Lutz Financial Surpasses $1 Billion in Assets Under Management

Lutz Financial Surpasses $1 Billion in Assets Under Management

 

LUTZ BUSINESS INSIGHTS

 

Lutz financial surpasses $1 billion in assets under management

Lutz Financial, an SEC Registered Investment Advisor and affiliate of Lutz, has announced that it recently surpassed the $1 billion threshold for assets under management.

“This is an exciting milestone in our firm’s history. This achievement demonstrates what can happen when a group of forward-thinking financial professionals focuses on the needs of their clients. We thank our wonderful clientele for allowing us to serve as their trusted financial advisor,” said Jim Boulay, Investment Advisor and Managing Member of Lutz Financial.

Lutz Financial serves more than 500 clients by providing wealth management, financial planning, and business retirement plan solutions. Acting as fiduciaries, Lutz Financial’s advisors serve their client’s ever-changing needs, personally, thoughtfully and practically.

Positioned for success, Lutz Financial looks forward to future growth and the expansion of client services. Learn more about Lutz Financial at https://www.lutz.us/services/lutzfinancial/.

 

RECENT POSTS

What is a Family Office?

Modern family offices have been in existence since the late 19th century when John D. Rockefeller decided he needed a professional team to manage his wealth. The complexity of the financial landscape, coupled with…

read more

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OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

601 P Street, Suite 103

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

April Retirement Plan Newsletter

April Retirement Plan Newsletter

 

LUTZ BUSINESS INSIGHTS

 

APRIL RETIREMENT PLAN NEWSLETTER

TEN REASONS TO ROLL OVER INTO YOUR PLAN VERSUS AN IRA

 TEN REASONS TO ROLL OVER INTO YOUR PLAN VERSUS AN IRA

Do you have employees in a prior employer’s retirement plan? Should they transfer these assets to a personal IRA or into your employer-sponsored retirement plan?

Review the pros and cons of an individual retirement account (IRA) versus consolidating into the current retirement plan with your employees to help them make this decision.

 

  1. Performance results may differ substantially.

As an institutional buyer, a retirement (401(k), 403(b), 457, etc.) plan may be eligible for lower cost versions of most mutual funds. Cost savings with institutional share classes can be considerable and can have significant impact on long-term asset accumulation.

One recent study by the Center for Retirement Research indicated that the average return retirement plan participants experienced was nearly 41 percent greater than other investors. Share class savings likely contributed to this result.

 

  1. The IRA rollover balance may be too small to meet minimum investment requirements.

Many of the low expense mutual fund share classes available to investors outside of retirement plans have minimum investment requirements in excess of $100,000. Some are $1 million or more. As a result, the average retirement plan participant who rolls a balance into an IRA may not have access to certain investments and/or will often end up investing in one of the more expensive retail share classes.

 

  1. IRA investment advisors may not be fiduciaries.

In a 401(k) or 403(b) plan (and even many 457 plans), both the employer and the plan’s investment advisor may be required to be a fiduciary. This means that investment decisions they make must be in the best interests of plan participants. This is the golden rule of fiduciary behavior and if not explicitly followed can lead to heavy economic impact to those organizations.

A non-fiduciary IRA broker or advisor is not necessarily required under law to act in the client’s best interests, and as a result, there is the possibility that their recommendations may be somewhat self-serving.

 

  1. Stable value funds are not available.

While money market funds are available to IRA investors, they do not have access to stable value funds or some guaranteed products that are only available in qualified plans. Historically money market fund yields have often been below that of stable value or guaranteed interest fund rates.

 

  1. IRAs typically apply transaction fees.

Many IRA providers require buy/sell transaction fees on purchases and sales. Retirement plans typically have no such transaction costs.

 

  1. Qualified retirement plans (like 401(k), 403(b), and 457) offer greater protection of assets against creditors.

Retirement plan account balances are shielded from attachment by creditors if bankruptcy is declared. In addition, retirement balances typically cannot be included in any judgments.

7. Loans are not available in IRAs.

Loans from an IRA are not allowed by law, unlike many qualified retirement plans which may allow for loans. Although we do not generally recommend participants take loans from their retirement plan, as they may hinder savings potential, some individuals prefer having such an option in the event they run into a financial emergency. Also, as a loan is repaid through payroll deduction, participants pay themselves interest at a reasonable rate.

 

8. Retirement plan consolidation is simple and convenient.

It is easier and more convenient for participants to manage their retirement plan nest egg if it is all in the same plan rather than maintaining multiple accounts with previous employers or among multiple plans and IRAs.

 

9.Retirement savings via payroll deductions are convenient and consistent.

