403(b) Retirement Plan 101. Basics and Beyond

Transcription

1 403(b) Retirement Plan 101 Basics and Beyond

2 Agenda Enroll Contribute Invest Next Steps

3 Why should you save in your plan?

4 ENROLL Convenience Tax advantages Compounding growth potential Employer match Reasons to contribute

5 ENROLL Convenience Taken right from your PAYCHECK

6 ENROLL Traditional Contributions Tax advantages Roth Contributions Taxes A distribution from a Roth 401(k) is federally tax free and penalty free, provided the five-year aging requirement has been satisfied and one of the following conditions is met: age 59½, disability, or death. State taxes may apply.

7 ENROLL Your Contributions Employer Contributions Account Earnings Compounding

8 ENROLL Annual Increase Age: 45 Salary: $40,000 Account balance: $50,000 Annual rate of return: 7% Person B Balance with annual increase in contributions Person A Balance without annual increase in contributions $358,185 $254,333 Year This is a hypothetical example. Assumptions: Person A and Person B are both 45 years old. Person A contributed 3%/year until age 65. Person B increased contributions 1%/yr for 10 years, then stayed at 13% contributions until age 65. Both earn $40,000 per year and start with an account balance of $50,000. This hypothetical example is based on monthly contributions made at the beginning of the month to a tax-deferred retirement plan and a 7% annual rate of return compounded monthly. Your own plan account may earn more or less than this example, and income taxes will be due when you withdraw from the account. Investing in this manner does not ensure a profit or guarantee against loss in declining markets. Past performance is no guarantee of future results.

9 ENROLL Your contribution Employer match Employer match

10 How much should you save?

11 CONTRIBUTE Save at least 15%

12 CONTRIBUTE! Save Meet enough the match Pay off credit cards Pay off student loans Make monthly payments Contribute more

13 CONTRIBUTE Your plan specifics

14 University of Louisville offers 2 Retirement Savings Plans for Eligible Employees: 403(b) Retirement Plan 457(b) Retirement Plan This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

15 403(b) Retirement Plan There are four components to this plan: 1. Employer 7.5% Contribution UofL Only Contribution 2. Employer 2.5% Match Contribution Employee & UofL Contributions 3. Employee Additional Contribution Employee Only Contribution 4. Employee Roth Additional Contribution - Employee Only Contribution This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

16 UofL s 403(b) Retirement Plan Contribution Options After one year of retirement eligible service Eligible Employees: After one year of retirement eligible service, regular full time employees and benefit eligible part-time employees who work at least 80% Full- Time Equivalent are eligible to receive the Employer 7.5% Contribution and are eligible to participate in the Employer 2.5% Match Contribution This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

17 1. Employer 7.5% Contribution You Contribute Nothing UofL Automatically Contributes 7.5% of Your Base Annual Salary 7.5% of Your Base Annual Salary Contributed to your Retirement Plan 2. Employer 2.5% Match Contribution (Pre-Tax) You Contribute 2.5% of Your Base Annual Salary Pre-Tax UofL Contributes 2.5% of Your Base Annual Salary to Match You 5% of Your Base Annual Salary Contributed to your Retirement Plan 1. Employer 7.5% Contribution + 2. Employer 2.5% Match Contribution 7.5% of Your Base Annual Salary Contributed to your Retirement Plan 5% of Your Base Annual Salary Contributed to your Retirement Plan 12.5% of Your Base Annual Salary Contributed to your Retirement Plan This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

