It’s a term thrown around a lot, and it sounds important: vesting. As in, being fully vested — that sounds pretty good and it is.
According to the IRS, being vested in a retirement plan means ownership. All employee contributions to a retirement plan are 100% fully vested — the employee owns everything he or she puts in.
However, employers usually provide a match of a certain percentage of employee contributions.
Employers match contributions made by employees in different percentages. An employer might say: If you put 6% of your paycheck into the 401(k), then we’ll match your contribution by 50%. So suppose your 6% equals $3,000. Then the employer will put in $1,500. That would be an unusually generous match. Typically, an employer may match 3% of the first 6% of the employee’s salary. That equals a 9% contribution — still pretty good, especially over the long term.
They key idea, though, is that the employer sets a certain match percentage. The employer may also have rules about when their contributions are fully owned (or vested) by the employee.
The employer, along with the fund managers, decides how much of the match the employee owns and when.
Newer employees may start out at lower percentages, but they become fully vested in time.
For example, an employee may become 20% vested in the company match after two years, meaning the employee owns their personal contributions plus 20% of the company match. Many 401(k) plans work out vesting in tiers. The longer you stay with the company, the more of the company contribution you own. An employee might become fully vested in, for example, six years. Then the employee owns 100% of the matching contribution.
Sometimes 401(k)s are set up so that an employee becomes 100% vested at a specific time — say after 2 years. Then they own all the matching funds on one day.
Being fully vested
The good thing about being fully vested is that you own all the money you put in and all the money your boss matches. (Plus, you own all the money that grows over time.) That means you can take the money with you if leave the company or retire.
It’s a term thrown around a lot, and it sounds important: vesting. As in, being fully vested — that sounds pretty good and it is.
Upon retirement, you don’t get a paycheck with the proper amount of taxes withheld. That’s obvious.
What may not be so obvious until you retire is the amount of taxes you owe. Unlike employees, retirees write checks for their taxes, making them acutely aware of their tax burden.
Of course, everything we save for retirement is taxable at some point and in some way.
If you are ready to retire, here are some things to look forward to:
- Social Security taxes: You have to pay tax on your benefit. You can have amounts from 7 percent to 22 percent withheld from every check. See form W-4V (for Voluntary).
- Pension and annuity taxes: See Form W-4P to instruct the payor how much to withhold.
- IRA distributions: The law requires 10 percent be withheld unless you tell the distributor not to withhold. You can also tell the distributor to withhold all of the taxes.
- Company plans and lump sums: Some of these plans are taxed at 20 percent.
Every facet of U.S. business abroad depends upon its international relationships. As a result, it’s vital that business professionals understand what is expected of and from him or her when visiting a foreign country on business.
According to Business Etiquette International, research and retain as much as you can about the specific region of the country you are visiting. Learn the cultural nuances of the area, and–at a minimum–be able to use the local words for “Yes,” “No,” “Please,” “Thank you,” and “Help.” Clients truly appreciate the visitor who is trying to speak their language, if only in a few words or phrases.
Keep in mind that etiquette has no uniform set of standards around the globe. A gesture or remark in the U. S. may have the opposite meaning in other cultures and countries.
Business relationships cannot be overstated in international business etiquette. How you meet and greet residents in a foreign country is probably the most important part of your visit.
Behavioral studies show that, in the U.S. and abroad, most people judge your social position, economic, educational, and success levels within 30 seconds of introduction. In the next five minutes, they also form their opinions about your intelligence, reliability, friendliness, and compassion, among other traits.
Be sure to rehearse your meeting in advance and dress for it in a manner reflecting the culture and your client’s expectations. Establish clear objectives for your meeting, communicate politely, and be upbeat.
The more you know and understand about the nation’s culture–and local language–the deeper your relationships will become.
Somewhere on an assembly line is a young worker who once told a reporter: I wouldn’t put my money in a 401(k) because the boss could steal it.
In average situations, there is very little chance the boss could steal the money from a 401(k), which would be a crime, probably involving fraud.
Contributions to a 401(k) go to a financial company. Maybe the boss picked the company, but the boss can’t access your money. The boss doesn’t own it and can’t spend it.
