The Diversified Blog

A wealth management blog dedicated to creating a long lasting sustainable retirement.

10 Big Employers That Let You Bring Your Dog to Work

Here is a nice article provided by Sarah Smith of Kiplinger:

 

By Sarah Smith Intern / August 2017

 

While Donald Trump has yet to appoint a four-legged friend to walk the halls of the White House (making him the first president since William McKinley not to have a dog), his Secretary of the Interior, Ryan Zinke, made history this March when he debuted a program allowing dogs in certain government offices. While this may have been a first for the government, many companies have known for years that letting man’s best friend come to work can boost employee satisfaction and retention rates.

...
Continue reading
171 Hits
0 Comments

Your Plan's Vesting Schedule: Tailor It to Meet Your Needs

A retirement plan's vesting schedule, which establishes when employer contributions to the plan will be owned outright by the employee, plays a role in how effective the plan is in helping to attract and retain employees. Employers will want to carefully consider their goals and the available options when selecting a vesting schedule for their plan.

Common Vesting Schedules

The simplest schedule -- from an administrative perspective -- is to allow immediate vesting in 100% of the employer contributions allocated to the employee. However, immediate vesting offers little incentive for employees to stay with the company and therefore may become more counterproductive as the rates of employee turnover increase.

For this reason, sponsors concerned about employee retention often turn to a delayed vesting schedule. Instead of allowing 100% vesting up front, they seek to maximize employee retention by tying the vesting percentage to the participant's years of service.

Generally, for defined contribution plans, such as 401(k) plans, delayed vesting is available in two forms: "cliff" vesting and "graded" vesting. With cliff vesting, a participant becomes 100% vested after a specific period of service. With graded vesting, a participant becomes vested at a percentage amount that gradually increases until he or she accrues enough years of service to be 100% vested. (It should be noted that an employee's own contributions to the plan are always 100% vested, or owned, by the employee.)





Employers may choose a schedule that provides for vesting at a more rapid rate than those shown above, but they may not adopt a schedule that provides for less rapid vesting.

How do employers calculate years of service? A year of service is any vesting computation period in which the employee completes the number of hours of service (not exceeding 1,000) required by the plan. Typically, the vesting computation period is the plan year, but it may be any other 12-consecutive-month period.

Are all employer contributions subject to a vesting schedule? Several types of employer contributions must always be 100% vested. These include both non-elective and matching contributions in a SIMPLE 401(k) plan or a "safe harbor" 401(k) plan.

Can vesting schedules be changed? Generally, a vesting schedule may be changed, but the vested percentage of the existing participants may not be reduced by the amended schedule. Moreover, an employee with three or more years of service by the end of the applicable election period can choose to select the previous vesting schedule. The election period begins no later than the date of adoption of the amended schedule and ends on the latest of the following dates:

•  Sixty days after the modified vesting schedule is adopted;

•  Sixty days after the modified vesting schedule is made effective; or

•  Sixty days after the participant is provided a written notice of the change in vesting schedule.

What situations would cause vesting of an employee's entire balance? In certain circumstances, the participant's interest in a 401(k) plan is required by law to be 100% vested. These circumstances include attainment of normal retirement age (as defined in the plan), termination or partial termination of the plan, and complete discontinuance of contributions to the plan. Additionally, though not required by law, nearly all 401(k) plans provide for 100% vesting upon the participant's death or disability.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Continue reading
336 Hits
0 Comments

When Employees Leave, but Plan Accounts Stay

Work force reductions may leave some employers with low-balance plan accounts owned by former employees. These accounts can be expensive to maintain and burdensome to administer. Below, you will find answers to commonly asked questions about handling these small accounts.

Can we just distribute small accounts to the former employees? Check your plan's provisions. Under federal law, plans can provide that, if a former employee has not made an affirmative election to receive a distribution of his or her account assets or to roll those assets over to an IRA or another employer's plan, the plan can distribute the account - as long as its balance does not exceed $5,000. For accounts valued at $1,000 or less, the plan can simply send the former employee a check for his or her balance. Distributions of more than $1,000 must be directly transferred to an IRA set up for the former employee. Accounts valued at $1,000 or less may also be rolled over for administrative convenience.

Should non-vested assets be included when determining whether a mandatory distribution can be made? You only have to include the value of the former employee's non-forfeitable accrued benefit. If the employee was not fully vested in any portion of the account when he or she left your employ, you do not have to count the non-vested portion.

What about rollovers? A plan may provide that any amounts that a former employee rolled over from another employer's plan (and any earnings on those rolled over assets) are to be disregarded in determining the employee's non-forfeitable accrued benefit. Thus, you may be able to cash out and roll over accounts greater than $5,000. Note that rolled over amounts are included in determining whether a former employee's accrued benefit is greater than $1,000 for purposes of the automatic rollover requirement.

What requirements do we have to meet when rolling over a small account? To fulfill your fiduciary duties as a plan sponsor, the following requirements must be met:

•  The rollover must be a direct transfer to an IRA set up in the former employee's name.

•  The IRA provider must be a state or federally regulated financial institution, such as an FDIC-insured bank or savings association or an FCUA-insured credit union; an insurance company whose products are protected by a state guaranty association; or a mutual fund company.

•  You must have a written agreement with the IRA provider that addresses appropriate account investments and fees.

•  The IRA provider cannot charge higher fees than would be charged for a comparable rollover IRA.
(Other fiduciary responsibilities apply.)

Are there rules for investing the rollover IRA? The investments chosen for the IRA must be designed to preserve principal and provide a reasonable rate of return and liquidity. Examples include money market mutual funds, interest-bearing savings accounts, certificates of deposit, and stable value products.

