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As I sat at Leatherby’s celebrating my son’s eighth grade graduation, I watched him over-indulge in a Big Daddy Dave’s Sundae. His goal was for he and his brother (who recently graduated from 5th grade) to eat the entire sundae. If accomplished, the reward was the placement of their picture permanently displayed on the restaurant wall ~ bona fide members of Big Daddy Dave’s Wall of Fame! A tribute to the over-indulgers, only a mother could be so proud.
I kept telling my boys not to finish the sundae; that it is never a good idea to over-indulge in anything. To my dismay, their dad offered constant encouragement and strategically sound advice.
Growing up, I always heard the advice “everything in moderation.” Then it hit me, there is a time to over-indulge, (my incessant need to relate every life’s moment to 401(k) advice giving)....................my 401(k) advice to them ~ over-indulge in saving for retirement. Participate in your 401(k) as soon as you are eligible and save at least 15% of your income. The earlier you start saving, the earlier you may be able to retire.
- 401(k) advice ~ over-indulge in saving for retirement. Retirement is the like the placement of your photo on Big Daddy Dave’s wall of fame. If you want to achieve that goal you need to over-indulge in saving to get there.
- 401(k) advice ~ although it may be difficult to save at times, a very similar feeling to the stomach ache you felt while eating that Big Daddy Dave’s Sundae (1 foot high by 1 foot wide heaping glob of ice cream), but keep your eye on the prize. You’ll be so proud when you reach your goal.
- 401(k) advice ~ seek 401(k) advice from professionals throughout your career. The more 401(k) advice you seek the better decision-maker you will become. Like dad’s advice which encouraged you to change flavors every so often when eating the sundae, and to not drink too much water. Listen to the experts, and seek as much 401(k) advice as possible.
- 401(k) advice ~ there are times for moderation in a saving for retirement. Don’t over-indulge in one asset class or specific investment vehicle. Stay diversified. Just like the sundae offered vanilla, chocolate and strawberry ice cream along with a mound of whipped cream, nuts and a cherry on top...it made the consumption a little easier, as the variety of the ice cream changed (similar to market volatility) it kept you headed in the right direction (balanced and on track to retire)!
Save away to your heart’s content!
Image courtesy of piyato.
Whether you are a 401(k) plan sponsor or are a 401(k) plan participant, at some point in time you will find yourself seeking 401(k) advice.
As a plan sponsor, you may request 401(k) advice from several parties, including a third party administrator (TPA), an investment advisor, or a certified public accountant (CPA). When seeking 401(k) advice as a plan sponsor, be certain to ask specific questions regarding the services available and fees associated with the services you receive. Think about what services you need, and follow a simple rule of thumb - THREE-FREE! Request 401(k) advice from at least three independent parties and seek the 401(k) advice from parties who offer free (one-time), no-obligation estimates for services.
If the 401(k) advice is free, is it really worth it?
When a TPA, investment advisor or CPA provides 401(k) advice, are you aware of what benefit, if any, that party will receive from providing you the 401(k) advice?
For example, a TPA will be able to review participant census data and recommend the most beneficial plan design along with an estimate of annual out of pocket expenses. Once you examine the benefits of the 401(k) advice (cost versus savings analysis), ask yourself, “Are you saving more than you are spending?” If the answer is yes, then examine the analysis more closely, and shop for more 401(k) advice. Why not obtain at least three quotes for services.
The TPA you choose will benefit only if you decide to retain their services. A reputable TPA will analyze your plan’s needs versus the benefits and costs associated with meeting those needs, free of charges. The free consultation is offered in the hope that the TPA will receive your on-going business.
At Benefit Resources, Inc. (BRI), we offer a free one-hour plan design consultation. Before the consultation we will ask for participant census data. Based on the data provided in conjunction with the plan sponsor’s targeted goals, BRI will provide you 401(k) advice consisting of optimum plan design recommendations, which will maximize plan benefits and minimize cost.
What type of 401(k) advice can a CPA offer?
A CPA may offer 401(k) advice based upon the tax benefit received by optimizing available tax deductions and credits, to minimize your tax liability. The more you can deduct and save tax free, the better your personal financial results. The biggest question when seeking 401(k) advice from a CPA is typically, “Would you rather pay Uncle Sam (in the form of taxes), or reduce your tax liability by paying benefits your employees and yourself?” Your CPA may refer you to seek 401(k) advice from several local financial advisors and TPAs. Again, follow the THREE-FREE rule by seeking 401(k) advice from at least three independent parties.
If you currently sponsor a plan, your CPA will ask your TPA to calculate the maximum deductible contribution allowed to the plan for your fiscal year. Based on the data provided from your TPA, the CPA will advise you of the contribution amount most beneficial to you from a tax liability reduction standpoint. Once you know the magic contribution number, you have to consider funding the contribution. At this point in time, you may seek 401(k) advice from a financial advisor, in order to best understand ho w the contribution should be invested.
Seeking 401(k) advice from any third-party takes time and an analytical perspective. Once you have followed the three-free rule, you may continue to seek more 401(k) advice, or you may feel you are armed with enough information to move forward in making decisions regarding your existing or new retirement plan.
Come back soon to view 401(k) Advice - Part 3.
Image courtesy of Ambro.