The convenience of payroll deductions is very helpful for consistent savings and achieving the benefit of dollar cost averaging.

 

10. For present retirement saving strategies retirement plans can provide greater savings than IRAs.

The law allows you to make a substantially larger contribution to many retirement plans than can be saved with an IRA.

Although personal circumstances may vary, it may be a good idea for participants to roll over their balance in a former employer’s retirement plan into your current plan rather than an IRA. It could be a mutually beneficial decision as your plan’s assets will grow and your employees’ savings potential will not be as limited as with an IRA.

 

About the Author, Michael Viljak

Michael joined RPAG in 2002 and has over 30 years of experience in the retirement plan industry, on both the wholesale and retail levels, focusing on retirement plans ever since their inception in 1981. Michael has an interest in fiduciary-related topics and was part of the team that created RPAG’s proprietary Fiduciary Fitness Program. He also authors many of the firm’s newsletter articles, communication pieces and training modules.

LOSS AVERSION AND FIGHTING FEAR

Loss aversion sounds like a good thing — trying to avoid losing. What could be wrong with that? Unfortunately, if taken too far, it can actually be a threat to retirement plan participants’ long-term financial health. Loss aversion is the tendency to prefer avoiding potential losses over acquiring equal gains. We dislike losing $20 more than we like getting $20. Yet, this common bias can come with a heavy cost.

Excessive risk avoidance can hurt participants when, for example, it keeps their money out of the market and tucked away in low-risk, low-interest savings accounts — where purchasing power can be eroded by inflation over time. Delaying enrollment in an employer-sponsored retirement plan due to fear of market downturns can cripple opportunities for future growth.

Loss aversion can also lead to undue stress and anxiety. Participants stay invested, but worry constantly, which can create health and other problems. Finally, it can result in short-sighted decision making, causing participants to jump ship during volatile and down markets rather than staying in for the long term. All these things can greatly compromise retirement preparedness.

Fortunately, the fact that people are susceptible to loss aversion doesn’t mean they have to succumb to it. It’s especially important not to during periods of high market volatility. Here are five things you can recommend your participants do to fight the fear.

  1. Understand it. Merely knowing about and identifying loss aversion tendencies can give greater insight and conscious control over decision making. Your participants should consider the potential consequences of loss aversion before making important financial decisions.
  1. Take the long view. Maintaining a long-term outlook on markets can be helpful. Let your participants know they should look at historical trends and how investments have performed over extended periods of time. Otherwise, it’s just too easy to get caught up in the latest financial fear mongering on the nightly news.
  1. Don’t obsess. Recommend setting limits on how frequently your participants check the performance of their portfolios and limiting consumption of financial news reporting. If the daily ups and downs of the stock market make their stomachs turn, suggest trying to limit reviews to quarterly performance reports instead.
  1. Get an outsider’s perspective. Your participants should consider speaking with your advisor — someone with more experience and greater objectivity. Participants tend to get very myopic when it comes to their own finances; it can help to seek out the advice of experts when they may be losing perspective.
  1. See the big picture. Take a balanced view of the overall economy, which comprises a lot more than stock market performance. Factors like increased growth, low unemployment and low interest rates are all favorable economic indicators during periods of volatility.

No one likes to lose, that’s for sure. It’s perfectly normal to prefer upswings over downturns, but the lesson is to not let fear take hold when it can compromise financial decision making and hurt long-term best interests.

HEY JOEL!

Welcome to Hey Joel! This forum answers plan sponsor questions from all over the country by our in-house former practicing ERISA attorney.

Hey Joel,

Should we consider life insurance in our retirement plan? – Beefin’ up my plan in Buffalo

Hey Beefin’,

I’m not a fan of having this type of “investment” within a retirement plan.  I often explain my position by asking a client what the purpose of their retirement plan is.  Most will answer that it is a vehicle that helps their participants save towards retirement at or around age 65. When you introduce insurance into the plan, you are increasing your fiduciary liability by offering a product that in most cases becomes an important investment after retirement.  In other words, you’re introducing a product that is designed to assist during the payout period, which could be measured in 10-20 years (or more) beyond when they actually worked for you.  You have to monitor the insurance product, just like a mutual fund.  If it doesn’t perform well, as a fiduciary, you may have to choose an alternative.  In addition the credit worthiness of the insurance provider can come under question, and this can happen many years after introducing the product. This becomes problematic if participants have accrued a benefit in an insurance product that they may lose if a change takes place. If a mutual fund has an issue it is very easy to change.

I do feel there is a place for insurance for many people, but let them do it outside of their retirement plan.  Once that money leaves the plan, it is no longer a concern of fiduciaries.

