The Partners Circle

The mission of the Partners is to empower all of us to go directly to each other with our expertise. FiduciaryFirst is considered an industry leader and our knowledge and informative blogs can help you gain an understanding about key topics within the industry.

Hidden Taxes in Your Tax-Free Retirement Account

Sometimes people are surprised to find out they owe taxes on investments in their “tax-free” retirement accounts. It’s not common, but pension consultants note that it can happen. While most earnings in tax-advantaged accounts, like IRAs, Roth IRAs, or 401(k)s, accumulates free of taxes, some types of investments within these accounts could qualify as Unrelated Business Taxable Income (UBTI) and trigger a tax bill. UBTI was originally created to make sure that tax-exempt organizations didn’t have an unfair advantage over taxable businesses like for-profit corporations. So if a tax-exempt organization regularly earns income from a trade or business that’s unrelated to the organization’s tax-exempt purpose, that income could be classified as UBTI and is subject to taxes. For example, if a university runs a pizza restaurant that sells to both students and non-students, that restaurant’s income is unrelated to the university’s tax-exempt mission of education. The university pays the same...
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Three Tax Tips That Can Help As You Approach or Begin Retirement

Retirement is a whole new phase of life. You’ll experience many new things, and you’ll leave other things behind. One thing that won’t disappear, however, are taxes. If you’ve followed the advice of retirement plan consultants, you’re probably saving in tax-advantaged retirement accounts, like 401(k)s or IRAs. These types of accounts defer taxes until withdrawal, and you’ll probably be withdrawing funds from them in retirement. Also, you may have to pay taxes on other types of income, like Social Security, pension payments, or salary from a part-time job. With that in mind, it makes sense for you to develop a retirement income strategy. Here are three tips: Consider when to start taking Social Security. The longer you wait to start taking your benefits (up to age 70), the greater your benefits will be. Remember, though, that currently up to 85 percent of your Social Security income is considered taxable if...
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Is Your 3(38) Fiduciary Really Customized?

Plan sponsors who rely on the services of 3(38) investment fiduciaries do so for a variety of reasons. A 3(38) investment fiduciary, as defined under the Employee Retirement Income Security Act (ERISA), has a duty to place plan participants’ interests first and to prudently select and monitor a retirement plan’s investment options. These investment advisors recommend a range of investments based on your plan’s objectives and goals. However, are these options truly customized for your participants? Here are some things you should consider when your advisor is presenting an investment menu to you. Did your advisor ask for your input? Your advisor should discuss your plan’s needs with you, and find out what types of investments you feel are appropriate for your plan. Your 3(38) investment advisor should work with you to draft an investment policy statement (IPS) that defines the criteria for selecting and monitoring your plan’s investments. The...
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Top Three Reasons Our Clients Outsource Fiduciary Services

Many companies are outsourcing more and more activities, mainly because outsourcing can provide cost savings and increase productivity. Outsourcing allows companies to focus more on their core businesses, rather than spending time on areas outside their expertise. For firms that are retirement plan sponsors, outsourcing 401(k) plan services makes sense for the reasons noted above, as well as several other grounds: Reduced Risks As a plan sponsor, you and your company are plan fiduciaries and can be held legally responsible for the plan’s administration and performance. Many sponsors outsource some or most responsibility. A 3(21) investment fiduciary assumes part of the risk, functioning as a co-fiduciary that provides prudent and objective advice. A 3(38) investment fiduciary accepts total responsibility and liability for selecting, monitoring, and replacing investment options, which helps the plan sponsor manage the risk of legal action concerning investment decisions. Increased Objectivity Increased objectivity. Independent third-party plan administration...
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Three Ways to Make Sure Your Retirement Portfolio Is On Track

Will you be ready to retire? That’s a question that a lot of retirement plan participants can’t answer, but it’s important. It’s hard to know how much you should be saving if you haven’t set any financial goals for your retirement. Retirement plan consultants have some suggestions for ways to help you assess whether or not you’re on track to a confident retirement. Start by calculating your retirement savings goal. To figure out where you are, you need to know where you’re going. Your savings goal will be affected by many things, including your age, how much you’ve already saved, other sources of income you may have, when you plan to retire, what type of retirement you want, and how long you’ll live. Fortunately, there are a number of retirement calculators available for free, such as this one from Investor.gov.1 You’ll need to estimate your Social Security income, which you...
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Key Considerations for Retiring Couples

Educating plan participants is one of the many duties of pension consulting firms, but many focus on accumulating and building wealth while plan participants are working. While that’s important, it’s also important for participants to consider what happens after they retire. Retirement is a significant milestone for most people, and like many milestones, requires a lot of planning, particularly for married couples. A 2013 survey by Fidelity Investments shows that many married couples aren’t on the same page when it comes to retirement.1 In fact, 38 percent don’t agree about the lifestyles they expect to live in retirement. A significant amount (36 percent) don’t agree on where they plan to live in retirement. Similarly, 32 percent don’t agree on whether or not they will continue to work in retirement. Retiring couples obviously have a lot of communicating to do. In addition to the issues raised above, here are some questions they...
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Three Ways to Ensure the Continuation of the American Retirement Dream

  Frequently, the news about retirement is pretty pessimistic. Pensions no longer exist for most workers, we aren’t saving enough, and Social Security is going to disappear. However, things may not be as bleak as they are often painted. If you’re a retirement plan sponsor, you may be wondering how you can help your employees prepare for retirement. Retirement plan consultants suggest three ways that anyone can use to help them retire: Start saving now. No matter what your age or financial circumstances, you’ll improve your retirement prospects if you start saving now. Ideally, you should set aside at least 10 percent of your income, but it’s more important to get started than to worry about exactly how much you can save. An employer-sponsored retirement plan can help you by allowing you to save pre-tax dollars, and the interest on your funds also accumulates free of taxes. You will be...
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With President Donald Trump’s Memo, DOL Rule on Hold

  If you’re wondering what the status is for changes to the 401(k) fiduciary rule, you’re not alone. On Friday, February 3, President Donald Trump signed a memorandum that asked the Department of Labor (DOL) to review the fiduciary rule that was scheduled to go into effect on April 10. The memo doesn’t revise or repeal the rule, or require the DOL to delay its implementation. However, it’s likely the DOL will delay the rule’s implementation to give the department time to conduct its analysis. President Trump’s stated goal is to, “empower Americans to make their own financial decisions,” and he feels the rule limits the number of investment options that financial advisors can offer to their clients. His instructions to the DOL require the department to determine whether or not the rule “may adversely affect the ability of Americans to gain access to retirement information and financial advice.”1 The DOL’s...
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