Resources for Employees
How Do I Set Up My Account?
The first step to setting up an account with SaveDay® is to verify your identity and to make sure your company is offering a 401(k) plan for you. Once you’ve gone through the verification process, you’ll be asked specific questions to measure your risk tolerance. After that, your account is set, and you are ready to start investing in your future! Click here to get started
How Do I Rollover My Previous 401(k) to SaveDay?
This is a great great question! A 401(k) rollover simply requires a form, which you’ll print out and send back to us. Here’s a link to form. Print it out and follow the step-by-step instructions. If you run into any difficulties, give us a shout! We love helping people invest.
What is a 401(k) plan?
A 401(k) plan is a type of retirement savings account. It is offered by your employer and automatically pulls money out of your paycheck and deposits it into an account for you. Your payroll deductions (also called contributions) can be done on a pre-tax (called Traditional) or after-tax (called Roth) basis.
Pre-tax (Traditional) contributions are deducted before taxes are calculated. In this way, your taxable income decreases for the year and the money you saved grows tax-deferred until you start taking distributions ideally when you are retired. Pre-tax contributions work great if, by the time you retire, your tax rate is lower.
After-tax (Roth) contributions are deducted after taxes are calculated so there is no reduction in your reportable income. However, when you take distributions the amounts withdrawn are generally tax-free.
Why is a 401(k) even important? What’s the big deal?
Not many people want to be working until the day they die. Investing for your retirement makes sure that you have the money to stop working at a certain age and pursue other interests.
A 401(k) plan is great for three reasons:
- First, many times an employer will match the amount of money you put in, essentially, giving you free money. So if you put in $100 per paycheck, your company will put in $100 too. Most companies will only match up to a certain amount so you can always ask what the maximum amount is.
- Second, it is a hassle-free way to save for retirement since your employer will automatically withdraw the money from your paycheck.
- Third, the money you put into your 401(k) can be deducted from your paycheck before taxes are taken out. This is called pre-tax. Your taxable income over the course of the year is decreased. This makes a lot of sense if by the time you retire your tax rate is lower.
What does it mean when my employer says they will match?
Matching means, basically, free money. Your employer, in order to encourage you to save your money, will put money into your account. So, for example, if you put in $1,000, they will match that amount and put in $1,000. Employer match may be subject to vesting which means your time as an employee with the company determines the portion you can keep. Your contributions deducted through your paycheck are not subject to vesting and are always fully yours to keep.
Why should I invest in a 401k when I’ll be getting Social Security benefits when I retire?
As of 2016, if you retire at 65 the maximum monthly payment you would get from Social Security would be $2,787.80. However, not everyone is eligible for the maximum amount. It depends on a few factors such as how much income you have made and when you started working.
If you want to see how much YOU would get, try this calculator. But also think of what you want to do after you stop working. Will that amount of money give you the freedom to explore your interests and also pay for your day to day living? Refer: www.ssa.gov/planners/benefitcalculators.htm
How much money should I put into my 401k?
Well, there is a top limit on the amount you can save every year. For 2020 and 2021, it is $19,500 if you were under 50 years old. If you were over 50, you could catch up and add an additional $6,500. So if you were over 50, you could contribute a maximum of $26,000. It changes every year.
I’m moving on to bigger and better things at another job. What do I do with my 401(k)?
You have three options:
- One, you could transfer it to an individual retirement account, like a Rollover IRA.
- Two, you could transfer it to your new company’s retirement account offerings, like a 401k.
- Three, you can withdraw the entire amount into cash. This last one is a bad idea because the government will take a huge chunk for taxes (remember that the money in there was placed before taxes were taken from them). And the government takes a 10% penalty. You wouldn’t be left with much.
I’m close to retirement. Is it too late for me to have a 401(k)?
It is never too late to start saving for retirement! If your employer offers a 401k, you should go for it. They will only match a certain amount of the money you put in. But you can deposit as much as $26,000 (as of 2020 & 2021) of your pre-tax paycheck, as long as you are over 50 and can support making those contributions.
Why is it called a 401(k)?
It is called a 401(k) after the section of the IRS tax code that created it and defined it.
When did this 401(k) thing start?
In 1978, the government set up this provision in the tax code allowing people to save money from their paycheck. They created this section of the code because, in those days, higher-paid executives could save their money in pension accounts. The pension accounts were similar to today’s 401(k) accounts but weren’t offered to everyone, only to the higher paid executives. And at that time they could save up a quarter of their salary (up to $30,000)! A benefits consultant, Ted Benna, saw this item and decided it would work very well for the employees where he currently worked. He created the first 401(k) plan for his company, The Johnson Co. (now Johnson, Kendall, and Johnson) and the idea took off. By the early 1980s, many employers were either offering 401(k) options to their employees or in the process of setting it up. Which leads to right here, right now — with you signing up for your 401(k) and planning ahead for a great retirement.
Can I borrow money from my 401k plan?
Yes, this is called a loan and it is a common feature of 401(k)s that many other types of accounts don’t allow (like IRAs). Subject to eligibility, you can generally borrow half of your vested account balance up to $50K. Loan repayments include amounts for both principal and interest that you pay back into your own account via a separate payroll deduction from any contributions you are making.
What is the maximum amount I can put into my 401k?
The government has placed a maximum limit on the amount you can contribute every year. For 2020 and 2021, it is $19,500 if you were under 50 years old. If you were over 50, you could catch up and add an additional $6,500. So if you were over 50, you could contribute a maximum of $26,000. If your employer also contributes to your 401(k) there is an overall maximum of $58,000 for 2021 for employee AND employer contributions. This limit can change each year.
What are my rights as someone who is using a 401(k) plan?
Under the Employee Retirement Income Security Act of 1974 (ERISA) everyone who is using 401(k) plan is entitled to:
- Examine without charge all plan documents including collective-bargaining agreements, copies of all documents filed by the plan with the U.S. Department of Labor, and detailed annual reports.
- Obtain copies of all plan documents and other information upon written request to the plan administrator. The administrator may make a reasonable charge for these copies.
- Receive a summary of the plan’s annual financial report. The administrator is required by law to furnish each participant with a copy of this summary annual report.
- Obtain once a year, without charge, a statement of benefits accrued to the participant.
- Examine without charge at the administrator’s office, or obtain upon written request from the administrator, a complete list of the employer and employee organizations sponsoring the plan.
- Upon written request, receive information from the administrator as to whether a particular employer or employee organization is a sponsor of the plan and, if so, receive the sponsor’s address.
In addition, your employer cannot fire you or otherwise discriminate against you in any way to prevent you from obtaining a 401(k) benefit or exercising your rights under ERISA. If your claim for a benefit is denied, you must receive a written explanation of the reason for the denial. You have the right to have the plan administrator review and reconsider your claim.
If you have additional questions about your rights under ERISA, you should contact the Pension and Welfare Benefits Administration division of the U.S. Department of Labor at (202) 219-8776, or on the Web at www.dol.gov.
I’m self-employed. Can I have a 401(k)?
How can I set up a 401(k) plan on my own? My employer doesn't offer one.
A 401(k) plan is an employer-sponsored retirement savings option. If your employer doesn’t offer one, you can open a traditional IRA or Roth IRA. Both of those accounts are retirement savings accounts for individuals.
If you want to have a 401(k) account, in which you can put your pre-tax dollars, you have the option of creating your own business and then opening a 401(k) account for your business.