Are multiple retirement accounts costing you money?

According to the financial tech company, Capitalize, by the end of 2021 there will be an estimated 25 million “forgotten” 401(k) accounts in the U.S., with an average account balance of approximately $55,000 and representing nearly $1.35 trillion of assets in total. In aggregate, these forgotten 401(k) accounts could be costing retirement savers a whopping $116 billion annually from higher fees and lower investment returns.

Often 401(k)s are left behind by people who have changed jobs or terminated their employment. People today change jobs more often—on average, 12 times over their careers. That could mean dealing with 12 different 401(k)s and/or 403(b)s over time, putting a person in a potentially very costly situation.

Steps are being taken to protect savers’ assets. Auto portability is a fairly new 401(k) plan default feature that automatically transfers small-balance retirement savings when participants change jobs. Bipartisan legislation to create a national lost-and-found database to help plan participants keep track of their retirement accounts has been introduced once again, and could end up being part of a larger SECURE Act 2.0 retirement reform package that may come out late this year. Lawmakers are also looking at ways to solve the problem of 401(k) “leakage,” which is when participants cash out their account instead of rolling it over to a new retirement savings account.

If you want to consolidate and aren’t sure where your old 401(k) is, there are three places it may be: In the old account set up by your employer; in a new account set up by the 401(k) plan administrator; or in your state’s unclaimed property division.

Do you or your partner/spouse have multiple accounts from old jobs? Did you have a retirement savings provider change at work and now have a second account? Consider rolling over to a WEA Member Benefits IRA account. It could save you money because of our low annual administrative fees and annual fee caps. And our IRA is open to your spouse/domestic partner, parents, parents-in-law, and children and their spouses, even in some states outside of Wisconsin.

Contact us for more information at 1-800-279-4030, Extension 8577 or visit weabenefits.com/rollover.

Restrictions may apply. Certain state residency required.

Simplify your life with account consolidation

Here are three reasons you may want to consolidate your retirement accounts.

Economic advantage

Consolidation may save you money by eliminating or reducing fees. Fees eat into your bottom line, which is even more crucial once you retire. Member Benefits retirement programs offer low fees that are capped annually, which keep costs in check (mutual funds fees still apply). Ask for a complete list of fees that may apply to each of your accounts, including mortality and expense fees, surrender charges, and custodial fees. Member Benefits does not charge these fees. Visit our Fees Matter page for more information.

Comfort

As you approach retirement, you need to consider reducing your risk as you have more to lose and less time to make up for market losses before you need the money. If you have more than one account, you may have different portfolios with differing levels of risk, and you’ll need to keep track of all of them.

Feeling comfortable with the level of risk you take when investing is key. Revisit your asset mix periodically to make sure your tolerance for risk matches how you’re investing your money. Having one account makes managing your risk easier to do.

Simplicity

A common reason people consolidate is convenience. Some or all of these might appeal to you.

Less work, more clarity. Managing multiple accounts can be a lot of work. If you have five different accounts, you receive five different quarterly statements. Each one reports the quarter’s activities differently, so it’s no small feat to get a glimpse of your overall situation. Putting your assets in one place, such as with Member Benefits, gives you a clearer snapshot of where you are financially.

Consolidation also makes tracking contributions and withdrawals easier. Because there are limits to how much you can contribute to most retirement accounts—penalties will apply if you go over—multiple accounts require you to more closely monitor where and how much you contribute.

Headache-free RMDs. The Internal Revenue Service (IRS) requires you to start withdrawing required minimum distributions (RMDs) from certain types of accounts, such as a 403(b) and Traditional IRA, generally at age 72 (or 70½ if you turned 70½ before January 1, 2020). When calculating your RMD, you must consider all of your accounts. Although you have some control from where and how you want your RMD to be taken, you are also responsible for communicating your withdrawal plans to all of your account providers. Failing to make your intentions clear can go bad—if an account owner fails to withdraw an RMD, fails to withdraw the full amount, or fails to withdraw by the applicable deadline, the amount not withdrawn is taxed at 50% (IRS).

One point of contact. Questions about your statement or asset allocations can get answered with one phone call or by logging in to one account. And tasks such as updating an address or changing a beneficiary are made simple.

Remember, you can stick with us—we’re here for you up to and through retirement. Take care when moving money so you can avoid common and costly mistakes such as surrender charges and other deferred sales charges. We can help talk you through what to consider. Call us about consolidating your accounts at 1-800-279-4030.

Get the facts about Member Benefits’ retirement and savings program

MYTH: You have to move your money out of WEA Member Benefits because (fill in the blank).

