-forms-of-debt-as-a-college-student/
- https://www.nitrocollege.com/research/remake-the-school-system
- https://lendedu.com/blog/college-students-and-personal-finance-study
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Saving for retirement is essential, and a 401(k) plan can be an effective way to have a comfortable retirement.
Yet, according to a 2023 survey, 4 in 10 workers with a 401(k) don’t contribute.¹
If you are hesitant to set aside a bit or more of your paycheck for your retirement, consider these 5 perks of saving for retirement in a 401(k).
#1 You May Be Able to Reduce Taxable Income
Perhaps the biggest perk of saving for retirement in a 401(k) is that it helps reduce your taxable income.
You get a tax break for every dollar that you invest into your 401(k) with pre-tax dollars.
For example, if you earn $50,000 per year and put 3% of your pay into your 401(k), it equals $1,500 in savings.
This $1,500 drops your taxable income down to $48,500.
In some cases, your 401(k) contributions may even push you into a lower tax bracket, which could mean paying a lower tax rate.
[Related Read: 5 Crucial 401(k) Mistakes to Avoid in 2024]
#2 You May Be Able to Take Tax-Free Withdrawals
Should your plan have the Roth provision and you are able to contribute to it, you won’t get a tax break since contributions are made with after-tax dollars.
But you will be able to withdraw tax-free in retirement.
[Related Read: Should I Consider the Roth 401(k)?]
#3 You Can Earn Free Money
A big perk of saving for retirement in a 401(k) is that you can earn free money through a company match.
Typically, 401(k) company matches are 3% – 6% of the employee’s salary.
If you contribute the required percentage, you receive the same amount back into your retirement plan from your employer.
You earn more money toward your retirement just by contributing.
For example, if your company matches 100% up to 6% of your pay and you make $40,000 a year, you could put in $2,400 (or 6%) for the year, and you would get $2,400 of free money toward your retirement.
[Related Read: 3 Reasons to Get the Company Match in 2024]
#4 You May Be Able to Boost Savings without Contributing More
Another perk of saving for retirement in a 401(k) is that it may be possible to boost your retirement savings without increasing your contributions.
The key is to stay engaged with your 401(k) and rebalance it regularly.
Rebalancing your 401(k) is the process of realigning the weightings of your portfolio’s assets (or investments).
This means periodically buying or selling assets in your portfolio to maintain the initial desired level of asset allocation.
And it helps you stay within your risk level, protects against potential losses, and allows you to take advantage of growth opportunities during good markets.
If you aren’t rebalancing your account allocations, you may be missing out on earning more and keeping more of your hard-earned retirement savings.
[Related Read: What Every Investor Needs to Know about Rebalancing a 401(k)]
#5 You Can Make Catch-up Contributions
As you near retirement, you can save even more with catch-up contributions.
Employees with 401(k)s can contribute up to $23,000 for 2024.
However, those 50 and older can utilize catch-up contributions up to $7,500, for a total of $30,500 in 2024.
[Related Read: Retirement Plan Contribution Limits for 2024]
Professional Management May Help Grow Your 401(k) Balance
Professional 401(k) management help has been shown to increase 401(k) investors’ returns.
The Vanguard Fund Group published a 2019 study titled Advisor’s Alpha, which reported a 3% average increase in the value of portfolios of clients who work with a good financial advisor and have their accounts regularly rebalanced.²
To see how 3% may improve your 401(k) performance, check out our retirement calculator.
When you have professionals personally managing your 401(k), like we do at 401(k) Maneuver, the focus is on the outcome, not a cookie-cutter approach to investing based on your retirement date.
We believe there’s no such thing as a one-size-fits-all approach to saving for retirement.
Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that harm your account performance.
We are not robo advisors – we are real people making decisions on your behalf.
And, as a fiduciary, we’re obligated to act in your best interest with the goal to improve your account performance so you have more money during retirement.
See how 401(k) Maneuver works.
Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors today.
SOURCES
- https://www.cnbc.com/2023/09/07/4-in-10-workers-with-a-401k-dont-contribute-to-plan-cnbc-survey.html
- https://personal1.vanguard.com/pdf/ISGQVAA.pdf
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No two people spend or save the same way. What works for you may not work for someone else.
But there are tried-and-true ways to save more and build wealth for retirement.
Use the following 3 personal money moves to guide your financial decisions in Q2, and your checking account, savings account, and retirement account may look quite different at the end of the year.
#1 Pay Yourself More
According to Statista, the number one New Year’s resolution for 2024 was “to save more money,” with 59% of those polled listing it.¹
If saving more is one of your goals, the best way to do it is to pay yourself first – and pay yourself more.
Paying yourself first means taking a percentage of every paycheck and investing it in a retirement account or other savings vehicle. And do it before you pay anyone else (i.e., bills, businesses, etc.).
Start by paying yourself first if you aren’t already.
If you are already doing it, see if you can increase how much you contribute to your 401(k) or IRA.
If you don’t think you have room in your budget to increase how much you contribute to your 401(k) from your paycheck, look for other areas in your life where you can cut back.