18 UofL s 403(b) Retirement Plan Contribution Options Both Before and After 1 Year of Service Eligible Employees: Any university faculty or staff member, full or part-time, can participate in the 403(b) plan in the Additional Employee Contribution (pre-tax) and/or the Roth Additional Contribution (after-tax) both before and after 1 year of service. Employee Additional Contribution (Pre-Tax) Employee Roth Additional Contribution (After-Tax) You Contribute Any % of Your Base Annual Salary Pre-Tax - there is no UofL Match You Contribute Any % of Your Base Annual Salary After-Tax - there is no UofL Match These options are for your employee contributions only. There is no UofL Match with these options. Before reaching 1 year of retirement eligible service, you are eligible to contribute to these 2 options. After working 1 year of retirement eligible service, you can continue to contribute to these 2 options. If you participate in the 2.5% Employer Match after 1 year of service and want to contribute more than 2.5% pre-tax, you can use the Employee Additional Contribution to contribute above the 2.5% pre-tax. The Roth option is for any after-tax contributions you want to make. For example, if after 1 year of service, you contribute 3.5% in the Employee Additional Contribution and 2.5% into the Match Option and UofL contributes 7.5% and the 2.5% UofL Match, that s equal to a total of 16% of your base annual salary contributed to your 403(b) retirement plan annually. You may change your contribution amounts at any time. This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

19 UofL s 403(b) Retirement Plan- 4 Contribution Categories on Fidelity Website Before or After 1 Year of Service -- if contributing to Employee Match 2.5% after 1 year of service, use for your pre-tax % Above 2.50% After 1 year of service, UofL automatically Contributes 7.5% Before or After 1 year of service use for your after-tax contributions After 1 year of service, If You Contribute 2.50% of Your Pay here, UofL will also make a 2.5% Matching Contribution For illustrative purposes only This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

20 403(b) Retirement Plan Maximum Employee Contribution Limit Maximum amount you can contribute in 2018 is $18,500 if you are under age 50 or $24,500 if you are over age 50 Maximum contribution limit is your combined contribution amounts from only you into the following 3 categories: o Your 2.5% contributions to the Employer 2.5% Match Option o Employee Additional Contribution o Employee Roth Additional Contribution Note: this annual maximum limit does not include any contributions or matching contributions from UofL This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

21 403(b) Retirement Plan Additional Plan Features Rollovers - You are permitted to roll over eligible contributions from another eligible retirement plan into the UofL 403(b) plan. Contact Fidelity at for details and to determine if your other retirement plan is eligible to be rolled over into the UofL 403(b) retirement plan. Vesting o You are immediately vested in your own contributions to the UofL 403(b) retirement plan as well as any assets you rolled over to the plan from a prior employer s eligible plan. o You are 100% vested in any UofL contributions including the UofL 7.5% contribution and the UofL 2.5% matching contribution after 3 years of retirement eligible service. Loans Although your plan account is intended for your retirement, you may take a loan from your account. Contact Fidelity at to request a loan. Withdrawals Withdrawals from the plan are generally permitted when you terminate employment, retire or reach age 59 ½ while actively working at UofL. Contact Fidelity at with questions about withdrawals. This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

22 403(b) Retirement Plan Enrolling, Contribution Changes & Investment Changes If You Have Less Than 1 Year Retirement Eligible Service with UofL If you want to start making your own contributions to the 403(b) plan, send an to the Human Resources Retirement Administrator at retplan@louisville.edu and ask for your account to be set up. If You Have Greater Than 1 Year Retirement Eligible Service with UofL You already have a 403(b) account set up at Fidelity If you want to make changes to your contribution amount, go to the Fidelity website at to make your contribution amount changes. See the instructions handout for details. If you want to make changes to your investment elections, go to the Fidelity website at to choose your investment provider and make investment elections. See the instructions handout for details. This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

23 UofL 457(b) Retirement Plan This is a separate plan and is for employee pre-tax contributions only. There are no UofL employer contributions or UofL matching contributions with this plan. There is no 1 year service requirement eligible employees can participate any time regardless of years of service Eligible employees may participate in both the 457(b) plan and in the 403(b) plan at the same time. Two 457(b) Plans are Offered You May Only Choose One o UofL 457(b) Retirement Plan and the Kentucky Deferred Compensation Plan are offered o Eligible employees can choose to participate in either the UofL 457(b) Retirement Plan or in the State of Kentucky Deferred Compensation Plan but not in both plans. This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