FACT:

Despite what you might hear, you DO NOT need to move your money from your 403(b) or IRA with Member Benefits if you:

MYTH: Consolidating your money will make it easier for your beneficiaries.

FACT:

Sure, consolidation makes managing your money easier, but unless you are consolidating into a low-cost program, your account balance could take a hit.

MYTH: You won’t have access to your 403(b) funds in retirement because it is in an “annuity” (tax-sheltered annuity).

FACT:

Our program has flexible withdrawal options without surrender periods (the amount of time an investor must wait before withdrawing funds from an annuity without penalty). Often individual annuities or insurance company annuities have surrender/maturity periods that are many years long (sometimes 5–12 years). Ours doesn’t.

MYTH: My beneficiaries are specified in my will, so I’m set.

FACT:

Your will is not enough. The beneficiary designated on any retirement account supersedes the instructions found in a will or a trust. So be sure yours are up to date on all of your retirement accounts, and review and update your accounts whenever you experience any major life events (marriage, divorce, birth of a child, death of a family member, etc.).

MYTH: There are fees to transfer money from other retirement accounts into Member Benefits program.

FACT:

Nope! The WEA TSA Trust does not charge fees to transfer money from other retirement accounts into our program. However, if your retirement account at your current carrier has a surrender fee, or if you move money from a mutual fund that has a redemption sales charge, you may be charged a fee from your current carrier. Contact your current provider to review possible charges.

MYTH: There are fees to get funds out of your Member Benefits account upon retirement.

FACT:

Nope again! Member Benefits does not charge transactional fees or surrender charges even if you move your money out. (Mutual fund redemption fees may apply in certain situations.)

MYTH: Member Benefits doesn’t offer nonretirement accounts.

FACT:

Yes, we do! We have been offering Personal Investment Accounts since 2018. It’s a way to invest your money outside of a retirement account without using a cash account such as savings, checking, or certificates of deposit. It can be registered in just your name or opened jointly with anyone.

MYTH: In order to open a WEA Member Benefits IRA, I have to live in Wisconsin.

FACT:

In case you missed it, Member Benefits recently opened our IRA program to folks who live outside of Wisconsin! If you meet eligibility guidelines and live in one of the states that offer our IRA program, you and your family may enjoy the benefits of saving with a WEA Member Benefits IRA.

Have some questions about your retirement account or need help getting started? Contact us at 1-800-279-4030 or retirement@weabenefits.com.

NEW! IRA program available outside of Wisconsin

For those who meet our eligibility criteria, we have great news! We’ve expanded our IRA eligibility guidelines to include those who live in certain states.

Our IRA is open to family members

Family may also participate in our IRA program if they live in one of the approved states, so you can all enjoy the benefits of saving with a WEA Member Benefits IRA.

Take advantage of this savings opportunity

For more information and to learn which states are eligible, contact us.

To be eligible for this program, you must meet the IRS eligibility requirements for contributing to an IRA. Restrictions may apply. Certain state residency required.

Women and retirement: 6 challenges to a secure future

A comfortable retirement is an expensive endeavor for everyone. Financial planners suggest one should shoot for an annual retirement income that’s roughly 85% of your preretirement income, depending on your continued fixed expenses. Translation? Everyone needs to save—a lot. But women should actually be saving more.

“Women are at a much higher risk of facing financial uncertainty in retirement and retiring with considerably less savings than men,” says Andrea Hartwig, Financial Planner at WEA Member Benefits. “Women face unique challenges. Generally, they spend fewer years in the workforce, earn less income, gravitate toward conservative investments, and have longer life spans than men.”

While not every woman will experience the same challenges, it is likely that most will face more than one, which compounds the problem. “Their road to retirement is more long and winding than that of their male counterparts,” explains Andrea, “making it even more critical for women to recognize key life events that can trigger a financial setback. Women need to be aware and prepare.”

Challenges facing women

1. LIVING LONGER

The life expectancy for men in the U.S. is 76 years. For women it’s 81.1 While five years may not seem like a lot over a lifetime, it does mean the average woman will need to save more to fund the extra years compared to the average man. From a financial perspective, this is significant—and the price tag on those years will likely be higher.

Longevity brings with it a greater potential for increased health care costs. “People often believe that once they hit 65 and qualify for Medicare, their health care costs are covered, but that simply isn’t the case,” says Andrea. “Medicare is a great benefit, but it’s far from free. There will still be out-of-pocket expenses that are not insignificant.”