One of the benefits of having life insurance in the plan is that it provides a “floor” value for a participant’s account that can limit the impact of market downturns. The fees are so high though, that the investments score a watch-list amount. Performance is mediocre at best. Those that offer it often see the exposure it adds to their plan –  sometimes their outside counsel also will have concerns, sometimes the plan sponsor must consider a freeze of this and no longer allow participants to add to the product and sometimes they experience poor service with their recordkeeper, who is also the insurance provider, and this is limiting their ability to find a new recordkeeper.  If the plan sponsor leaves, they may force participants to cash out of this. These companies may use this to lock in a client and it becomes difficult to do anything different.

There are other plan design alternatives you may discuss with your plan advisor to beef up your plan in other ways.

 

Pumpin’ up plan sponsors,

Joel Shapiro

About Joel Shapiro, JD, LLM

As a former practicing ERISA attorney Joel works to ensure that plan sponsors stay fully informed on all legislative and regulatory matters. Joel earned his Bachelor of Arts from Tufts University and his Juris Doctor from Washington College of Law at the American University.

PARTICIPANT CORNER: TAX SAVERS CREDIT REMINDER

This month’s employee memo reminds participants about the annual tax savers credit. Download the memo from your Fiduciary Briefcase at fiduciarybriefcase.com and distribute to your participants. Please see an excerpt below.

You may be eligible for a valuable incentive, which could reduce your federal income tax liability, for contributing to your company’s 401(k) or 403(b) plan. If you qualify, you may receive a Tax Saver’s Credit of up to $1,000 ($2,000 for married couples filing jointly) if you made eligible contributions to an employer sponsored retirement savings plan. The deduction is claimed in the form of a non-refundable tax credit, ranging from 10% to 50% of your annual contribution.

Remember, when you contribute a portion of each paycheck into the plan on a pre-tax basis, you are reducing the amount of your income subject to federal taxation. And, those assets grow tax-deferred until you receive a distribution. If you qualify for the Tax Saver’s Credit, you may even further reduce your taxes.

Your eligibility depends on your adjusted gross income (AGI), your tax filing status, and your retirement contributions. To qualify for the credit, you must be age 18 or older and cannot be a full-time student or claimed as a dependent on someone else’s tax return.

Use this chart to calculate your credit for the tax year 2019. First, determine your AGI – your total income minus all qualified deductions. Then refer to the chart below to see how much you can claim as a tax credit if you qualify.

 

FILING STATUS/ADJUSTED GROSS INCOME FOR 2019

Amount of Credit

Joint

Head of Household

Single/Others

50% of amount deferred $0 to $38,500 $0 to $28,875 $0 to $19,250
20% of amount deferred $38,501 to $41,500 $28,876 to $31,125 $19,251 to $20,750
10% of amount deferred $41,501 to $64,000 $31,126 to $48,000 $20,751 to $32,000

 

For example:

  • A single employee whose AGI is $17,000 defers $2,000 to their retirement plan will qualify for a tax credit equal to 50% of their total contribution. That’s a tax savings of $1,000.
  • A married couple, filing jointly, with a combined AGI of $39,000 each contributes $1,000 to their respective company plans, for a total contribution of $2,000. They will receive a 20% credit reducing their tax bill by $400.

With the Tax Saver’s Credit, you may owe less in federal taxes the next time you file by contributing to your retirement plan today!

DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Lutz Financial (“Lutz”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Lutz.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Lutz is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the Lutz’s current written disclosure Brochure discussing our advisory services and fees is available upon request. Please Note: If you are a Lutz client, please remember to contact Lutz, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Lutz shall continue to rely on the accuracy of information that you have provided.

For more important disclosure information, click here.

RECENT LUTZ FINANCIAL POSTS

Best Practices for Plan Fiduciaries

Are you offering a competitive retirement plan? In this webinar, Chris Wagner of Lutz Financial covers the step by step process for making fiduciary decisions and administering…

read more

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

601 P Street, Suite 103

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

Best Practices for Plan Fiduciaries

Best Practices for Plan Fiduciaries

 

LUTZ BUSINESS INSIGHTS

 

best practices for plan fiduciaries

Are you offering a competitive retirement plan? In this webinar, Chris Wagner of Lutz Financial covers the step by step process for making fiduciary decisions and administering a prudent retirement plan, as well as discusses current hot topics in the financal industry.

 

RECENT POSTS

What is a Family Office?