If you are hard-pressed to boost your savings, it may mean you are overspending or living beyond your means.
#2 Build Your Emergency Fund
A 2024 Bankrate survey found that “only 44 percent of U.S. adults say they would pay for an emergency expense of $1,000 or more from their savings. […] Without savings to fall back on, 35 percent say they would borrow to pay a $1,000 unexpected expense, either by financing with a credit card and paying it off over time, taking a personal loan or turning to friends or family.”²
This is a problem.
Emergencies happen. And they are often costly.
There will be a bill, whether it is a sudden need for new tires, an emergency dental procedure, a required plumbing visit, a natural disaster, or a medical emergency.
How will you pay this unexpected expense without an emergency fund?
Will you have to borrow money or put it on a credit card? Either way, you’ll end up in debt.
The last few years have been financially challenging for many Americans.
As a result, a high number of Americans have turned to taking hardship withdrawals from their 401(k) accounts.
According to Bank of America, “15,950 participants took hardship distributions during Quarter 3, which is up 36% from 2022.”³
Additionally, Vanguard’s How America Saves 2023 Report claims, “In 2021, overall hardship withdrawal activity reverted to pre-pandemic levels from 2019, and in 2022, hardship withdrawal activity increased to a new high.”⁴
Without an emergency fund, people were forced to borrow from their future.
401(k) hardship withdrawals have consequences, and they should only be sought in extreme situations.
This is why it is critical to build your emergency fund. And do it now.
Set aside money every month to build up this fund.
Sell unused items and put the money you make toward this fund. Consider a side hustle just long enough to boost your savings for emergencies.
#3 Get Professional Help
If you have never been taught how to choose your own investments or simply don’t have the time to do it, having someone to help manage your 401(k) may have big advantages.
Aon Hewitt and Financial Engines conducted a study from 2006 to 2012 comparing the returns of investors who sought help in the form of online sources or managed accounts to those who managed their 401(k)s themselves.
The study revealed, “If two participants—one using Help and one not using Help—both invest $10,000 at age 45, assuming both participants receive the median returns identified in the report, the Help participant could have 79 percent more wealth at age 65 ($58,700) than the Non-Help participant ($32,800).”⁵
However, not all professional 401(k) management companies are created equal.
A robo advisor managed account is where an investment service selects a group of funds and packages them in an investment portfolio for you.
There is little personalization; many only rebalance annually, and personal risk tolerance is rarely considered.
Compare that with a personalized professional managed account where your 401(k) is personally managed by a person or team.
Personalization occurs using the investment options that are offered, and a personalized strategy – tailored to your unique situation and risk tolerance – is designed using the full menu of investment options in your 401(k) plan.
When you have professionals personally managing your 401(k), like we do at 401(k) Maneuver, the focus is on the outcome, not a cookie-cutter approach to investing based on your retirement date.
We are not robo advisors – we are real people making decisions on your behalf. And, as a fiduciary, we’re obligated to act in your best interest with the goal of improving your account performance, so you have more money during retirement.
Have questions or concerns about your 401(k) performance? Click below to book a complimentary 15-minute 401(k) Strategy Session with one of our advisors today.
SOURCES
- https://reviewed.usatoday.com/lifestyle/features/most-popular-new-years-resolutions-2024-according-statista-survey
- https://www.bankrate.com/banking/savings/emergency-savings-report/
- https://business.bofa.com/content/dam/flagship/workplace-benefits/id20_0905/documents/Participant-Pulse.pdf
- https://institutional.vanguard.com/content/dam/inst/iig-transformation/has/2023/pdf/has-insights/how-america-saves-report-2023.pdf
- https://www.edelmanfinancialengines.com/press_category/2014/financial-engines-aon-hewitt-find-401k-participants-who-use-professional-help-are-better-off/
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Americans are taking early withdrawals from their 401(k)s at record rates “across different ages and income levels.”¹
According to Capitalize, “Half of Americans have made early withdrawals from retirement savings. […] These withdrawals will cost Americans $6.12 billion in penalties to the IRS in 2023.”²
A separate report from Bank of America found “the number of 401(k) participants accessing their retirement savings early increased 27% since the beginning of this year.”³
In addition to simply needing extra money to cover current expenses or emergencies, people are taking early withdrawals when they change jobs.
Marketing Science reports, “41.4% of employees leaked by cashing out 401(k) savings at job separation, most draining their entire accounts.”⁴
Rather than rolling over their 401(k)s, these investors faced penalties for early withdrawals.
It’s not ideal to touch your retirement savings.
But if you must take an early withdrawal, you want to withdraw the money with the least amount of impact on your finances – and your financial future.
Penalties for Taking an Early Withdrawal
Even if you feel pressed to dip into your 401(k) savings before you hit retirement age, pause and consider the penalties.
Let’s start with taxes. The IRS requires automatic withholding of 20% of a 401(k) early withdrawal.
For instance, if you withdraw $15,000 from your 401(k), you may only get about $12,000 after taxes are taken out.