Fear: I can’t afford to contribute.
There are a lot of benefits to a 401(k). The money you put in isn’t taxed. It’s only taxed when you take it out at retirement.
If you took about $100 a week out of a paycheck every month for 15 years and put it in a 401(k), you would probably have more than $146,000 at the end of 15 years. At the end of 30 years, you’d have $611,729. This example by the Motley Fool assumes a return of 8 percent.
So, when you reach retirement, you might have your Social Security (depending on government future plans), and you’ll be able to add to it by taking 4 percent of your nest egg each month. You’ll be comfortable then if you sacrifice now.
Fear: I’ll lose all my money.
Over the long term, there is a 99 percent chance you will make money. But sometimes you won’t. Recently, retirement plans have racked up interest of 10 percent and higher. In 2008, during the housing crisis, people lost money…but not all of their money.
If you can’t stand losses, you usually can have your plan administrator put your money in highly conservative, safe investments. They don’t make as much money, but they don’t lose it either.
Fear: What if the company goes out of business?
Your money is safe because the company usually doesn’t manage retirement accounts. They have big financial companies like Fidelity, Vanguard, or Principal do that. Those companies manage millions of retirement accounts. Motley Fool says be skeptical if the plan administrator is “Scruffy’s Retirement and Fried Chicken.”
Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries
By Safi Bachall
St. Martin’s Press
In 2004, a team of engineers was gripped with a fantastic idea: They would make a handheld phone with a big color screen and give it the ability to connect to the internet. Plus they would set up a store where people could download applications for the phone.
Sound familiar? Surprise. Those engineers were not at Apple. They were at Nokia, where that crazy idea was shot down soon after birth.
Three years later, writes Safi Bachall, Nokia engineers watched Steve Jobs introduce their dumb idea on a stage in San Francisco.
Bachall’s book chronicles Loonshots, crazy ideas that change the world — or would change the world, if they weren’t buried and forgotten.
Bachall’s exceedingly readable book combines the principles of science with business to show how good teams often kill good ideas.
The structure of companies and teams means more than culture, he writes. Bachall points out that small, starving companies can produce dazzling results because the stakes are high for all members. Rank doesn’t matter. But as the teams get larger and more successful, the stakes aren’t nearly as high. Then rank matters more. At that point, good ideas can be ditched.
Small changes in structure, not culture, can transform a team, he writes.
This book will interest business leaders for its unique take on teams and culture. But anyone who wants to know about the nature of success and failure will be fascinated by the many stories Bachall tells.
Data breaches, hacking, and skimming — all of it poses a threat to consumers and business during 2019.
According to the Identity Theft Resource Center (ITRC), data breaches increased sharply in 2018 with 1,027 breaches reported and 57,667,911 records compromised.
Today’s hackers are very deft at outsmarting security measures, said Michael Bruemmer, Experian Vice President of Data Breach Resolution, adding that, “cybercriminals always seem to stay a step ahead of new security gates.”
Experian’s top five threats for 2019 are:
1) Biometric hacking and detecting flaws in touch ID sensors, passcodes, and facial recognition. Although biometric data is the most secure method of authentication, it can be stolen or altered.
2) Skimming a major financial institution’s national network with hidden devices to steal credit card information, and invading bank network computers with undetectable malware.
3) Attack on a significant wireless carrier with simultaneous effect on iPhones and Androids, stealing personal information from millions of smartphones and possibly disabling all wireless communications in the U.S.
4) A breach in the security operations of a top cloud vendor will jeopardize the sensitive information of major companies.
5) The gaming community will be faced with cybercriminals posing as gamers for access to its computers and the personal data of trusting players.
According to the ITRC, significant breaches from 2005-2017 rose from about 200 per year to more than 1,300. Billions of data pieces have been exposed, allowing cybercriminals to monetize stolen data, leading to an increased risk of identity theft.
What can consumers do against security threats?
- Do not share personal information with strangers over the phone, email or text messages.
- Sign up for free credit report monitoring to receive alerts about your credit activity.
- Get a free dark web scan to see if your Social Security number, email or phone number has been compromised. Hackers sell stolen information on the dark web.