Modern family offices have been in existence since the late 19th century when John D. Rockefeller decided he needed a professional team to manage his wealth. The complexity of the financial landscape, coupled with…

read more

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

601 P Street, Suite 103

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

Retirement Income + Distribution Planning

Retirement Income + Distribution Planning

 

LUTZ BUSINESS INSIGHTS

 

retirement income + distribution planning

Most investment and financial advice has traditionally been focused on the accumulation phase (growing assets before retirement). But with the elimination of traditional pension plans and increased life expectancies, retirees are now finding that the distribution phase (spending down assets in retirement) is far more complex and requires a skill-set that neither they nor their financial advisor may possess. This seminar, led by Joe Hefflinger and Nick Hall of Lutz Financial, will highlight the key components of a successful retirement income and distribution plan as well as specific strategies to consider.

 

RECENT POSTS

What is a Family Office?

Modern family offices have been in existence since the late 19th century when John D. Rockefeller decided he needed a professional team to manage his wealth. The complexity of the financial landscape, coupled with…

read more

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

601 P Street, Suite 103

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

Is the Traditional Bypass Trust Outdated?

Is the Traditional Bypass Trust Outdated?

 

LUTZ BUSINESS INSIGHTS

 

Is the traditional bypass trust outdated?

justin vossen, investment adviser, principal

 

Many early-retirement Boomers feel comfortable that their estate plan is in order, having put their estate plan in place when they had younger children. With adult children, and the increase in the estate and gift tax exemption amounts, many feel that there is little planning to be done. However, upon review, we see plans that may need adjusting due to the recent changes in tax laws. Specifically, those plans with the AB Trust/Bypass trust structure.

How the AB trust/Bypass Trust Structure Works

With the traditional bypass trust, when the first spouse dies, the bypass trust is funded with an amount equal to the applicable exclusion amount in order to minimize federal and state estate taxes. Any remaining marital assets would transfer to the surviving spouse via a separate marital trust, typically. 

Today, that amount is $11,400,000; meaning that all assets would be moved into the bypass trust if the estate is less than $11.4 million. Anything over that $11.4 million would go to the surviving spouse via the marital trust. Most folks do not have $11.4 million of assets in their name; so generally, most assets will flow to the bypass trust when trusts contain inflexible formulas for funding at death.

Assets owned by the deceased spouse receive a basis adjustment at death. However, assets placed in the bypass trust will NOT receive a second basis step at the surviving spouse’s death. This is a key worry in today’s estate planning environment. Any assets passed outright to the spouse or placed in a marital trust, WOULD receive a second step at the surviving spouse’s later death. However, the bypass trust would allow for the growth of those assets to occur outside the surviving spouse’s estate. This structure is written to use the client’s maximum estate exclusion at the first passing to primarily avoid estate tax.

 

Why Does/Did This Structure Make Sense?

Attorneys and planners used this bypass trust structure because estate tax avoidance was a primary concern when individuals passed away a handful of years ago. For example in 2001, the estate and gift tax exclusion was $675,000; and if you did not use that exclusion on the first death, it died with you. If you owed estate tax for amounts of assets higher than $675,000, you would have had to pay a tax of 55% on that amount. The estate tax used to be extremely punitive. Therefore, good estate planners would make sure to use the full $675,000 exemption amount at the first passing via the bypass trust. This shielded those assets and any growth from future estate taxes on the second passing. 

Advantages of the Bypass Structure:

Creditor protection: This varies from state to state, so consult an attorney to understand your particular situation.

Spendthrift protection: A couple can predetermine how the surviving spouse benefits from the trust and protects the money for future generations. This also provides control of the assets for the benefit of the future generation. Also, this could shield the assets from a future spouse in case of divorce or from a comingling of assets in a mixed family situation. This could avoid the children being accidentally disinherited.

Probate: The assets in the bypass trust would avoid probate when the surviving spouse dies.

 

Disadvantages of the Bypass Structure:

New Laws: Today, two major things have happened, the first being the $11.4 million exclusion amount and the second was the advent of portability in 2011. Portability allows for the surviving spouse to actually “port” the amount that is unused by the first spouse which is then added to their own exclusion amount. Thus, the surviving spouse could have a $22.8 million estate and gift exclusion, as well as essentially two steps in basis if both spouses’ steps are used. The estate and gift tax percentage has also dropped to 40%, still punitive but lower than before. So, the bypass structure may no longer be needed in many cases.

Expense: Over a lifetime, the bypass trust structure is costly to create and perhaps a costly burden to administer as it requires its own tax return and administration.  

Taxes: The bypass trust has a compressed (high) tax structure so careful considerations to allocations and income distribution need to be considered.

Today – What Could I Be Doing?

