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Tax Act, Your Company’s 401(k), and how $99 dollars could turn into $300,000


As each New Year begins, many people make New Year’s resolutions, with the mantra – New Year, New Me. Topping the resolution charts year after year is health, both physical and financial. And while many are focused on eating right and exercising, others are budgeting and saving.

This year, employers may be able to help those with financial resolutions thanks in part to the 2018 tax changes!

Under the new Tax Cut and Jobs Act, many Americans will see a slight, modest uptick in their monthly take home pay. The expected average increase per employee is around $99 more per month.[1] Now, for many families, these extra dollars could be used to pay for additional groceries, a dinner out, a few new toys, and/or other small purchases.  But what happens when you encourage employees to put that towards retirement?

This could be an important difference in your employees’ future lives. Therefore, as we enter into the New Year and we’re still motivated with good intentions, help your employees use that momentum to take action. It’s important to note that your employees will first see the increase in their paychecks happening in February 2018, so act fast and encourage financially health habits.

Here are a few ways to encourage healthy financial habits:

-         New Year, New You! Send a company email and remind everyone about ways they can save, such as through the company’s 401(k) plan – (Reminder: tax cuts go into place in February, so nudge now before employees adjust to their paycheck increase.**)

-         Reach the Match. Does your company offer a 401(k) match? If so, create a poster (like the one attached), print them out on poster board, and place them near the coffee pots. Get your employees talking about ways to save.

-         Financial Wellness. Many employers are looking at offering Financial Wellness initiatives to help their employees tackle debt and save for the future. If your firm does not have a program, this could be an opportunity to explore new possibilities. One suggestion is to contact your current 401(k) recordkeeper and ask them what Financial Wellness programs they offer. You might find that your current service provider has an available solution. 

We understand that everyone likes a little treat now and then; however, most of your employees are already living a consistent lifestyle. That $99 per month (for most) will not dramatically increase their living standards, which is why, the next time you get the familiar knock-knock, “Got a second? I have a quick question,” we suggest that you take a moment to nudge your employees to consider how this slight paycheck bump could add up to additional savings in their retirement accounts.

With the momentum of New Year’s pushing healthy saving habits and the Tax Act providing a runway for launch, why not nudge your employees to put their resolutions to work – and because that money is already out of sight out of mind, this $99 could make a difference.

CURTIS S. FARRELL CFP AIF

949.455.0300 x222 | cfarrell@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA/SIPC.

[1] Ryan, Paul. “Typical Families Will See a $1,182 Tax Cut Under the Tax Cuts and Jobs Act.” Speaker Ryan Press Office. Nov. 3, 2017

*Hypothetical example for illustration only. Past performance is no guarantee of future results. Investing involves risk, including the loss of principal. The example shown does not reflect the impact of any applicable taxes, fees or expenses. Had these items been included the overall return would be less.

** FMN is not in the business of providing tax advice. Depending on your specific situation, take home pay could be more, less, or the same. Contact a tax advisor for specifics.

 

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Comment   |  9 months, 1 week ago from Mission Viejo, CA