It is estimated that the average couple retiring at age 65 will need $285,000 to cover health care and medical costs in retirement. Women will need more than men—$150,000 vs. $135,000.2 And that doesn’t include long-term care services, which, despite what many think, are not covered by health insurance or Medicare. This is an important consideration as:

Health care continues to be one of the largest expenses in retirement. The longer you live, the greater the cost will likely be.

2. EARNING LESS

While strides have been made regarding equal pay, women are not always paid as much as men in the same fields and positions. According to the U.S. Census Bureau, women earn about a third less than men during their working lives, resulting in smaller contributions to Social Security, pensions, and other retirement accounts. It is a major contributing factor as to why women are 80% more likely to wind up in poverty than men when they’re age 65 or older.4

Women are also more likely to work part-time because they often fulfill other roles in the family requiring their time (like caregiving). Part-time workers may not qualify for their employers retirement plan, and again, lower income means less going into Social Security on their behalf.

3. TAKING CARE OF OTHERS

The pay gap issue is amplified for women who drop out of the workforce temporarily to be stay-at-home moms or to care for sick or aging parents. With 75% of all unpaid caregivers being women, the impact is far reaching and has long-term financial implications.5

Here’s what that means for women financially.

However, Andrea notes, this shouldn’t discourage women from taking time out of their careers.

“The key is to plan for it. The earlier you start saving and the more you contribute, the more time you can comfortably take off from your career,” she says.

4. INVESTING TOO CONSERVATIVELY

By and large, women gravitate toward more conservative investments than men. Playing it safe is more comfortable and may be a good approach when near or in retirement, but such a strategy usually means lower earnings over the long run. “If you take this approach, you may need to invest more money to meet your goals. But if there’s a time to be more aggressive, it’s when you’re young. Because of the long timeline, you are in a better position to recover from market fluctuations,” says Andrea.

Having a better understanding of investing and the relationship between risk and reward will help you find an investment strategy that will help you reach your goals and still sleep at night. It’s a balance. And, don’t be afraid of getting some professional help. You can go to weabenefits.com/financialconsults to learn about financial consultation options and set up a phone or video conference with a financial planner.

The Investor Suitability Profile Questionnaire offered by Member Benefits can help you determine the level of risk you’re comfortable with. After providing some basic information about your situation and answering six questions, you will receive an indication of your investment style along with an appropriate investment allocation.

5. BEING SINGLE or SINGLE AGAIN

This challenge is really more about planning for your future than it is about marital status. Because nearly every woman will have sole responsibility for her finances at some stage in her life—whether single by choice, divorce, or widowhood—it’s important for women not only to have a plan but to also have ownership in the plan.

“Women should always be involved in conversations about finances, whether that’s at the financial advisor’s office or at the dining room table at home. This is not the place to hand off control. Taking responsibility for your own financial security will prepare you for whatever turns your life may take,” encourages Andrea.

6. MAKING BIG DECISIONS WITHOUT ALL THE FACTS

It goes without saying that any big decision should be made with care—and there may be no greater decisions to make right now than about your financial future.

“Here is where having knowledge about your long-term finances comes in handy,” says Andrea. Knowing how you (and your spouse if applicable) are saving and what kind of accounts you have—403(b,) IRA, 401(k), and/or your Wisconsin Retirement System—is significant, because each account type has different rules and restrictions, and each serves a strategic role in your retirement income stream.

Without that knowledge, people can make costly and irreversible mistakes. For instance, it’s all too common for people to dip into their retirement account early. In fact, 52% of all savers take early withdrawals—a move that can cost you dearly in three ways:

  1. Penalties for unqualified distributions typically run 10% but could be higher if the account has surrender fees.
  2. Taxes may apply to withdrawals and may push you into a higher tax bracket.
  3. Earnings on the money you withdraw will cease, and you will lose out on future growth from compound interest.

“While this may be tempting, especially in difficult times like the COVID-19 pandemic, it really should be a last resort option,” says Andrea. “Your retirement savings should be earmarked for retirement. Building an emergency fund where the money is easy to access is a better way to plan for surprise financial situations that pop up in daily life.”

It’s all connected

Generally, the closer you get to retirement, the more complex your finances become—and it’s also a time when you are financially vulnerable. You will have several big decisions to make, including when to stop working, when to take Social Security, how to pay for health care, and how to generate cash flow from your retirement assets. These decisions are interconnected and could make a difference in your living costs and lifestyle in retirement—and ultimately determine when you can retire.

Andrea advises, “You really want to have a handle on these well before retirement. If you have a solid plan and an understanding of what your plan entails, the decisions will be easy to make.”