You need to consult your estate attorney on what is most appropriate to use in your particular situation.  However, a few things should be considered:

Portability: If your assets are substantially less than the $11.4 million exemption, the portability provision has given rise to a simplified approach. This provision allows individuals to leave all of their assets to the surviving spouse and transfer their exemption to them. This allows the couple to protect $22.8 million from estate taxes without using the bypass trust planning. While this does NOT protect it from creditors or future spouses, it is a simple way to avoid the estate tax. However, keep in mind that these increased exemption amounts are due to sunset in 2026 to their pre-2018 levels.

Disclaimer Provisions: Many attorneys are drafting flexibility into plans by the use of disclaimers or “Clayton” disclaimers for federal tax planning. With this trust planning, when the first spouse dies, the surviving spouse receives the assets of the deceased spouse. At that time, the surviving spouse then has the OPPORTUNITY to make a disclaimer election. This disclaimer election would allow the assets to pass directly into a bypass or martial trust. This allows for the surviving spouse to use all or a portion of the deceased spouse’s estate exclusion amount. 

Why would you want to leave the surviving spouse with a decision to make at an emotional time? The reasons to do this type of disclaimer would be to provide flexibility as the laws change over time. As mentioned, the current estate and gift exemption is scheduled to sunset at the end of 2025. Given the political climate, it may make sense to provide flexibility in the plan to do what is best at the time of the first passing.

 

What Should I Do?

There is not a one-size-fits-all solution for anyone with estate planning. Family dynamics, balance sheets, asset structure, and legislation continue to change as people’s lives evolve. You may not be able to achieve all of your objectives and goals with one solution, but you can get pretty close. Ultimately, creating the optimal wealth transfer plan requires an evolving strategy refined by you and your trusted advisors over time.

 

 

IMPORTANT DISCLOSURE INFORMATION

PLEASE REMEMBER THAT PAST PERFORMANCE MAY NOT BE INDICATIVE OF FUTURE RESULTS.  DIFFERENT TYPES OF INVESTMENTS INVOLVE VARYING DEGREES OF RISK, AND THERE CAN BE NO ASSURANCE THAT THE FUTURE PERFORMANCE OF ANY SPECIFIC INVESTMENT, INVESTMENT STRATEGY, OR PRODUCT (INCLUDING THE INVESTMENTS AND/OR INVESTMENT STRATEGIES RECOMMENDED OR UNDERTAKEN BY LUTZ FINANCIAL), OR ANY NON-INVESTMENT RELATED CONTENT, MADE REFERENCE TO DIRECTLY OR INDIRECTLY IN THIS NEWSLETTER WILL BE PROFITABLE, EQUAL ANY CORRESPONDING INDICATED HISTORICAL PERFORMANCE LEVEL(S), BE SUITABLE FOR YOUR PORTFOLIO OR INDIVIDUAL SITUATION, OR PROVE SUCCESSFUL.  DUE TO VARIOUS FACTORS, INCLUDING CHANGING MARKET CONDITIONS AND/OR APPLICABLE LAWS, THE CONTENT MAY NO LONGER BE REFLECTIVE OF CURRENT OPINIONS OR POSITIONS.  MOREOVER, YOU SHOULD NOT ASSUME THAT ANY DISCUSSION OR INFORMATION CONTAINED IN THIS NEWSLETTER SERVES AS THE RECEIPT OF, OR AS A SUBSTITUTE FOR, PERSONALIZED INVESTMENT ADVICE FROM LUTZ FINANCIAL.  TO THE EXTENT THAT A READER HAS ANY QUESTIONS REGARDING THE APPLICABILITY OF ANY SPECIFIC ISSUE DISCUSSED ABOVE TO HIS/HER INDIVIDUAL SITUATION, HE/SHE IS ENCOURAGED TO CONSULT WITH THE PROFESSIONAL ADVISOR OF HIS/HER CHOOSING.  LUTZ FINANCIAL IS NEITHER A LAW FIRM NOR A CERTIFIED PUBLIC ACCOUNTING FIRM AND NO PORTION OF THE NEWSLETTER CONTENT SHOULD BE CONSTRUED AS LEGAL OR ACCOUNTING ADVICE.  A COPY OF LUTZ FINANCIAL’S CURRENT WRITTEN DISCLOSURE STATEMENT DISCUSSING OUR ADVISORY SERVICES AND FEES IS AVAILABLE UPON REQUEST.

ABOUT THE AUTHOR

402.827.2300

jvossen@lutzfinancial.com

LINKEDIN

JUSTIN VOSSEN, CFP® + INVESTMENT ADVISER, PRINCIPAL

Justin Vossen is an Investment Adviser and Principal at Lutz Financial with over 20 years of relevant experience. He specializes in wealth management and financial planning.