Do we have to provide disclosures? Yes. Before you cash out an account, you must notify the former employee in writing, either separately or as part of a rollover notice, that, unless the employee makes an affirmative election to receive a distribution of his or her account assets or rolls them over to another account, the distribution will be paid to an IRA. As long as you send the notice to the former employee's last known mailing address, the notice requirement generally will be considered satisfied. In addition, you must include a description of the plan's automatic rollover provisions for mandatory distributions in the plan's summary plan description (SPD) or summary of material modifications (SMM).

"For accounts valued at $1,000 or less, the plan can simply send the former employee a check for his or her balance."


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Continue reading
274 Hits
0 Comments

Business Owner or Corporate Exec: Are You On Track to Retire (Someday)?

If you are a business owner, corporate executive or similar professional, “success” often means at least two things. There’s the career satisfaction you’ve worked your tail off for. Then there’s that question that starts whispering in your ear early on, growing louder over time:

Am I on track to retire on my own terms and timeline? (And if not, what should I do about it?)

While every family’s circumstances are unique and personalized retirement planning is advised, the ballpark reference below can help you consider how your current nest eggs stack up. It shows the savings you’ll want to have accumulated, assuming the following:

•  You’re saving 10–16% of your salary (or equivalent income) and receiving an annual raise of 3%.

•  Your annual investment return is 6%.

•  At retirement (age 65) you want to spend 40% of your final salary (with Social Security making up an additional 20–40% of the same).

•  You plan to withdraw 4% annually from your portfolio.

Salary vs. Age vs. Desired Savings Today (To Retire at 65)



Still feeling a little overwhelmed by the size of the chart? Let’s look at some plausible scenarios.

Let’s say you are a 40-year-old couple earning $100,000 annually. The table suggests you should have saved about $317,000 by now. If you continue to save 10–16% of your salary every year and the other assumptions above hold true as well, you should be on track to retire at age 65 and replace 40% of your final paychecks by withdrawing 4% of your portfolio each year. If you’re already 50 and pulling in $200,000, your savings should be right around $1.067 million to be on track in the same manner.

Do your numbers not add up as well as you’d like? No need to panic, but it’s likely you’ll want to get planning for how you can make up the gap. That may mean saving more, retiring later in life, investing more aggressively or employing a judicious combination of all of the above.

If you’re not sure how to get started, I recommend turning to a professional, fee-only advisor who you’re comfortable working with. He or she should be able to offer you an objective perspective to help you decide and implement your next steps. In the meantime, here is one tip to consider.

How To Channel Your Salary Increases Into Retirement Assets

As you approach retirement, many business owners’ or corporate executives’ salaries tend to increase, while some of their expenses (such as the mortgage) remain level. If that’s the case and you’re behind on your retirement savings, you may be able to direct your annual salary increases into increased saving.

For example let’s say you’ve been saving 7% of your salary, or $10,500/year, and you receive a 3% raise.  Take that extra 3% ($4,500) and direct it into savings. Without having to alter your current spending, you’re now saving 9.7% of your salary or $15,000 total.  If you get another 3% raise the following year, do it again and you’ll be saving $19,635 or about 12.3% of your $159,135 salary.

And so on. If you can’t allocate all of every raise every year to increased savings, do as much as you’re able and the numbers should start adding up, without having to significantly tighten your belt. Who knows, as you and your spouse see the numbers grow, you may even begin to enjoy the exercise.

One repeated caveat before we go: Remember that the table above offers only rough saving guidelines. It’s certainly not the final word, and should not be taken as such. In addition to saving for retirement, you’ll want to ensure that the rest of your financial house is in order, so your plans won’t be knocked off course by life’s many surprises.

Again, a financial professional can assist. He or she can help ensure that your investment portfolio is well diversified (to manage investment risk), your estate plan is current, your advance directives and insurance policies are in place, and your tax strategies are thoughtfully prepared. 

So, start with the chart, and give us a call if we can tell you more.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.



Continue reading
362 Hits
0 Comments

Top Issues Facing Corporate Executives Before They Retire

As a well-paid corporate executive, you might think that shifting into retirement will be a breeze.

But even with enough money to retire, there are concerns facing corporate executives, which can turn that calm breeze into choppy gusts.  For a smoother ride, be prepared to do some planning many years before you retire.

A good place to start your planning before retirement is to calculate how much money you need.  To answer this, look at what your take home pay is and subtract out any current savings. Current savings can consist of contributions to an IRA (Roth IRA), contributions to a taxable investment or savings account or extra principal payments. From this, subtract estimated amounts for additional retirement income such as Social Security, pensions, or rental incomes. This will provide a good idea of what you need on an after tax basis to live on during retirement. Typically, this works out to be 60%-80% of your pre-retirement income. But having enough money to retire is not all there is to it.

One of the biggest issues facing a corporate executive is figuring out what to do with your large position in the company stock or company stock options. Just like any other stock, owning a large position in a single stock is risky business.  It leaves you with an unbalanced portfolio, that’s subject to wild swings.

Look at the standard deviation of your portfolio with and without the large position in the company stock. There are techniques to hedge your large position by using stock options and equity collars. These methods can become complicated and usually require the assistance of an investment professional and accountant.

...
Continue reading
2344 Hits
0 Comments

Let us give you a second opinion

Contact us to schedule a no-cost no-obligation consultation and receive a free special report called Finding the Right Financial Advisor - Seven Questions to Help You Discover Whether a Financial Advisor Is the Right Match for You and Your Family.