The information in this article is provided only as a summary of complicated topics and does not constitute legal, tax, investment or other professional advice on any subject matter. Further, the information is not all-inclusive and should not be relied upon as such. All investments hold risk and there can be no guarantee that your investments will be profitable or that your goals will be achieved.
SOURCES
1 U.S. Census Bureau   |   2 HealthView Services (a provider of health-care cost projection software) and Fidelity Investment (2019)
3 Wisconsin Office of the Commissioner of Insurance (OCI) (2019)   |   4 2018 report from the National Institute on Retirement Security
5 American Association for Long-term Care   |   6 Center for American Progress
ARTWORK: Daisy Garrett

Take advantage of our financial planning services

Our financial advisors specialize in working with Wisconsin public school employees, understand the unique retirement benefits available to them, and are experts in coordinating those benefits. We take time to help you identify and prioritize your financial goals, determine whether you are on track to meet your goals, and provide you with the information and tools to help you get there.

Member Benefits’ financial planning services are designed to address the changing needs of Wisconsin public school employees at various points in their careers and lives. And there are no commissions, which means you receive an unbiased analysis of your situation.

weabenefits.com/financial-planning

1-800-279-4030, Extension 6730

Ready to rollover to a WEA Member Benefits IRA?

Managing your investment accounts is easier when you consolidate. Consider rolling over into our IRA program where you’ll pay ONE low administrative fee up to an annual fee cap.**

It’s even easier to save by making automatic contributions from your savings or checking if you’re still working.

Here’s a few reasons to rollover your IRA to us:

It’s open to family members. Your family, including your spouse or domestic partner, children and their spouses, parents, and parents-in-law, may also be eligible to participate in our IRA program.1

Low fees save money. Fees charged by some plans can take a big bite out of your earnings. The number one factor in determining your rate of return—after asset allocation—is cost. To make the most of your invested dollar you will want to minimize the fees you pay.

Our IRA has just one low annual administrative fee (0.45%) that is capped annually at $600 for WEAC members $750 for non-members. No other administrative fees apply; however, mutual funds include investment management and redemption fees.

Rollover with ease. We can help you complete your transfer or rollover in a few easy steps. It only takes about 5 minutes with the help of one of our technical assistants.

Our enrollment experts will help you:

For more information, give us a call at 1-800-279-4030, Extension 8568, or start the process online at weabenefits.com/rollover.

*Be sure to consider all your available options and the applicable fees and features of each option before moving your retirement assets.
**A minimum annual fee of $25 will apply to accounts that have no annual contributions. Mutual fund management and redemption fees may apply.
1To be eligible for this program, you must meet the IRS eligibility requirements for contributing to an IRA. Restrictions may apply. Certain state residency required.

Decisions, decisions on distributions

Your required minimum distribution (RMD) is the minimum amount you must withdraw from your account each year, but you can choose to withdraw more. You generally have to start taking withdrawals from your IRA, SEP IRA, SIMPLE IRA, and your retirement plan account at age 72 (age 70½ if reached prior to January 1, 2020) or the calendar year you retire from an employer through which you contributed. Roth IRAs do not require withdrawals until after the death of the owner.

If you’re not sure what to do with your RMD by December 31, we have a few ideas for you.

Donate

Did you know you can choose to give up to $100,000 to a qualified charity from your Individual Retirement Account (IRA) without counting it as taxable income when you are over 70 ½ years old? This type of gift is called a qualified charitable distribution (QCD). It’s not only a powerful incentive for charitable giving, it also has tax benefits. QCDs count as IRA distributions, so they can be used to satisfy all or some of your required minimum distribution (RMD) for the calendar year.

Member Benefits requires you to complete a specific form if you wish to take advantage of this IRA option. Consider giving a donation to WEA Member Benefits Foundation or one or more of your favorite charities.

Reinvest

If you don’t need the funds for necessities, consider opening a Personal Investment Account with Member Benefits. It’s a way to invest your money outside of a retirement account without using a cash account such as savings, checking, or certificates of deposit. You can choose from individual, joint, UTMA, or trust accounts.

Ask us about the tax benefits of this type of account. For more information, visit the Personal Investment Account page.

Give

The Uniform Transfers to Minors Act (UTMA) provides an avenue for a grandparent, parent, aunt, and/or uncle to make monetary gifts to a minor. Or consider making a contribution to a 529 college savings plan (in Wisconsin, visit Edvest).

Transfer

If you have a Roth 403(b), you can roll the money into a Roth IRA, which has no RMDs for the original owner. You can also convert your Traditional IRA, Roth IRA, or pre-tax 403(b), but you will owe tax on the conversion.