AREAS OF FOCUS
  • Financial Planning
  • Wealth Management
AFFILIATIONS AND CREDENTIALS
  • Certified Financial Planner™
  • Financial Planning Association, Member
EDUCATIONAL BACKGROUND
  • BSBA in Economics and Finance, Creighton University, Omaha, NE
COMMUNITY SERVICE
  • St. Augustine Indian Mission, Board Member
  • Nebraska Elementary and Secondary School Finance Authority, Board Member
  • St. Patrick's Church, Trustee
  • March of Dimes Nebraska, Past Board Member

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

601 P Street, Suite 103

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

March Retirement Plan Newsletter

March Retirement Plan Newsletter

 

LUTZ BUSINESS INSIGHTS

 

MARCH RETIREMENT PLAN NEWSLETTER

DEPARTMENT OF LABOR ISSUES RELIEF GUIDANCE FOR VICTIMS OF CALIFORNIA WILDFIRES

Department of Labor Issues Relief Guidance

The U.S. Department of Labor (DOL) recently issued benefit plan guidance and relief for plans and participants affected by the 2018 California Wildfires.  The DOL recognizes that plan sponsors and participants may be affected in their ability to achieve compliance with various regulatory requirements.  The guidance generally applies to all parties involved in employee benefit plans located in areas identified by FEMA as disaster areas, listed here:  www.fema.gov/disasters. 

The guidance provides relief from procedures related to plan loans and loan repayment, distributions, contributions and blackout notices.  In general, the DOL will not take enforcement actions if plans follow the guiding principle to act reasonably, prudently and in the best interests of workers and families who rely on the plans for their economic well-being. 

Specific guidance is offered in certain areas:

  • Loans and Distributions: Plan sponsors must make a good faith effort to follow procedural requirements under the plan, but the DOL will not assist with requirements and if unable, make a reasonable attempt to assemble any missing documentation as soon as practicable.
  • Participant Contributions and Loan Repayments: The DOL recognizes that some employers in these disaster areas may not be able to forward amounts withheld from employee wages within prescribed timeframes.  Employers are required to act reasonably, prudently and in the interest of employees and comply with the regulations as soon as practicable.  The DOL will not take enforcement action if timelines were not met solely due to the 2018 California Wildfires, in the FEMA-identified areas. 
  • Blackout Notices: Generally, 30 days’ advance notice is required when a participant’s rights under a plan will be temporarily suspended, limited or restricted due to a blackout period.  The DOL regulations provide an exception to this requirement when the inability to provide notice within the required timeframe is due to events beyond the plan sponsor’s or fiduciary’s control. 

The full DOL fact sheet can be found here.  Your advisor is available to answer any questions you may have or help you determine practical approaches to meeting fiduciary duties and requirements. 

 

About the Author,Bill Tugaw

Bill specializes in public sector 457(b) deferred compensation, 403(b) and 401(a) defined contribution plan consulting. He is a faculty instructor for the International Foundation of Employee Benefit Plans (IFEBP) on Public Sector 457(b), 401(a) and 403(b) plans.  Bill earned a Bachelor of Science degree from the W.P. Carey School of Business at Arizona State University and is co-author of two books: Deferred Compensation / Defined Contribution: New Rules / New Game for Public and Private Plans and Defined Contribution Decisions: The Education Challenge.

VISUALIZE RETIREMENT | WHAT ARE YOUR PARTICIPANTS SAVING FOR?

All too often, retirement planning success is measured purely by financial metrics: savings amounts (15 percent per year), income replacement ratios (75 percent of preretirement income), or withdrawal strategies (4 percent per year). And the most critical part of planning for retirement is forgotten: the plan itself.

 

Put another way: how can an employee know how much money they’re going to need in retirement if they don’t know what they’re saving for?

74% of 50-59-year-olds have made a serious effort to plan for financial aspects of retirement.

Only 35% of 50-59-year-olds have made a serious effort to prepare for the emotional aspects of retirement.

Visualize Retirement addresses the one planning need that many pre-retirees don’t even know they have: preparing for the nonfinancial side of retirement.

 Three key areas that studies and actual retiree responses, indicate are key drivers of happiness in retirement are:

1. LIFESTYLE: how participants will spend their time in retirement (family, leisure, travel, work, etc.).

Workers’ Vision for Retirement:

  1. 70% want to travel
  2. 57% want to spend time with family and friends
  3. 50% want to pursue hobbies
  4. 30% say they want to work

 

2. HEALTH CARE: how participants want to give and receive needed care.

Concern About Personal Events:

Concern About Personal Events Chart

 

3. MEANING: how participants will create a sense of purpose fulfilment.

Following almost 1,000 people, a study found that people with “high purpose” were:

  • 4x Less Likely to be afflicted with Alzheimer’s
  • Less Likely to develop mild cognitive impairment
  • Less Likely to develop disabilities or die young

 

 Benefits for Plan Sponsors

Workforce Management Flexibility:

  • Large amounts of time, money and resources go to offer and maintain benefits programs that help prepare employees for the next phase of their lives (retirement plans, company matching money, physical/financial wellness programs, healthy incentive programs).
  • What happens when the employee – due to a lack of emotional and psychological preparedness – doesn’t end up retiring?
  • That backlog can create recruitment and retention issues – as younger talent may seek opportunities elsewhere if A) there is no “foot in the door” position open, or B) they see minimal opportunities to advance internally.

 

Food for thought: Even if widespread workforce management issues are not prevalent, consider the type of employee that may have a difficult time moving on: the “career-minded executive” whose identity is wrapped up in their achievements and stature within the organization.

Long-term Cost Mitigation:

  • As a workforce’s age and tenure increase, so do the costs related to keeping that employee
  • An aging demographic – many of whom may not be emotionally prepared to retire – could impact organizational costs such as increased health care, payroll, or worker’s compensation.

To learn more about the Visualize Retirement program and plan sponsor and participant resources associated with it, please contact your plan advisor. The monthly participant memo companion piece to this newsletter is the Visualize Retirement workbook that helps participants visualize their retirement and define their purpose in retirement.

HEY JOEL!

Welcome to Hey Joel! This forum answers plan sponsor questions from all over the country by our in-house former practicing ERISA attorney.

Hey Joel,

My client wants to conduct an RFP for an ERISA attorney, what are important questions they should include? – Questioning the Expert

Hey Questioning,

While it is a somewhat unusual step to formally RFP for an ERISA counsel search, it can be a good exercise to ensure your client finds the best fit for their organization. Note, ERISA counsel typically does act in a fiduciary capacity in providing legal advice, so selection of ERISA counsel would likely not engender the same fiduciary scope as selection of an advisor, record-keeper or TPA. Fees, if paid out of plan assets, have to be reasonable, but that can be difficult to determine as legal fees can have an incredible variance.

All that said, here are a few excellent questions to assist the client in identifying ERISA counsel who will be a good fit:

  • Do you require a retainer? If so, what is the required amount? Does it need to be replenished on a regular basis, or is it just an initial engagement requirement?
  • What is your hourly fee?
  • Do you provide project-based fees? If so…
    • What falls into the scope of a project?
    • How are scopes determined?
    • How are scopes tracked to ensure the original quote is met?
  • What services do you anticipate will be included on an ongoing basis on an annual basis? What do you project the cost to be?
  • What issues do you commonly see arise with plans of similar size and design that require legal assistance? Please provide an estimate of cost for legal work for each.
  • Who in your firm will provide the work on our engagement? Please list all attorneys, paralegals, and anyone else whose time might be billed to us with their bio and their potential/anticipated role on our engagement.
  • Please provide three referrals for three clients who sponsor plans of a similar size and complexity.

The Expert,

Joel Shapiro

 

About Joel Shapiro, JD, LLM

As a former practicing ERISA attorney Joel works to ensure that plan sponsors stay fully informed on all legislative and regulatory matters. Joel earned his Bachelor of Arts from Tufts University and his Juris Doctor from Washington College of Law at the American University.

PARTICIPANT CORNER: VISUALIZE RETIREMENT WORKBOOK

Visualize Retirement Image

This month’s employee memo is from our partner, T. Rowe Price, and gives participants a questionnaire so they can determine their priorities for retirement. Download the memo from your Fiduciary Briefcase at fiduciarybriefcase.com and distribute to your participants. Please see an excerpt below.

Retirement planning is both a financial and nonfinancial process. You may have received financial resources from your employer or financial advisor. But putting money aside now for a future date may be more meaningful to you if you have a good idea of what you’re saving for. This workbook is intended to help you visualize your retirement.

Retirees defined a personal retirement vision as follows¹: 50% said, “Working with my spouse/partner to define what we want in retirement”; 46 percent said, “creating a picture of what my retirement lifestyle could be”; 42 percent said, “defining how I would like to receive required health care in retirement”; and 32 percent said, “defining my purpose in retirement.”