Along with the withholding taxes, the IRS will also hit you with a 10% penalty if you’re under the age of 59½ on all funds withdrawn when you file your tax return.
The amount withdrawn will also be taxed as ordinary income for the year the money was taken out, which could push you into a higher tax bracket and force you to pay even more taxes.
Let’s return to the example. Let’s say you’re under 59½ and you withdraw $15,000 from your 401(k).
Now we’re up to 30% in taxes and penalties.
You’re going to get only about $10,500 of the $15,000 early withdrawal.
You’ve lost 30% of your money.
Is it worth it?
Can You Avoid the 10% Penalty?
10% is a considerable chunk, so before you take an early withdrawal, see if you qualify for an exemption on the 10% tax penalty.
There are a few ways to qualify:
- The first way is if you qualify for a substantially equal periodic payment plan. With this plan, retirement plans can be cashed out penalty-free. But this is only if you take annual distributions for a period of 5 years or until you turn 59½. However, income tax must still be paid on the withdrawals.
- The second way to qualify for the 10% penalty exemption is if you leave your job – but this only applies to those aged 55 and over.
This is what is called the 55 and Separated from Service rule. This is an IRS policy that allows workers aged 55 and over to take early withdrawals from their employer-sponsored retirement accounts without paying a 10% penalty, provided that they leave their jobs. It only applies to accounts you have with your current employer. But you will still owe taxes on the withdrawal, and funds withdrawn will be taxed as ordinary income. - The third way to get an exemption is if you’re getting a divorce and must withdraw money from your 401(k) to give to your spouse.
If this happens, then you won’t be charged the 10% penalty for taking money out of your 401(k).
Other exemptions include disability, significant medical expenses, higher education expenses, and certain first-time homebuyer expenses (which are different from hardship withdrawals…see below).
To find out if you qualify for an early withdrawal exemption, you will need to contact HR or your 401(k) plan administrator to learn the rules of your plan.
Hardship Withdrawal 10% Exemption Rules
Hardship withdrawals are another way to bypass the 10% penalty.
They are different from early withdrawals exceptions.
A hardship withdrawal is a withdrawal of funds from a retirement plan due to “an immediate and heavy financial need,” and, if you qualify, you usually don’t have to pay the penalty.⁵
The key here is that hardship withdrawal is only up to the amount of the actual hardship.
Situations that qualify for a hardship withdrawal:
- Medical bills for you, spouse, and dependents
- Money to buy a house
- Money to avoid foreclosure or eviction
- Funeral expenses
- Disability
- Adoption purposes
- Higher education expenses
- Disaster
- Military reservist
In order to qualify, you need to prove you can’t get the money anywhere else – for example, you can’t get a loan or don’t have a savings account.
In addition, the administrator of the 401(k) will have to approve a 401(k) hardship withdrawal. They’ll want to see the documentation of the hardship.
Know that just because you’re experiencing hardship doesn’t mean you will qualify because employers don’t have to allow hardship withdrawals!
Keep in mind that, if you do qualify, you will still have 20% taxes withheld, and it’s taxed as ordinary income.
[Related Read: The Real Impact of 401(k) Hardship Withdrawals]
The Real Cost of Tapping into Your 401(k)
Pulling from your 401(k) should not be done without carefully thinking about the overall cost.
You may fix the problem today, but create bigger problems for yourself come retirement.
Consider the following implications of an early withdrawal.
- Tax Consequences
The IRS requires automatic withholding of 20% of a 401(k) early withdrawal for taxes if you are under age 59½ – and it’s considered ordinary income. Along with the withholding taxes, the IRS will also hit you with a 10% penalty on all funds withdrawn when you file your tax return – again if you’re under the age of 59½.
- Missing Out on Compound Returns
When you contribute to a 401(k), your money earns interest, and that interest compounds over time – meaning you earn returns on your returns. This may lead to significant growth over time. The longer your money is invested, the more it can grow. Should you raid your 401(k) early, you risk missing out on that compounding effect, and you’re losing out on the potential growth. This can have a significant impact on your retirement savings over time.
- Financial Future Might Suffer
When you are tempted to take an early withdrawal, consider your future self. Will he or she be happy to live with less during retirement? While it may alleviate today’s stress, it may lead to more financial stress later on.It doesn’t matter which 401(k) withdrawal strategy you use; you should only take the money if you absolutely need it AND take the least amount possible because, even if you get the 10% penalty waived, you’ll still get hit with income taxes.
But if you must, you want to withdraw the money with the least amount of impact on your finances.
Have questions or concerns about your 401(k) performance? Click below to book a complimentary 15-minute 401(k) Strategy Session with one of our advisors today.
SOURCES
- https://www.hicapitalize.com/resources/fire-401k/
- https://www.hicapitalize.com/resources/fire-401k/
- https://www.foxbusiness.com/personal-finance/early-withdrawal-surge-2023
- https://pubsonline.informs.org/doi/epdf/10.1287/mksc.2022.1404
- https://www.irs.gov/retirement-plans/hardships-early-withdrawals-and-loans
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The Roth 401(k) is gaining in popularity due to employers offering it inside their plans and also thanks to provisions in the Secure Act 2.0 that only pertain to the Roth option.
The question is, is it right for everyone?
Read on to see if the Roth 401(k) is the right choice for you.
How the Roth 401(k) Works
The Roth 401(k) is a type of 401(k) that you fund just like a traditional 401(k).
The key difference is that you either get a tax break today with the traditional 401(k), or tax-free withdrawals in retirement with the Roth 401(k) since your contributions are made with after-tax dollars today.
2024 Contribution Limits for Roth 401(k)s
The contribution limits for Roth 401(k)s are the same as a traditional 401(k).
You can contribute $23,000 in 2024 with a catch-up contribution of $7,500 for those 50 or older ($30,500).
[Related Read: Retirement Plan Contribution Limits for 2024]
The Downside to the Roth 401(k)
Many CPAs try to get you to contribute to the traditional 401(k) each year, so you get the biggest tax break on your taxes.
If you contribute to the Roth 401(k), you won’t get a tax break since contributions are made with after-tax dollars.
Whether or not this is a downside ultimately comes down to the individual.
Some people need a tax break today, while others aren’t concerned with it and would rather have their retirement be tax-free.
Other Considerations for a Roth 401(k)
Not every employer offers the Roth 401(k) provision.
If your employer does offer the Roth 401(k) provision, you’ll need to read your plan carefully to understand the terms.
Some employer 401(k) plans allow employees to split contributions between a traditional 401(k) and a Roth 401(k).
If split contributions are allowed, it is up to the individual to determine which percentage is best for their personal financial situation.
Contact your HR or your plan administrator if you are unsure of the rules of your plan.
How the Secure Act 2.0 Affects Roth 401(k)
The Roth 401(k) plays a bigger role with the Secure Act 2.0 provisions.
There are 3 main Secure Act 2.0 provisions that affect Roth 401(k)s.
The first provision started in 2024.
It allows employee plan sponsors to create emergency savings accounts for participants, who could then make Roth pay-ins (on an after-tax basis) to that savings account within the 401k plan.
The rules state that your savings account balance cannot exceed $2,500 and you can only take up to one withdrawal per month.
Also, the first 4 withdrawals in a year must be penalty-free.
If you take more than four withdrawals in a year, your employer may impose fees, but you’ll still have access to your money.
Your employer may also automatically enroll you in the emergency savings account, setting aside up to 3% of your compensation.
An added bonus is that contributions to this emergency savings account qualify for matching contributions to your 401(k).
If you leave the company, the funds may be converted into a Roth investment account or withdrawn because your contributions are always yours to keep.
The second provision for the Roth 401(k) in the Secure Act 2.0 allows employers to make matching contributions directly to employees’ Roth 401(k)s.
This change took effect instantly upon the Secure Act 2.0’s passage, but it’s important to note that this option is discretionary, and employers may choose to make pre-tax matches or not provide a company match at all.
The third Secure Act 2.0 provision caused all sorts of noise when it was announced because the new rule states that 401(k) investors who make more than $145,000 must now make “catch-up” contributions to an after-tax Roth 401(k) account instead of a traditional pre-tax 401(k).
This new rule was set to start in 2024, but a recent announcement from the IRS has pushed back the deadline for this rule change to 2026, giving companies more time to adjust and investors to plan.
[Related Read: SECURE Act 2.0: How It Affects Your Retirement Savings]
RMDs and Roth 401(k)s
Traditional 401(k)s require investors to take RMDs.
But, starting in 2024, investors with a Roth 401(k) or Roth 403(b) will no longer need to take RMDs.
Early Withdrawal Rules of a Roth 401(k)
If you withdraw funds from a traditional 401(k) before you turn 59½, you could owe taxes plus a 10% penalty on the amount withdrawn.
With a Roth 401(k), there are no taxes or penalties on early withdrawal of your contributions as long as the account is at least 5 years old.
However, you may owe taxes and a penalty on earnings that are withdrawn before age 59½.
Roth 401(k)s and Inheritance
Heirs who inherit a Roth 401(k) have different tax treatment than those who inherit a traditional 401(k).
If the account is a Roth 401(k), then you won’t owe any income taxes, unlike an inherited traditional 401(k).
Since the traditional 401(k) is funded pre-tax, you’ll pay taxes at ordinary income rates.
According to the IRS, “Withdrawals of contributions from an inherited Roth are tax free. Most withdrawals of earnings from an inherited Roth IRA account are also tax-free. However, withdrawals of earnings may be subject to income tax if the Roth account is less than 5-years old at the time of the withdrawal.”¹
[Related Read: Pros and Cons of a Roth 401(k): Key Differences and Tax Implications]
If you have questions about your 401(k) or if you need help, we’re here for you. Click below to book a complimentary 15-minute 401(k) Strategy Session.
SOURCES
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The number of 401(k) millionaires has soared in recent months.
