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Summary

In this video, you'll learn about the importance and operation of the Health Carousel 401k plan. You become eligible upon hire if you're 21 or older, and contributions can be adjusted flexibly. You can opt for pre-tax or Roth contributions, both with tax advantages. Health Carousel matches your contributions up to 6% of your compensation, a valuable benefit with vesting schedules. Setting retirement goals and choosing investments are crucial steps.

Transcript

Hello, and welcome to the Health Carousel 401k plan education and enrollment presentation.

My name is Kyle Redmond with Lang Financial Group, and I will be discussing with you today the importance of investing through the Health Carousel 401k plan and, of course, how it all works. There are many great benefits that the 401k plan offers so let's go ahead and get started.

We will get started with how you can begin to participate in the plan. You will be eligible for the 401k plan on your date of hire as long as you are age 21+. You may actually enter the plan on the 1st of the month following your hire date. For example, if you are hired June 15th, you could enter the 401k plan on July 1st. The only exception to this example would be if you were hired on July 1st, then you are automatically eligible to join on July 1st as well. One of the best features of the 401k plan is its flexibility.

Contribution amounts in the plan can be changed any time and will take effect the next payroll. So you are never locked into any one contribution rate in the plan. This can be changed anytime based on your situation and your retirement needs.

Let's talk a little bit more about your contribution options in the plan. There are two types of contributions available to you through the plan. Pre-tax and Roth.

The chart on the slide shows the differences between each of these contribution types. To begin with, pre-tax contributions are made to the plan before taxes are taken out of your paycheck. They reduce your taxable income for the current year. So for example, if you made $50,000 and contributed $1,000 pre-tax to the plan, it would really be like you made $49,000 for tax purposes for the year. The contributions and earnings from investments on those contributions will grow tax deferred in your account, and you will have to pay taxes once you start to take distributions from your account in retirement.

Roth contributions are essentially the opposite. They are made to the plan after taxes are taken out of your paycheck. They do not reduce your taxable income for the year. So if we use the same example and you make $50,000 and contribute $1,000 Roth to your 401k plan, it would still be like you made $50,000 for tax purposes for the year. The benefit is that the contribution and any earnings on those contributions grow totally tax free, and you do not have to pay taxes on these contributions or the gains when you take the money out in retirement. You can contribute to one or both of these options and they will be invested the same whether you do pretax or Roth contributions.

So you may be wondering which one is best for me. Well, the answer is it depends on your individual situation, and it may even be a combination of both. A good rule of thumb is to try and pay taxes when you think they will be lowest for you. If you are in your prime earning years, it is likely that the tax break on your income today would mean more than a tax break in retirement since your retirement income is likely to be lower than your current income today. So in this case, pre-tax contributions may make more sense.

If you are younger, especially under age 40 and may not be in your prime earning years and have a long time until retirement, Roth contributions might make more sense for you. This is because the taxes you pay now may be lower than your taxes in retirement. And also the money has a very long time to compound. So avoiding tax on all those years of gains in your account could be very beneficial.

Just like diversifying investments, diversifying your deferrals, meaning doing both pre-tax and Roth is also an acceptable strategy.

One thing to remember as well is the contribution Health Carousel makes to your account is always pre-tax. So whether you defer into the pre-tax or the Roth, you will still always have some pre-tax funds at retirement. If you have any questions about what is best for you, please reach out to us and we would be happy to help provide guidance.

Now let's talk about the best part. Health Carousel matches you $0.50 on every $1 that you contribute to the plan up to the first 6% of your compensation.

As an example, if you make $40,000 and contribute 6%, or roughly $92 a pay, Health Carousel will match you 3% or roughly $46 per pay additional going into your account. Health Carousel is contributing to your retirement, so please try to take advantage of this and get to at least a 6% contribution rate in the plan. Otherwise, you really are leaving money on the table.

All matching contributions in the plan are subject to what's called a vesting schedule, which means the amount you get to keep upon leaving the company is dependent upon how many years you have worked for company. The schedule is listed on the slide. For example, if you work at Health Carousel for two years and leave the company, you will be able to take 50% of all money Health Carousel contributed to your account. Please note, once you have been with Health Carousel for 4 full years, you will be fully vested in your account. It is important to remember the money you contribute yourself to the plan and any rollover contributions, which we will talk about more on the next slide, are always 100% immediately vested and you will take that money with you whenever you leave the company, whether it be it's 6 months or after 3 or 4+ years.