Give us a call at 1-800-279-4030 if you have questions. As with most IRS provisions, we encourage you to work closely with your tax advisor to determine what would work best for your specific situation.

Working at a new district this year? Don’t forget your 403(b)

That’s right. Your 403(b) is an employer-sponsored plan, so when you leave a district, any contributions to that account stop. To continue funding your retirement savings, you need to set up a new retirement account with your new district.

Member Benefits is an approved vendor in 98% of the school districts in Wisconsin, so chances are you can continue saving for retirement with our nationally recognized 403(b). Here’s what you need to do.

Call us

We’ll help you set up your new account in about 10 minutes.

Fill out an SRA

Fill out a Salary Reduction Agreement (SRA) and submit it to your new district’s benefits manager or payroll coordinator, authorizing them to withhold and forward money from your paycheck to your 403(b). We can provide you with the SRA or you can get it from your district’s business office.

Update your account

While you’re setting up your new account, take the opportunity to:

Moving to a new district requires you to open a new 403(b) account in order to contribute to your retirement savings. Your 403(b) account with a previous district is still yours and will remain in that district’s plan until you either move it or need it for retirement.

Decide what you want to do about your old account

Keep in mind you may have the option to transfer the money from your old plan to your new one. The process is pretty easy. Our staff can explain your options and help you decide whether or not it makes sense to transfer the money.

>>Call 1-800-279-4030

P.S. Consolidating your retirement accounts makes them easier to manage and may save you money. If you want to rollover a 401(k) or other retirement account(s) to a WEA Member Benefits IRA*, we can help with that, too!

 

*The Trustee Custodian for the WEA Member Benefits IRA accounts is Matrix Trust Company. To be eligible for this program, you must meet the IRS eligibility requirements for contributing to an IRA. Restrictions may apply. Certain state residency required. 

Back to school…back to saving for retirement

Start saving…now. National 403(b) Day is observed every September! Our celebration idea for you: Open a 403(b) or increase your contributions.

You can save with a 403(b) through your district, and if eligible, you can also open an Individual Retirement Account (IRA). Try to save as much as you can. Keep in mind that even a small amount can make a big difference over time due to compound interest. (Try out EconEd’s compound interest calculator that visually shows the dramatic effect that compounding can have on investments.)

If you wondering how much you can afford to save, use our helpful online budget sheet, which can help you maximize your savings and clarify your short- and long-term savings goals.

Make sure to fund your account. If you have a 403(b), enrolling is not enough. Be sure you’ve also filled out the appropriate Salary Reduction Agreement (SRA) so you can begin funding your account.

If you have an IRA, making automatic contributions directly from your savings or checking account will make it much easier to save. With Member Benefits, you can set up SmartPlan.

Take the match. If your school district offers a match in your 403(b) plan, take it. It’s free money. Added bonus: The match effectively increases your income without increasing your tax bill, since you pay no taxes on matching contributions until you withdraw them in retirement.

If you’re already saving, consider increasing your contributions. A new school year is a great time to increase your 403(b) contributions by filling out a new SRA. Some employers only allow changes at the start of the school year and then again in January. Others allow more frequent changes.

Both the 403(b) and the IRA have annual contribution limits, which can change every year. Visit weabenefits.com/limits to learn more.

Enroll now. Enroll online to open a 403(b) or IRA with Member Benefits, or give us a call and we’ll help get you back on track to saving. If you need more guidance, Member Benefits also offers a variety of financial planning services for members. Call us at 1-800-279-4030.

P.S. Your family members may be able to save, too! Call us to learn more.

Investors should understand the fees and risks involved in making investments, including interest rate risk, credit risk and market risk. The value of market investments can vary; investors can lose some or all of their principal

Save more for your nest egg!

One secret to building financial security is to regularly pay yourself first. Instead of paying your bills and then trying to save what is left over, set money aside before you pay your bills. This way you can develop a budget around saving, and not the other way around.

Automatic payments to an IRA, such as automatic contributions from your checking or savings account, not only help build your savings but also make it more affordable because you are budgeting for smaller, regular amounts.

If you already have an IRA, consider giving yourself a raise. If maxing out contributions is not realistic for you right now, remember: With compound interest, even a small amount invested today can grow to a large sum by retirement. Learn more about contribution limits.

Don’t forget your family can also save with an IRA from Member Benefits! Have them give us a call at 1-800-279-4030 to enroll.

Your spouse or domestic partner, children, parents, and parents-in-law, may be eligible to participate in the WEA Member Benefits IRA program. To be eligible for this program, you must meet the IRS eligibility requirements for contributing to an IRA. Restrictions may apply. Certain state residency required.