According to a Fidelity Q4 2023 Retirement Analysis report, “This quarter saw a 20% increase in 401(k) millionaires following Q3 2023. […] The number of millionaires in Q4 is also 11.5% higher than Q2 2023.”¹
In other words: 20% of 401(k) investors entered the 7-figure club between September and the end of December.
Fidelity’s report reveals that there were 422,000 retirement savers who are currently 401(k) millionaires.²
Impressive.
If you want to be a 401(k) millionaire, read on to see how it happened for more people and how you could boost your 401(k) account balance, too.
Why There Are More 401(k) Millionaires Today
The main reason for the surge of 401(k) millionaires is due to improved market conditions.
But new provisions in the Secure Act 2.0 contributed as well.
For instance, the RMD (required minimum distribution) age has increased to 73.
As a result, more retirees are continuing to allow their 401(k) money to grow instead of withdrawing it.
According to Fidelity, “Most pre-retirees and retirees under the age of 70 maintained a savings mindset and did not withdraw from their 401(k) plans. […] 20% of retirees age 70-72 made 401(k) withdrawals in 2023.”³
Another reason we are seeing more 401(k) millionaires is because employees are contributing more.
Fidelity reports, “At the end of 2023, 78% of 401(k) savers were contributing at rate high enough to secure the full matching contribution offered by their employer.”⁴
4 Things You Can Do to Increase Your Balance
Here’s the thing – it’s becoming more and more necessary to be a 401(k) millionaire as the cost of retirement is higher than ever before.
It’s not as impossible as you might think.
Use the following 4 tips to make achieving this goal more possible.
1. Stay the Course
When Fidelity released these exciting 401(k) account balance figures, they also shared their thoughts.
Sharon Brovelli, president of Workplace Investing at Fidelity Investments, told CNN Business, “When it comes to matters like market stability and economic events, 2023 gave us the highs of the highs, and the lows of the lows but, encouragingly, many retirement savers took the long view and stayed the course through it all, which is the type of commitment that can lead to a secure financial future.”⁵
She spoke to CNBC and declared, “These are the poster children of staying the course and taking a long-term approach.”⁶
Life will not always be easy, and you will be tempted to contribute less to your 401(k) or withdraw funds.
Don’t do it. Stay the course.
[Related Read: How Long Will Your 401(k) Savings Last in Retirement?]
2. Contribute More to Your 401(k)
According to Fidelity, “In Q4, 10% of employees increased their contribution rate. For the full year, 37.2% made an increase.”⁷
One of the fastest ways to boost your 401(k) account balance – and get closer to becoming a 401(k) millionaire – is to contribute more.
Do what you can to save more out of each paycheck.
And, if you are not already saving enough to get the company match, make this a priority!
[Related Read: 3 Reasons to Get the 401(k) Company Match in 2024]
3. Rebalance Regularly
Rebalancing is simply changing how you allot your investments so that you can take advantage of growth opportunities and protect yourself against potential losses.
According to Fidelity, “In Q4, 5% of workers changed their asset allocation. Looking at all of 2023, 8.4% made adjustments.”⁸
You want to be part of that percentage.
[Related Read: What Every Investor Needs to Know about Rebalancing a 401(k)]
4. Get Professional Help
If you are unsure how to properly rebalance your account or don’t know where to start when it comes to boosting your 401(k) account balance, we’re here to help.
Professional help makes a significant difference.
In a 2019 study titled Advisor’s Alpha, The Vanguard Fund Group, Inc., reported a 3% average increase in the value of portfolios of clients who work with a financial advisor.⁹
[Check out our 401(k) calculator to see how professional account management (and properly rebalancing) may improve your 401(k) performance.]
Let’s say you have an account balance of $150,000, and you expect 7% returns, and you have 15 years until retirement.
Using our 401(k) calculator, you would see that having professional help to properly rebalance your account may improve your retirement by $212,732.49.
These calculations do not include employer contributions or future salary deferrals. With those included, you can see that the difference has the potential to be much larger.
Continuing with the example above, imagine what an additional $212,732.49 at retirement might mean for your future.
Would it make the difference between having just enough to get by or being able to enjoy your retirement?
Really think about it.
Then ask yourself, Can you afford not to seek professional help to regularly rebalance your 401(k)?
Check out our 401(k) calculator here to see how you may improve your account performance.
401(k) Maneuver provides independent, professional account management to help employees, just like you, grow and protect their 401(k) accounts.
Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that may be hurting your retirement account performance.
With 401(k) Maneuver, you can go about your life doing what you love with confidence, knowing we are handling the changes for you
Have questions or concerns about your 401(k) performance? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.