The customer says the pizza tastes bad, but the customer ate half of it.
The shopper asks for a refund for a shirt that has clearly been worn and worn out.
The caller says the gadget he bought was broken on arrival. It has been six months!
In small business, when you’re running close to the margin, customers who want your product for free are not only annoying but also expensive.
How should you treat this situation?
Give them the benefit of the doubt, says CXService360. Small business has a huge investment of time and money in each customer. You generally want to keep the customer, if there is any chance the customer is telling the truth. Customers return to a company where they’re treated with respect. Not only do these customers come back but they also tell their friends, comment on social media, and discuss positive experiences with family and friends.
That means treating even the unlikely complaint with respect and professionalism. Agents can thank the customer for calling or showing up and then point out the shirt looks well-worn and make an offer that is somewhat less than a refund. To make this work, the agent or sales person has to be trained.
Some customer service situations occur because the customer is angry, not about their current complaint, but about something else. Customer service representatives can make polite chat about how often they shop or use the service and whether they have had other complaints. It could be a learning situation.
If the business does make an exchange or refund on an item in which the credibility of the customer is suspect, a record should be made. You don’t have to keep a dishonest customer. All you have to do is keep your temper because losing it usually goes badly.
While some companies are terrified of bad talk on social media, remember that while happy customers talk you up, and unhappy customers can talk you down, dishonest customers pass the word around. If you are too easy, there is a slice of humanity out there who will exploit it. Some larger retailers make 100 percent lifetime quality guarantees and they have accepted routinely dishonest customers as a cost of business. But talk to the customer service reps and they’ll tell you: the word gets around. If you aren’t a giant retailer, that’s a word you may not want out there.
To start a small business, most entrepreneurs tap into their funds first, even when they also plan to procure debt financing in the form of a small business loan, equity financing from angel investors, or a venture capitalist.
Otherwise, virtually every lender expects the person seeking a business loan or equity investment to make a personal financial contribution.
If you don’t have ready cash, look to your personal assets as potential sources of startup money. These sources include real estate, vehicles, retirement accounts, stocks and bonds, or any other asset that can be mortgaged, sold for cash, or used for collateral.
According to the small business website, home equity loans are among the most cost-effective methods for borrowing. Compared to other types of financing, their interest rates are meager, and financial institutions are prepared to lend up to 80 percent of the value of a home.
At the same time, credit cards are a familiar source of startup money for asset-poor entrepreneurs despite the soaring rates of interest.
The next most prevalent source of small business startup funds is family, friends, or a combination of both. This sort of small business financing often takes the form of a personal loan.
Statistics indicate that about half of the investors in businesses are family members, 30% are friends and neighbors, and the remaining 20% are colleagues or strangers.
Of course, one of the main advantages of family and/or friend financing is flexibility. Family and friends are much more likely to seek a lower rate of return on their investment and wait longer to get their money back. They are less likely to require collateral and scrutinize a business plan as would a financial institution.
Even so, borrowing money from family and friends is not without its potential pitfalls. Loans from one or more family members to another can produce jealousy or resentment. Family or friends who’ve invested in the business venture may feel they have a right to make or participate in the owner’s business decisions. Even worse, if the business fails and the owner is unable to repay the money owed, his or her relationship with the family members and/or friends may be forever impaired.
The Tax Cuts and Jobs Act of 2017 (TCJA) may not mean reduced taxes for every taxpayer, but it figures prominently for the American population as a whole.
According to TaxAct.com and other sources, the tax rates of past years are gone. Almost every tax rate and bracket for each filing status have been changed. Except for the 10% and 35% tax rates, tax changes modified most bracket rates from 1 to 4 percentage points.
The standard deduction has been increased for every filing status. Now it’s $12,000 for a single person, $24,000 for married couples filing jointly and the surviving spouse, $12,000 for married couples filing separately, and $18,000 for the head of a household.
However, the higher standard deductions mean that fewer people can itemize deductions. This change has its pros and cons, as new limits on certain itemized deductions indicate some taxpayers will lose substantial amounts they could have deducted in the past.