As an employee at Health Carousel, it's possible that you have one or more 401k or other retirement accounts at a previous employer.

The Health Carousel 401k plan accepts rollovers from your old retirement plans as soon as you get started. There is no limit in the amount of the rollover or the amount of rollovers that you may have from prior employers.

As a reminder, any money you roll over into the plan is always 100% yours, and you take it with you if you ever were to leave the company. For more information regarding your rollover options, please reach out to Lang Financial Group after this presentation.

Because of the tax advantages available through the plan, there are specific reasons listed above for how you can withdraw money from the plan. The most common reason for 401k withdrawal is termination from your current employer. Other options you have would be to take a loan against your 401k balance or take a hardship withdrawal from the plan. There are requirements for both of these withdrawal types, and they should only be used as a last resort.

Always keep in mind the 59 and a half age mark. At 59 and a half, you are no longer subject to the 10% early withdrawal penalty from the 401k plan. Any withdrawals from the 401k plan before age 59 and a half can be subject to the 10% early withdrawal penalty and any applicable taxes. Please note, a rollover to another qualified account is not treated as a withdrawal, and you will not be taxed or penalized as long as you move your money into another tax qualified retirement account.

The money you contribute to the plan is really meant for retirement, so think about this as money you will be setting aside and not using until you reach retirement age.

Now that we know about the various roles and provisions of the 401k plan, you may be asking what's next. To start, we should consider setting a retirement goal for ourselves.

One day if you plan to retire, you will no longer be receiving a paycheck from Health Carousel, or any other company for that matter. Instead, you will need to pay yourself that paycheck every month. And one of the best ways to do this is through the 401k plan. Most experts recommend that you may need between 70 to 80% of your pre retirement annual income in retirement to live comfortably.

Different factors to consider when determining how much to save include your current income, social security benefit, and time until retirement and any other potential retirement benefits or money that you may have or inherit.

Once you set a retirement income goal, you will need to begin saving in the plan towards this goal. Again, most experts recommend that you save between 10% to 15% of your income over the course of your working career toward your retirement plan. This chart shows where your potential savings goals may be at age 30, age 45, and age 60. Take a look at these goals and adjust your contributions accordingly to get on track for retirement.

Choosing where to invest in the plan can be overwhelming, but it doesn't have to be. The easiest way to choose your investments in the plan is by going the do it for me route in the plan. Once you enroll, you will be automatically placed in the Vanguard Target date fund that most closely corresponds to your age. This fund will automatically diversify your investments for you and change with you throughout your career. For those of you who want to do things yourself, the plan has a variety of investment options to choose from so that you can create your own allocation and manage that allocation going forward. Remember that you are always in full control of your account. You are able to change how your contributions are invested as well as how your balance is invested at any time going forward.

So whether you are a new participant or have an account already in the Health Carousel 401k plan, you can access your account at www.mykplan.com. New employees can enroll here and set up their contributions, investments, and beneficiary.

Current employees can adjust their contributions, investments, and beneficiary information at any time through the website.

You can also download the ADP mobile app. On the app, you can access all the same features as on the website, including changing contributions, investments, and beneficiaries.

It is, however, recommended that the first time you set up your account and elections, you do that on the website and then begin using the app.

As a reminder, it is also very important to establish a beneficiary either online or via the mobile app. Setting up a beneficiary can help make sure that your ones are cared for after you are gone. Think about updating your beneficiary whenever you have a life event happen where this may change.

Lang Financial Group has a landing page where Health Carousel employees can come to discover additional education resources and schedule one on one meeting one of the financial advisors here at Lang Financial Group. We will also be posting any videos that we record out to the Health Carousel landing page for your convenience. Please take advantage of this great resource.

Thank you for your time today to review the benefits of the Health Carousel 401k plan. The advisors at Lang Financial Group are here to help with any questions you may have. Some of the most common questions we receive are questions on personal finance, guidance on how to invest and where to invest in the plan, guidance on how much you need to defer into the plan, and guidance on whether Roth or pre-tax or both contribution options would be best for you. Please contact us at 513-984-7246 or at service@langinvestments.com with any questions that you have. In closing, remember to take full advantage of the company matching contribution to 6% and let Health Carousel contribute to your retirement. Thanks again for your time, and please take care.