Sources
- https://www.fidelity.com/about-fidelity/Q4-2023-retirement-analysis
- https://newsroom.fidelity.com/pressreleases/fidelity–2023-retirement-analysis–despite-uncertain-market-conditions–retirement-savers-have-high/s/b1b9fef9-4da9-4725-9080-bd614678181b
- https://www.fidelity.com/about-fidelity/Q4-2023-retirement-analysis
- https://www.fidelity.com/about-fidelity/Q4-2023-retirement-analysis
- https://edition.cnn.com/2024/02/27/success/401k-balances-fidelity/index.html
- https://www.cnbc.com/2024/02/27/401k-millionaires-and-average-balances-rose-in-2023-fidelity-says.html
- https://www.fidelity.com/about-fidelity/Q4-2023-retirement-analysis
- https://www.fidelity.com/about-fidelity/Q4-2023-retirement-analysis
- https://www.investopedia.com/articles/personal-finance/102616/how-much-can-advisor-help-your-returns-how-about-3-worth.asp
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There is a looming retirement crisis.
It’s not a possibility. It’s about to be a reality for many Americans.
According to a survey by Clever, “Two-thirds of retired Americans say the U.S. is in a retirement crisis (66%). The average retiree owes $15,393 in non-mortgage debt, and 40% worry they will outlive their retirement savings.”¹
Those 66% have good reason to fear a retirement crisis.
Consider this information from the National Council on Aging.
“80% of households with older adults—or 47 million—are financially struggling today or are at risk of falling into economic insecurity as they age. […] Combined together, longer lives and lower savings are fueling a retirement security crisis for millions of Americans. It is exacerbated by inflation, rising health care costs, and the fact that someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and support in their lifetime.”²
The 2023 Protected Retirement Income and Planning (PRIP) study from the Alliance for Lifetime Income found:
- 51% of consumers between 45 and 75 feel they do not have enough retirement savings to last their lifetime.
- 32% are not confident they will have enough money in retirement to cover basic monthly expenses.
- 44% are retired currently or retired previously and have gone back to work.³
It’s becoming more common for people to work past age 75.
According to the Bureau of Labor Statistics, the number of people over 75 in the labor force is expected to grow 96.5% by 2030.⁴
One reason for working longer is because people are in better health for longer.
The other reason is people do not have enough retirement savings to live on.
At the same time, Clever found, “54% of retirees say they retired earlier than planned — with 82% of that group retiring before age 65. In most cases, those aren’t success stories. About 38% retired early due to health problems, and 14% were laid off.”⁵
So, retirees either worked well into their retirement years because they haven’t saved enough, or they are forced to retire earlier than planned and live on what they have acquired up to that point.
Neither option is a good one.
Read on to learn why so many Americans fear the retirement crisis and worry they will experience it.
People Are Not Saving Enough in General
The first thing to recognize is that people are not saving enough for retirement in general.
Clever’s survey found, “The median retiree has $142,500 in savings – 4x less than the recommended minimum for starting retirement ($572,000). […] 25% of retirees have nothing saved for retirement.”⁶
There are several reasons why people are not saving enough.
- They underestimate how much they will need for retirement. Financial planners often suggest the cost of retirement is 80 percent of your pre-retirement income.⁷ If a couple has $120,000 annual income, they should plan to bring in $96,000 annual income ($8,000 a month). However, many Americans have far less than what is needed in their savings.
- They think Social Security will provide enough. Wrong. Go back to the previous example. The 2024 COLA adjustments mean that a couple can expect about $3,033.⁸ That’s a lot less than the $8,000 the couple needs. Where will that extra $5,000 come from to support the cost of retirement?
- Pensions are a thing of the past. Previous generations had retirement help in the form of pensions. But, as Jason Fichtner, a senior fellow and head of the Retirement Income Institute and chief economist at the Bipartisan Policy Center, explains, “There has been a seismic shift in retirement security from a time when many people could rely on a pension in retirement. […] This is the first retiring generation in which more than half don’t have a pension to cover part of their retirement costs. That makes this the first generation where the majority must rely on their own savings efforts to prepare for retirement.”⁹
Medical Expenses and Costs of Living Are on the Rise
Add in the horrifying costs of medical care, and it becomes even more clear why people are worried about a retirement crisis.
Fidelity Investments 22nd annual Retiree Health Care Cost Estimate in 2023 found, “A 65-year-old retiring this year can expect to spend an average of $157,500 in health care and medical expenses throughout retirement [or $315,000 for a couple].”¹⁰
Given the high costs of medical expenses and the lack of enough retirement savings, it’s sad but not shocking to learn that “15% of retirees say they’ve avoided medical appointments or treatments to preserve their savings.”¹¹
In addition to rising medical costs, the cost of living will continue to rise.
Some Retirees Are Already Running out of Savings
Matt Brannon, the author of Clever’s research, explains, “Retirees who aren’t sufficiently prepared will have to make serious sacrifices or risk outliving their savings. […] Our survey found some retirees have skipped meals or medical care to preserve their savings. It’s not how anyone wants to spend what are supposed to be their golden years – living in financial hardship, often in poor health, with no real sense of control.”¹²
Even so, their study found:
- 46% of retirees have no plan if their retirement savings run out, yet 2 in 5 (40%) worry they will outlive their savings entirely.
- About 1 in 5 retirees say their savings have already run out (19%), and 1 in 10 (10%) have skipped meals to preserve their retirement savings.¹³
Do What You Can to Maximize Your 401(k)
To help avoid a retirement crisis of your own, it’s time to do what you can to save more and max out your 401(k) savings.