Depending on how many people live in the household, the increase of the standard deduction may or may not be sufficient to offset the loss of the personal exemption. Also, under the new reforms, no longer can the taxpayer claim the $4,050 personal exemption for each dependent.
Gone too are miscellaneous itemized deductions that exceed 2% of adjusted gross income (AGI). Among these deductions are unreimbursed employee expenses, safe deposit fees, investment management fees, and union dues.
Also, when previously there was no cap on state and local income taxes, now those expenses are limited to $10,000.
Meanwhile, the Child Tax Credit increases from $1,000 to $2,000, plus a new $500 credit applies for non-child dependents.
With the repeal of the Affordable Care Act’s mandate, no longer does a person choosing to forego health care coverage in 2019 pay tax penalties.
As for the mortgage interest deduction, filers who purchased a home in 2018 can deduct interest up to $750,000 in mortgage debt instead of the previous $1 million.
Also, no longer is the interest on a home-equity loan deductible.
Entrepreneurs are busy people. They’ve got a ton of things on their mind from marketing and advertising to customer service and phones forever ringing to business appointments — and more.
Unfortunately, legal and technical issues have to be attended to at the same time.
According to Entrepreneur magazine, small businesses need to take some basic steps as they grow.
- Set up the proper business structure. There are sole proprietorships, LLCs, S corporations, C corps, and partnerships. Choosing the correct one means learning the advantages and disadvantages of each. For example, as a sole proprietor, the business owner and the business are considered as one in the legal system. If your company is sued, all your personal assets are at risk. Corporate structures and LLCs offer protection of personal assets, although this protection isn’t a guarantee. Talk to a lawyer and accountant about the structure you need.
- Set up and follow customer service policies. When you access company websites, especially those that provide services of some sort, you’ll usually see a Terms and Conditions agreement. Included in this agreement are all the specifics for the use of your products or services and the customer’s obligations in that use. If you do not have this policy in writing and a box for a customer to check before a purchase, you are wide open to inclusion in a lawsuit should that customer become a defendant.
- Set up accounting and tax systems. Is your business subject to sales/VAT taxes? When must you file your business income tax returns? Do you need to make quarterly payments? Business tax laws are complex. You need a good business accountant–or at the very least, proven accounting software–to keep accurate records and file your taxes on time.
- Obtain appropriate and complete contracts with outside vendors. When you use the services of or purchase raw materials from someone outside of your business, demand iron-clad contracts. Never agree to anything with a contractor without a legally-binding agreement with the terms and language set out clearly and properly.
- Get the proper documentation on employees. At minimum, before hiring, document and verify past employment. After hiring, document work hours, complaints, responsibilities and attendance issues such as sick days, personal days off, and vacation.
Be sure to specify, in writing, work expectations – including whether work can be done remotely.
The no-spend challenge
A financial writer set out to spend no extra money for a year.
Michelle McGagh and her husband vowed to pay bills, but not to buy coffee, clothes, or a beer at a pub. They didn’t eat out or even buy gas. Instead she rode her bike everywhere all the time. She spent only $35 on food every week, so she had to plan cheap meals.
What happened? At the end of one year she saved $23,000.
She admits the effort was not easy. She missed having face cream and fresh flowers. She missed socializing with friends at a pub. And they missed her.
On the other hand, she also found new ways to have fun for free and she realized how much money she frittered away. McGagh wrote about her extreme challenge in her book, “The No Spend Year: How you can spend less and live more.”
McGagh’s challenge was extreme–but what if you could spend nothing extra for just one month. Could you save money? Definitely.
According to Bankrate.com, the first thing to do is decide why. It could be to pay off a big bill that is coming or pad your savings account, but the goal should mean something to you.
- Eliminate any optional expense that comes out of your checking account such as subscriptions. They will take your money next month.
- Eliminate luxuries and start thinking of some things as luxuries. For example, cable TV. You could get rid of Netflix for $10 a month or cable for $120, or both.
- Make a barebones food plan and stick to it. No prepared foods. Make your own cookies. This is nearly its own challenge. Can you spend $100 a week or less on food?
- Cellphone: No extra overages or get rid of the plan, if you can.
- No restaurants or pubs. Plan some things to do that are free.
Then count your cash at the end of the month!