Providing Comprehensive Insurance Policies

Retirement plans are a main priority when employees choose their employers. It is pivotal to offer the right mix of benefits for everyone.  Northeast Benefit Solutions has several retirement plans options with all the top rated carries in this space.  Let our dedicated staff work up a proposal that fits your goals and budget.

401(K)

 A 401(k) is a retirement savings and investing plan that employers offer. A 401(k) plan gives employees a tax break on money they contribute. Contributions are automatically withdrawn from employee paychecks and invested in funds of the employee’s choosing (from a list of available offerings).

401(k) and Taxes

You get a tax break when you contribute to a 401(k). That’s because you can deduct your contributions when you file your income tax return. This reduces your taxable income, which can save you money.²

You’ll pay taxes after you reach retirement age and begin to make withdrawals from the plan. These withdrawals are called distributions and are subject to income taxes at your then current rate. If you think your income will be higher when you retire, you may want to plan, as all income from your distributions will be taxed.

Roth IRAs

A variation of traditional individual retirement accounts (IRAs), a Roth IRA is set up directly between an individual and an investment firm. Your employer is not involved.

As you set up and control the account, your investment choices aren’t limited to what the plan provider offers. This gives IRA holders a greater degree of investment freedom than employees have with 401(k) plans, even though the fees charged by those providers are generally higher.

In contrast to the 401(k), after-tax money is used to fund a Roth IRA, meaning you get no tax deduction in the years you make contributions or deposits. As a result, no income taxes are levied on withdrawals during retirement. While in the account, any investment gains are untaxed.

Highlights of changes for 2022

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $20,500. Limits on contributions to traditional and Roth IRAs remains unchanged at $6,000.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If neither the taxpayer nor their spouse is covered by a retirement plan at work, their full contribution to a traditional IRA is deductible. If the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced or phased out until it is eliminated. The amount of the deduction depends on the taxpayer’s filing status and their income.

 

Traditional IRA income phase-out ranges for 2022 are:

• $68,000 to $78,000 – Single taxpayers covered by a workplace retirement plan
• $109,000 to $129,000 – Married couples filing jointly. This applies when the spouse making the IRA contribution is covered by a workplace retirement plan.
• $204,000 to $214,000 – A taxpayer not covered by a workplace retirement plan married to someone who’s covered.
• $0 to $10,000 – Married filing a separate return. This applies to taxpayers covered by a workplace retirement plan

Roth IRA contributions income phase-out ranges for 2022 are:

• $129,000 to $144,000 – Single taxpayers and heads of household
• $204,000 to $214,000- Married, filing jointly
• $0 to $10,000 – Married, filing separately

Saver’s Credit income phase-out ranges for 2022 are:

• $41,000 to $68,000 – Married, filing jointly.
• $30,750 to $51,000 – Head of household.
• $20,500 to $34,000 – Singles and married individuals filing separately.

The amount individuals can contribute to SIMPLE retirement accounts also increases to $14,000 in 2022.

Annuities

What is an annuity?

An annuity is a contract with an insurance company. With an annuity, the insurance company promises to pay you income on a regular basis for a period you choose-including the rest of your life. Some annuities begin paying income to you soon after you buy it – this is called an immediate annuity. Others begin at some later date that you choose – this is called a deferred annuity.

Who needs an annuity? Why should I buy it?

Most people buy annuities for retirement purposes. Before you buy, make sure it fits your needs.

How much do annuities cost?

The fees associated with annuities will vary depending on the type of policy. Below are some of the common fees associated with annuity contracts, but this list is not exhaustive. Make sure to read your policy to understand exactly what fees apply to you and how the fees are used by the company.

• Mortality and Expense Fees. 
  These fees are commonly known as M&E fees and cover the expenses associated with the sale of policies (e.g., commissions) and the death benefits that may be standard under that policy type.
• Administrative Fees
  Most companies charge an annual fee for the administrative expenses associated with the contract. This fee is sometimes waived if the contract value is over a certain threshold.
• Surrender charges.
  Most insurance companies limit the amount that can be withdrawn during the initial years of a contract (contract term) and assess a surrender charge on any withdrawals above a preset limit (e.g., 10% per contract year). Annuities are generally long-term investments, so make sure you understand what the surrender charge schedule is for your policy, as surrender charges can be significant and can be imposed for an extended time period.
• Investment Management Fees.
  If you are purchasing a variable annuity, the subaccounts in which you invest your money within the policy are like mutual funds. Like mutual funds, there are often management fees associated with these subaccounts. Check the annuity prospectus for any underlying funds to learn how much you might pay for investment management fees.
• Rider Charges
  When you apply for an annuity, you may be able to elect additional enhanced guaranteed benefits above and beyond what is standard for the policy. Riders allow you to elect these enhanced benefits but will likely come at an increased cost. Make sure you understand the riders you are purchasing; if you are going to be paying for a benefit, it should be something you anticipate using.

There are generally three different types of annuities:

1. Fixed annuities – Your money – minus any applicable charges – earns interest at rates set by the insurer, as specified in the annuity contract.

2. Variable annuities – Money in a variable annuity earns a return based on the performance of the investment portfolios, known as “subaccounts”, where you choose to put your money. Your investment choices likely will include subaccounts with different types and levels of risk. Your choices will affect the return you earn on your annuity. Subaccounts usually have no guaranteed return, but you may have a choice to put some money in a fixed interest rate account, with a rate that won’t change for a set period. The value of your annuity can change every day as the subaccounts’ values change. If the subaccounts’ value increases, your annuity earns money. But there’s no guarantee that the values of the subaccounts will increase. If the subaccounts’ values go down, you may end up with less money in your annuity than you paid into it.

3. Equity-indexed annuities – The insurer offers a guaranteed minimum return, plus it offers a variable rate based on the return of a specific index. During the accumulation period, the insurer credits you with a return based on interest earned plus or minus changes in the index, subject to participation rates, caps, charges, and other restrictions.