Below are 5 tips to help you save more, keep more, and not outlive your retirement savings.
#1 Get the Company Match
If you aren’t contributing enough to get your company match, you are missing out on free money.
Even a small company match, like 50 cents on every dollar you contribute up to 6% of your salary, can add up significantly over your career.
Remember, this is your retirement future that’s at stake. Do what you can today to ensure a brighter future tomorrow.
Check out 3 Reasons to Get the 401(k) Company Match in 2024
#2 Know What You’re Invested In
Are you invested in the default option or a target date fund (TDF)?
Yes, target date funds make 401(k) investing easy.
But, there can be a significant difference in performance over time from target date funds versus other plan options.
This is because target date funds don’t take into consideration your unique retirement goals and risk tolerance.
Know what you’re invested in and make changes if necessary to maximize your 401(k) savings.
Check out Are Target Date Funds the Best for Your Retirement Goals?
#3 Avoid Withdrawing Early from Your 401(k)
401(k) hardship withdrawals should be a last resort.
But, as recent data shows from Vanguard, Bank of America, and Fidelity, investors are playing fast and loose with their retirement savings.
The ability to take a withdrawal from your 401(k) plan may seem appealing – especially if you are facing a financial emergency.
However, a 401(k) hardship withdrawal may cost you way more than you think.
Check out The Real Impact of 401(k) Hardship Withdrawals
#4 Regularly Rebalance Your 401(k)
If you are like many 401(k) investors, rebalancing your 401(k) is probably not one of your top priorities.
But what if we told you that by failing to rebalance, you are essentially turning your investments (and future retirement income) over to chance.
Failing to regularly rebalance your 401(k) portfolio often results in significant losses during bad markets and may open you up to more risk exposure than you initially intended.
And you may be missing out on earning more and keeping more of your retirement savings.
Check out What Every Investor Needs to Know about Rebalancing a 401(k)
#5 Get Professional Help
If you are looking for a way to improve your account performance, professional 401(k) management may help you in more ways than you might think.
Although you might have basic investment knowledge, utilizing an expert to make the moves that require skill and care may change the performance of your account from good to great…
And potentially boost retirement savings.
Check out How Professional 401(k) Management May Help Account Performance
If you have questions about your 401(k) or if you need help, we’re here for you. Click below to book a complimentary 15-minute 401(k) Strategy Session.
Book a 401(k) Strategy Session
SOURCES
- https://listwithclever.com/research/retirement-statistics-2024/#crisis
- https://www.ncoa.org/article/addressing-the-nations-retirement-crisis-the-80-percent-financially-struggling
- https://www.foxbusiness.com/markets/inside-americas-retirement-income-crisis
- https://www.bls.gov/opub/ted/2021/number-of-people-75-and-older-in-the-labor-force-is-expected-to-grow-96-5-percent-by-2030.htm
- https://listwithclever.com/research/retirement-statistics-2024/#crisis
- https://listwithclever.com/research/retirement-statistics-2024/#crisis
- https://www.fool.com/retirement/how-much-do-i-need/
- https://www.cnbc.com/2023/10/19/social-security-cola-heres-how-much-your-check-may-be-in-2024.html
- https://www.foxbusiness.com/markets/inside-americas-retirement-income-crisis
- https://newsroom.fidelity.com/pressreleases/fidelity–releases-2023-retiree-health-care-cost-estimate–for-the-first-time-in-nearly-a-decade–re/s/b826bf3a-29dc-477c-ad65-3ede88606d1c
- https://newsroom.fidelity.com/pressreleases/fidelity–releases-2023-retiree-health-care-cost-estimate–for-the-first-time-in-nearly-a-decade–re/s/b826bf3a-29dc-477c-ad65-3ede88606d1c
- https://listwithclever.com/research/retirement-statistics-2024/#debt
- https://listwithclever.com/research/retirement-statistics-2024/#debt
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Choosing between paying off student loans and saving for retirement is a reality for many Americans.
But that’s about to change.
A provision in the Secure Act 2.0 permits employers to consider student loan payments as qualifying contributions toward retirement plans with the goal of enhancing retirement savings while paying off student loan debt.
Keep reading to find out how it works, who is eligible, and if it’s the right option for you.
The Student Loan Debt Crisis
The Federal Reserve estimates student loans are costing more than $1.6 trillion for borrowers as of 2024.¹
Data shows it takes an average of more than 20 years to pay off student loans.²
The struggle to pay these loans is why student loan repayments were paused during the pandemic.
Fast forward 3 years, in September 2023, student borrowers started receiving bills, and interest started accruing again.
Despite the advanced notice, student borrowers were not prepared.
According to Business Insider, “Nearly 9 million student-loan borrowers missed their first payments in October [40% of borrowers].”³
Given that the average monthly student loan payment is $503 and with the increased cost of living, it is easy to see why so many Americans missed their first repayment check.⁴
We get it. It’s hard to prioritize saving for your future retirement when you are stuck paying off your past.
That’s one reason many young people put off saving for retirement. They often can’t do both.
But, in doing so, they miss out on the compound growth that comes from early retirement contributions.
That’s about to change thanks to the Secure Act 2.0 provision that allows employers to offer student debt relief through matching contributions.
[Related Read: 5 Major Changes Coming to Your 401(k) in 2024]
How the 401(k) Match for Student Loans Works
The Secure Act 2.0 that passed in December 2022 has over 90 provisions to encourage more people to save for retirement in workplace plans and IRAs and to help grow their retirement savings.
A big provision for 2024 relates to student loans and retirement.
Effective January 1, 2024, employers may offer student debt relief through workplace retirement plans, such as 401(k)s, 403(b)s, 457s, and SIMPLE IRAs, by making matching contributions tied to a participant’s student loan repayments.
Instead of depositing a percentage of your paycheck to your 401(k) to max out the employer match, you will get the same employer match benefit when you make a qualifying loan payment.
Sounds great, but there are rules you need to be aware of.
According to the rules, it’s up to the discretion of your employer whether or not they add this benefit to the plan documents.
So not every plan will offer this.
While employers can make matching contributions to your retirement plan account based on your student loan payment amount, the contribution amount cannot exceed the total matching contributions available in the plan.
Employer matching contributions are required to follow the same percentage, eligibility, and vesting rules as traditional 401(k) employer matching contributions.
This is why it is critical to know your vesting schedule.
If you leave your job before you are fully vested, you could potentially lose some or all of your non-vested retirement savings.
If the money in your 401(k) is from employer-match contributions, you run the risk of having no retirement savings.
So, if you do not think you will stick around for at least 3 to 5 years with your current employer, taking advantage of the student loan match probably isn’t right for you.
Another thing to remember: Employer matching contributions for this new provision still apply to annual contribution limits.
For 2024, the 401(k) contribution limit is $22,500. Those ages 50 or older can contribute an additional $7,500.
[Related Read: Big Catch-Up Contribution Changes for 2024]
It’s important to recognize that the IRS has not provided much guidance for employers about this new provision.
A big issue that plan sponsors face is verifying the authenticity of employees’ student loan payments.
Any employer offering a 401(k), 403(b) 457, or SIMPLE IRA is eligible to offer a Secure 2.0 student loan match as an employee benefit.
If you want to see this in your plan, it is best to contact HR and ask them to add this benefit.
Better Prepare for a Life of Abundance in Retirement.
Check us out on YouTube.
Sources:
- https://www.businessinsider.com/personal-finance/how-to-secure-2-0-student-loan-match-works?r=MX&IR=T
- https://www.usatoday.com/money/blueprint/student-loans/average-student-loan-debt-statistics/
- https://www.businessinsider.com/student-loans-what-happens-if-i-miss-payments-debt-relief-2023-12
- https://educationdata.org/average-student-loan-debt
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We’ve been through a lot over the last couple of years, but 2024 is showing signs that things may be turning around.
In 2024, we have had a really good market thus far. We hit new highs on the Nasdaq, the Dow Jones, and the S&P 500 – marking the end of the bear market and a full recovery.
So where do we go from here?
All Eyes on the Fed
The market has struggled with the idea that the Fed has raised interest rates to a point that it could harm the economy.
There has been a lot of back and forth in the market about whether the Fed is going to raise rates too high and send us into a recession. Can the economy withstand the higher interest rates for a longer period of time?
And the market has struggled with recession vs no recession.
We’re now at a point that the expectation is that the Fed is done raising rates.
In fact, the market is building in the expectations that we will have a soft landing or no landing at all, meaning that the higher interest rates are definitely having an impact on the economy.
The question is: Is the market getting ahead of itself by pricing in rate cuts as early as the next Fed meeting in March, despite the fact that Powell said that’s not likely?
Key Factors to Watch
We’ve had reasonably solid economic results from the ISM manufacturing indicators and the gross domestic product indicators, which is the total economic output of the economy.
In fact, those expectations have been raised.
Another positive sign is that we are starting to see the market broaden out, and other sectors of the market beginning to do better.
Once interest rates start to come down, we expect even the small cap or the smaller companies will start to perform better, too.
The other thing that’s driving the market is the AI revolution.
We expect artificial intelligence to continue to drive the tech market and could possibly drive the entire market going forward.
There will be times where we need a little bit of a market correction and profit taking to build a foundation that will help sustain the next move up.
But, overall, we’re pretty confident the markets could continue to do well in 2024.
Check out the video as Mark Sorensen, our Chief Investment Officer, provides further insight into current economic conditions, how AI may rock the market, and where he thinks we’re headed this year.
Plus chart reviews!
401(k) Maneuver exists to help employees grow and protect their 401(k) accounts.
Our done-for-you, virtual service allows you to keep your 401(k) right where it is while we review and rebalance your account based on your risk tolerance and current market conditions.
Find out what 401(k) Maneuver may do for your retirement account balance. Click below to book a complimentary 15-minute 401(k) Strategy Session with one of our advisors today.
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