24 UofL 457(b) Retirement Plan Contribution Categories on Fidelity Website For the UofL 457(b) plan, you can enter either a Flat Dollar Amount or a Percentage of Your Base Salary for your contribution on the Fidelity website ( You may change your contributions at any time. For illustrative purposes only This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

25 457(b) Retirement Plan Maximum Employee Contribution Limit The maximum amount you can contribute to the 457(b) plan in 2018 is $18,500 if you are under age 50 or $24,500 if you are over age 50 If you participate in both the 403(b) plan and in the 457(b) plan at the same time, you are allowed to contribute: - 18,500 (under 50)/$24,500 (over 50) into the 403(b) plan Plus - $18,500 (under 50)/$24,500 (over 50) into the 457(b) plan This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

26 457(b) Retirement Plan Additional Plan Features Rollovers - You are permitted to roll over eligible contributions from another eligible deferred compensation plan into the UofL 457(b) plan. Contact Fidelity at for details and to determine if your other deferred compensation plan is eligible to be rolled over into the UofL 457(b) retirement plan. Vesting - You are immediately vested in your own contributions to the UofL 457(b) retirement plan as well as any assets you rolled over to the 457(b) plan from a prior employer s eligible plan. Loans Although your plan account is intended for your retirement, you may take a loan from your account. Contact Fidelity at to request a loan. Withdrawals Withdrawals from the plan are generally permitted when you terminate employment or retire. Contact Fidelity at with questions about withdrawals. This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

27 457(b) Retirement Plan Enrollment UofL 457(b) Retirement Plan - If you would like to enroll in the UofL 457(b) plan, please the UofL Retirement Plan Administrator at Retplan@Louisville.edu and state you want to begin participating - You will receive a reply with enrollment instructions. Kentucky Deferred Compensation Plan - If you would like to enroll in the Kentucky Deferred Compensation Plan, please contact the Sate of Kentucky Deferred Comp. Plan at or at As a reminder, eligible employees can choose to participate in either the UofL 457(b) Retirement Plan or in the State of Kentucky Deferred Compensation Plan but not in both plans. This workshop only provides a summary of the main features of the Plan, and the Plan document will govern in the event of any discrepancies.

28 How do you want to invest?

29 INVEST Professional investment help Do it yourself

30 INVEST Managed Account Single-fund Solution Professional investment help Target date funds are designed for investors expecting to retire around the year indicated in each fund's name. The funds are managed to gradually become more conservative over time as they approach the target date. The investment risk of each target date fund changes over time as the fund's asset allocation changes. The funds are subject to the volatility of the financial markets, including that of equity and fixed income investments in the U.S. and abroad, and may be subject to risks associated with investing in high-yield, small-cap, and foreign securities. Principal invested is not guaranteed at any time, including at or after the funds' target dates.

31 Fidelity Portfolio Advisory Service at Work Disciplined Model Portfolio Construction Exhaustive Research Process Ongoing Investment Management Active research, analysis, and management Comprehensive investment communications Knowledgeable investment team making sure your workplace savings account stays aligned with your goals Fidelity Portfolio Advisory Service at Work is a service of Strategic Advisers, Inc., a registered investment adviser and a Fidelity Investments company. This service provides discretionary money management for a fee.

32 INVEST Do it yourself Tools Resources

33 Take the next steps

34 NEXT STEPS 1 Enroll in your plan 2 Set your contribution rate 3 What s next? Increase your contributions 4 Choose your investments 5 Add beneficiaries to your account

35 NEXT STEPS Call for help Take your next step Visit NetBenefits Library NetBenefits.com with any questions Schedule an in-person consultation with a Fidelity Retirement Planner at entplans. Click Retirement Investment One-on-One Consultations link.

36 Thank You

37 This information is intended to be educational and is not tailored to the investment needs of any specific investor. Investing involves risk, including risk of loss. Fidelity Portfolio Advisory Service at Work is a service of Strategic Advisers, Inc., a registered investment adviser and a Fidelity Investments company. This service provides discretionary money management for a fee. Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation. The PDF of today s presentation available for download should not be circulated any further and this content is only current for the next 30 days FMR LLC. All rights reserved. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI