At Mazzella Companies, we understand that planning for retirement can be daunting. With many Americans living an average of 10 years longer than they did when the 401(k) was created in 1978, it’s more important than ever to understand how a 401(k) turns some of your paychecks into future savings.
We sat down with our in-house expert, Michelle Caldwell, Payroll Manager, to field questions we received from team members about taxes, contributions, matching, and the tools and technology that can help team members become experts in their retirement planning.
When should I start saving in a 401(k)?
Saving for retirement means that you’ll have enough money to be able to afford and enjoy retirement. While retirement may feel far away, starting early allows your money to grow over time, thanks to compound interest.
Michelle shared how much of an impact starting young can have, “If you start saving $200 a month at age 25, you could retire at 65 with around $500,000. By contrast, if you start at 35, it would be half that.”
That extra savings will make a big impact seeing as Social Security typically covers only about 40% of the income you’ll need, so the rest must come from your savings.
How much money am I really saving?
Most of what affects how much you save is how much you put in, but compound interest takes things to a higher level.
Michelle said, “Let’s say you save $100 from every paycheck here for 30 years, and the annual return you get from your investments is 7%. That’s a total savings of 78,000, and with the compound interest earned, you’d be looking at about 245,000 dollars when you retire.”
Plan participants can change how much they contribute at any point in the year, decreasing contributions during hardship or increasing them after a promotion.
Michelle shared how even small increases in contributions can benefit the participant, “Increasing your savings by just $50 a month can add over $25,000 to your retirement fund over 20 years.”
When can a team member open a 401(k) account?
At Mazzella Companies, team members who meet the below criteria are all eligible to enroll:
- Are over the age of 18
- On the first day of the month after 30 days of employment (including tenure with a now Mazzella Companies-owned company)
- Are non-union
- Earn their income within the United States
- Are not leased, temporary, seasonal, or part-time
Are there limits to how much I can contribute?
The 401(k) plan that we offer allows team members the ability to contribute up to $23,000 annually if you’re under 50 years old. Michelle shared that there are exceptions to the rule.
Something known as a catch-up contribution makes it easier for those closer to retirement to save. “If you’re 50 and over, that goes up to $30,500,” said Michelle.
Related: 401(k) 101: 11 Terms to Boost Your Retirement Savings
Does Mazzella Companies do anything to help me save?
Mazzella Companies offers a matching contribution to help boost your savings. That means we match 100% of the first 2% (See Figure 1) of your compensation and 50% of the next 4% (Figure 2). If you contribute 6% of your salary, you’ll receive an additional 4% from the company, bringing your total savings to 10% (Figure 3).
When do my contributions become mine?
We have something called immediate vesting. This means from the moment you start contributing, every penny is yours. This provides you with control over your retirement savings from day one.
Who decides on how it’s invested?
Michelle shared how Mazzella Companies partners with Creative Planning, a fiduciary advisor, to ensure your investments are managed with your best interests in mind, but ultimately, it’s your account. “You can choose how the money is invested, or we can let our experts help fund it for you
What kind of support is available?
Michelle is always working on ways to connect team members with Creative Planning, including in-person and virtual meetings and distributing planning and knowledge resources from Creative Planning themselves through a company newsletter.
Not only that, but Creative Planning has many digital tools on its website that enable plan participants to set goals.
Related: What Education Benefits Does Mazzella Companies Offer?
Is there anything in place for veteran team members?
If a Mazzella Companies plan participant is a Veteran reemployed under the Uniformed Services Employment and Reemployment Rights Act of 1994, qualified military service may be considered service with the employer for vesting purposes.
In addition, if the plan participant is a reservist or National Guardsman under the age of 59 1/2 and is called to an active-duty assignment for at least 180 days, then they can receive plan distributions without any tax penalties.
Can team members roll over an existing 401(k) from their previous employer?
New team members can roll over any prior 401(k) accounts – even if they are from a previous employer. This is called a rollover contribution. “Rolling over” your account into a 401(k) at Mazzella Companies should only be done after consulting with qualified counsel. They’ll need to determine whether the rollover is in the team member’s best interest. If a new team member chooses to roll over a plan, they will always be entitled to all amounts in their rollover account and rollover contributions, even if they leave or are terminated.
Wise Investment Requires Careful Planning
As an organization, we know how uplifting wise investment can be. We also know that it requires careful planning. We want our team members to find the planning process for their retirement with us clear and approachable and are committed to supporting their financial goals.
