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Peter, hello. Good to see you. Welcome back, everyone. The question today, are you and your spouse leaving free money on the table? A new study from the Center for Retirement Research at Boston College found that nearly one in five married couples failed to coordinate their retirement contributions. On average, those couples are missing out on $760 a year. might not sound like a lot, but of course it adds up. So, Peter, what does it mean to coordinate your retirement savings as a household? >> Well, it doesn’t sound like a lot
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because that’s on average. And remember, average is the result of extreme. So, there’s a lot of people not missing anything, and good for them, but there’s a lot of people missing a lot more money than that $760 average. And I just want to take a moment and uh also put a little asterisk on this. I hate the term free money. I mean, I know that’s what it’s called when we’re talking about 401k match, but it is not free money. You work for that money whether or not you get it or you
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don’t. So, you are working the same amount. It’s part of your compensation package. But if you’re not putting enough skin in the game, you’re missing out on the air quotes here, free money. It’s still not free because generally the company is nice enough to match but not nice enough to pay your taxes for you. So their match is going in on that pre-tax side. They get a deduction for that and then ultimately down the road you have to pay tax on their matched contribution. So again, not totally
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free. However, for couples, coordinating benefits is important because a lot of times one spouse might say, “Well, they’re doing the retirement savings on their side, so I don’t need to and be missing out on some of the progress that they could be making and missing out on the match, the again, air quotes here, free money that is available and on the table.” And sometimes uh everybody just says, “Okay, well, we’re doing something. We’re doing 5%.” or something
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like that, but one couple’s match might be more generous and advantageous than the other. So, we really do need to sit down, look at household retirement savings, and make sure that the household, everybody is doing their part to make as much progress as possible because goodness knows retirement is expensive, and we need every dollar of free money that we can get to get there, >> right? And and while this conversation is really about getting the match, I do find it confusing, especially when I was
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younger, because it’s like up to 6%, 50 cent for every. So it I can understand how people could miss out on it. Can you explain how a married couple could unknowingly miss out on that money even if both spouses are contributing to their 401k? >> Yeah. Well, let’s say that one spouse has a dollar per dollar match up to 4%. Fantastic. They’re doing five. They’re capturing all of the free money that’s on the table, all of the match. But the other spouse might have a 50% match up to 8%. Meaning they put in
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eight and the company matches the same four that the first spouse was getting, but they have to do all eight to get it. So if everybody sort of just went in and said, “Hey, we’re going to do 5% across the board.” we could be missing out on that. And and then Erin, I’ve actually seen this on a a different end of the spectrum extreme here where somebody is a pretty high income earner and is able to contribute to their 401k so aggressively that they max it out early in the year. maybe, you know, in June or
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July, they end up maxing out and meeting the contribution limits for how much they’re able to put into a 401k. Well, if they are contributing so much that they actually miss months, that might mean that you also miss matching dollars over those months. And some companies, this is a very specific thing that is plan by plan. And every company might have some different specifics on their plan, but some companies offer at the end of the year what they call a true up. Meaning that if you maxed out early
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and you missed those dollars across months, they’ll they’ll come in at the end of the year and bring your match up to what it should have been. But some companies don’t. So, it’s actually possible for more aggressive savers to potentially hurt themselves and not capture all of the free money on the table. And we do a deep dive into 401ks to make sure that people are doing the right things and understand their plan documents and that they are capturing all of that match that’s available. And
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if you’ve got any questions about your your plan specifics, we can kind of do an X-ray and see inside of it and make sure that you are taking advantage. Um, and we can talk about, you know, how and when to to use certain investments, what the allocation is. If you’re interested at all in that, go to 401kdistributions.com is kind of our root uh 401khub and resource center. 401kdistributions.com or or just be in touch with us and and and we can run an X-ray. We can give you some recommendations on how to make the
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most of that that so so important critical tool that you have available in your 401k. >> Right. and of course where most of us save the majority of our money. So, as you’re touching on now, if one spouse has a more generous employer match than the other, how should couples think about prioritizing their retirement contributions? >> Well, if if we’re only able to save so much, let’s call it, right? That uh household income just for nice round numbers here is uh call it $100,000. and uh both both
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both spouses are working, but one of the members of the of the team here has a more generous match or has a match at all. We need to prioritize taking advantage of that 401k first, even if it’s not kind of a level playing field, so to speak. And keep in mind that when you save for retirement in these qualified accounts, the IRS is always tagging those specific dollars to your specific social security number. So when you roll a 401k out, it always becomes an IRA, an individual retirement account. Sometimes we get caught up in
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in a little bit of tit fortat or uh you know a little bit of internal competition within a household that uh we want to keep everything on an even playing field. But even though these are IR dollars or specific age uh to to your specific social security number dollars, they’re they’re marital assets. If we’re if we’re playing on the same team, it’s a team ball game. We all want to win. So if one 401k has a 100% match, very very generous, we need to be putting the bulk of the retirement savings in that if we
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are limited in how much we can get into retirement accounts, right? So take advantage of that match where we can. Um, do keep in mind that because the IRS looks at 401ks and any uh qualified retirement dollars based on an individual specific social security number and age that there can be a discrepancy there between ages 59 and a half when you can access these dollars. So that’s another thing that we really need to kind of keep our eye on and monitor and make sure that along the way we are planning for the end result of
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when and how we are going to use and access these dollars. But again, I not in love with the term free money, but certainly don’t leave any of it on the table. And we need to coordinate these these plan contributions to make sure we’re getting the most. >> Right. And to dovtail with what you’re talking about right now, a lot of couples say they’ve just simply never even considered trying to coordinate their savings. while others have concerns about keeping their retirement
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assets separate. So, what conversation should spouses be having to make sure they’re working toward the same retirement goals? >> Well, I I see it where one couple maybe is saying, “Our goal is to save 15%.” But they’re only accounting for one spouse’s income and the other one’s like not contributing at all. and they’re like, well, with 50 15% going in of maybe the primary bread winner in the household, but you know, all household income is household income and needs to
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be accounted for. So, um I I do follow kind of the rule of thumb that the benchmark that we should be aspiring to is 15% of all household income first and foremost, paying ourselves a and sending that to our future selves for retirement security. That is kind of where I I try and strive to get our clients to to to uh save up to. But we we we really need to look at this as a team game and both members of the team need to be trying to contribute 15%. Now, if one does not have a 401k available, that’s that
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doesn’t prevent that amount of savings from happening. we we would look at the primary breadwinners 401k, the the most optimal match first or whoever has a 401k available. Can we account for 15% there? Um and there is a good better best order of operations here. If your 401k has a WTH with a match, you you do that first. Then actually, if we have enough discipline, we pivot out of the 401k and make Roth IRA contributions. Once those are maxed out, and we can do that for both spouses. Even if one
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spouse is is not in the workforce as a stay-at-home spouse, you can still do a spousal IRA or Roth IRA contribution. Once we’ve got those maxed out, then we pivot back to the 401k and basically max that out to our savings capacity. And if everything is maxed out, there are actually even some some more advanced strategies. we could well not not that advance. We could just invest money if we’ve got extra money. We don’t have to qualify it uh as 401k or we could even do uh if your plan allows some
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non-deductible contributions into that 401k. So there there are ways to make sure we’re making that progress and and where we are at. I think the 401k is probably one of our best tools available to make the most progress possible. But the theme of the program here, a lot of people are not Aaron. A lot of people are missing out on making the most of this important tool. >> Absolutely. So then for all of our listeners today, Peter, who are married and they’re just looking for one nugget,
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something that they can do to have that conversation today to make sure they’re maximizing every dollar available to them. What What advice would you give them? And I would give this advice to single individuals or married couples, like carefully examine all of your savings opportunities. Uh, evaluate them. Make sure that you’re aligned with your risk tolerance, but most importantly, make sure that you are at the very very least not leaving any of that match money on the table. Again, the the term free money, the terminology
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there, uh we can we we can debate, but it it is part of your compensation. And if you’re not putting enough skin in the game to at least capture that, you’re not getting everything that you are working so hard for and you’re not making that progress toward retirement that you need to. So, carefully examine that. And we do that with all of our clients. We analyze the 401ks that are available, uh the investments inside the 401ks. We provide some guidance on that. We check up on them regularly. So, if
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you feel like you’ve been missing out on that, uh, or you just want to make sure you’re you’re not missing any opportunities, uh, give us a call. 919-3000-5886. 91930005886. 401k is a a a wonderful tool. So many so many advantages, but there also is a time and a place where you want to move the money out of the 401k. and that website that we’ve got 401kdistributions.com that kind of runs the gamut from starting one out to all the way what is the end purpose of this what what is it
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going to be intended for and when do I have the opportunity to take control so if you want to go to that website we’ve got a customizable report that will be generated for you 401kdistributions.com but always give us a call for your total plan 919-30005886 your optimized retirement plan and the 401k of course is part of that >> yeah nice to get that phone call in early no matter where you are in your retirement journey. Good point. >> Absolutely. >> Peter, thank you so much for your time
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today. I appreciate it. >> Thanks Aaron. >> Hey folks, Peter Rashan here with Rashan Planning. So glad that you are enjoying the podcast Planning Matters Radio. You know, one of the tools that we’ve put out there that people really seem to appreciate and really are are finding of value is at 919 retired.com. It is your retirement tax bill calculator. If you’ve got any kind of retirement account, your tax deferred 401k or IRA, this is the website. This is the resource where you can go, you can plug
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in your own numbers, your information. You can slide the the the tool calculator up and down for your tax rate or your amount of savings and see what your tax bill is likely to be if you default and defer to the IRS’s plan versus what you could potentially bring that tax bill down to. A lot of times it is a very significant savings. So if you have not yet, go to the website 919retired.com, run your numbers on the retirement tax bill calculator. This has been Planning Matters Radio. >> The content of this radio show is
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provided forformational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment, tax, or legal advice from an independent professional adviser. Any investments and/or investment strategies mentioned involve risk, including the possible loss of principle, advisory services offered through Brooks Zone Capital Management, a registered investment adviser. Fiduciary duty extends solely to investment advisory advice and does not extend to other
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