 

1. Rank this list in the order of who you spend the most time with today. (1=most)

  •  Family/Household
  • Friends
  • Work/Former Work Colleagues
  • Social Groups (Clubs, Sports, Worship)
  • Neighbors/Community/Volunteerism
  • Other:

2. Now, reorder this list based on who you think you will spend the most time with in retirement.

  • Family/Household
  • Friends
  • Work/Former Work Colleagues
  • Social Groups (Clubs, Sports, Worship)
  • Neighbors/Community/Volunteerism
  • Other:

3. Who will be on your wellness support team in retirement, meaning who will provide you with care if needed?

  • Spouse/Partner
  • Siblings
  • Children
  • Other family members
  • Friends
  • Other:

4. Whose wellness support team do you anticipate being on, meaning, to whom will you provide care if needed?

  • Spouse/Partner
  • Siblings
  • Children
  • Other family members
  • Friends
  • Other:

Next Step: What can you do today to ensure you have the social and support network you will need in retirement?

5. Rank this list in the order of how you spend your time now (1=most)

  • Work
  • Leisure/Fun Activities
  • Physical Activities/ Exercise
  • Kids/Parents/Grandkids
  • Pets
  • Social
  • Learning/Education
  • Religious/Spiritual
  • Travel
  • Other:

6. Now, reorder this list based on how you plan to spend your time in retirement.

  • Work
  • Leisure/Fun Activities
  • Physical Activities/ Exercise
  • Kids/Parents/Grandkids
  • Pets
  • Social
  • Learning/Education
  • Religious/Spiritual
  • Travel
  • Other:

7. What activities will you pursue in order to have a vibrant retirement? (choose all that apply)

  • Exercise Regularly
  • Eat Well
  • Manage Your Weight
  • Be Proactive About Preventative Care With Doctors
  • Adopt a Positive Mindset
  • Learn New Things to Keep Your Mind Sharp
  • Engage With Others Socially
  • Do Mental Exercises
  • Spend Time With Family and Friends
  • Do Nice Things for Yourself (“Pampering”)
  • Other

Next Step: What changes can you make today so that you can spend your time in retirement doing what you want/need to do

8. Rank the following factors in deciding where to live in retirement. (1=most important)

  • Closeness to Family
  • Climate
  • Urban/Suburban/Rural
  • Access to Local Resources (Culture, Education, Recreation, Spiritual)
  • Cost of Living
  • Low Crime
  • Access to Good Health Care
  • Proximity to Work
  • Peaceful/Beautiful Location(s)
  • Access to Public Transportation
  • Social Access
  • Other

9.When you think about your primary home in retirement, what’s most important to you? (choose all that apply)

  • Stay in Your Current Home
  • Downsize
  • Upsize
  • Low Maintenance
  • Low Cost of Living and/or Taxes
  • Nice Climate
  • Live With Family
  • Live in Planned Community
  • Live in Resort Location
  • Live in College Town
  • Other

Next Step: What can you do now to help you prepare for where you want to live in retirement?

10 When would you like to retire, based on your personal definition of retirement?

  • At age:
  • At Asset Level:
  • In Which Timeframe:
    1. 55 (Early)
    2. 65 (Average)
    3. 75 (Late)

11. What is the primary reason for your expected timing?

  • Financial Readiness
  • Satisfaction With My job
  • Reaching My Intended Retirement Age
  • Want to Start a New Chapter/Do Other Things
  • Health-Related Issues (mine or others)
  • Feeling Personally/Emotionally Ready
  • Becoming Eligible for Government Benefits (Social Security, Medicare)
  • Other

Next Step: What can you do now to prepare to retire when you would like to

12. What provides you with the most fulfillment or meaning in your life today? (1=most)

  • Success In My Job
  • Family Time
  • Staying Healthy and Energized
  • Continuous Learning/Education
  • Traveling to New Locations
  • Nonwork-Related Hobbies
  • Religious/Spiritual Activities
  • Neighborhood/Community Involvement
  • Other

13. Now, reorder this list based on how your sense of fulfillment or meaning may change in retirement.

  • Success In My Job
  • Family Time
  • Staying Healthy and Energized
  • Continuous Learning/Education
  • Traveling to New Locations
  • Nonwork-Related Hobbies
  • Religious/Spiritual Activities
  • Neighborhood/Community Involvement
  • Other

Next Step: What can you do now to help you move towards a future retirement that aligns with what’s important to you?

 

You’ve thought about what and who is important to you today, and how that may change after the initial transition to retirement. Now, write your “dust jacket”: the personal profile of your retired life.

Think about your responses for each section in the workbook and how your rankings changed based on priorities and preferences. Incorporate your action items and key components from your vision that will lead to a happy, fulfilling retirement.

DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Lutz Financial (“Lutz”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Lutz.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Lutz is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the Lutz’s current written disclosure Brochure discussing our advisory services and fees is available upon request. Please Note: If you are a Lutz client, please remember to contact Lutz, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Lutz shall continue to rely on the accuracy of information that you have provided.

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