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Episode 22: Retirement Planning Updates with Todd Tevens
14 Plays2 months ago
We are thrilled to have Todd Tevens, Managing Director at Lawley Retirement Advisors, back on the podcast today.
Todd is a wonderful asset to everyone at HFW, and talks through important details on HFW's 401k program, changes coming in 2025 and issues everyone should consider in their retirement portfolio.
We are so thankful for our great partnership with Todd and Lawley! Special thanks to Todd for his time discussing these pertinent topics!
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Transcript
Introduction with Todd Stevens
00:00:01
HFW Industries
All right. And welcome back to the HFW shop talk podcast. We are excited to have a recurring guest today and Todd Tevins. Todd, thanks for being here. Thank you. Uh, so as we've done the past, well, first let's start by having you introduce again, what you do and who you are, um, especially for a lot of the younger guys who may not be familiar with you and Polly.
00:00:24
HFW Industries
Sure, absolutely. My name is Todd Stevens, a yeah managing director of Lawly Retirement Advisors, and we've been working very closely with HFW Industries now for a number of years. um Here at Lawly Retirement, we provide retirement plan services to employers and organizations throughout Western New York and really predominantly the Northeast.
Role of Retirement Advisors and Service Benefits
00:00:44
HFW Industries
And and our role is really twofold. We help employers build and manage successful retirement plans and ultimately help participants understand the retirement plan and really give them guidance and support along their career path to meeting a successful retirement goal. So we're absolutely a resource for employees and have come to know a lot of the yeah folks here at HFW.
Importance and Benefits of 401k Plans
00:01:05
HFW Industries
It's great.
00:01:06
HFW Industries
Yeah, and we've we've been fortunate to have a great relationship with you guys at Lolly and Utah and in particular. As we, I guess let's start at high level and we'll dive into some of the more specific stuff that um I know people that have been with us for a while will will probably want to know. um So starting high level for someone that's just getting into the workforce, we have a number of kids that are Well, young men that are 18 or 20 years old. um what should they What are the key facts they should know about a 401k retirement program? Yeah. Number one, it's easy. You know, if you think about the 401k as a retirement savings vehicle, it came out in 1979 as part of a tax code and has evolved really into number one savings vehicle for a majority of the American workforce today.
00:01:52
HFW Industries
And and the really the reason behind that is is it's because it is so easy. So what I mean by easy is it's an automated payroll deduct way to save for your future self, right? Is to create that paycheck for life versus having to write the check and mail it in or ah do a transfer of assets to an IRA for example. An employer sponsored 401k plan is a very efficient way to save for your future.
Understanding Pre-tax vs Roth Contributions
00:02:16
HFW Industries
um and it's been ingrained in our heads since the creation back in 79 and 1980 that it's it's a tax effective way to save as well um because traditionally when you save in a 401k you control your destiny in the sense that you as an employee and ah and a participant who's eligible here at HFW to save in your 401k you choose how much you want to put into your plan.
00:02:37
HFW Industries
Number one, you choose how you want to invest at number two. And ultimately, you choose when you want to take it out. So it ah creates a lot of flexibility um within the program. and um And so when you think about a 401k, it's an efficient way to save. You could choose to save on a pre-tax basis, which has been the traditional way a majority of our population is saved is the notion of, I will put money away into my 401k.
00:03:04
HFW Industries
before I pay any state and federal taxes on those dollars, right? So a dollar's being invested in my 401k. It doesn't cost me a dollar out of my take home pay because I'm saving state and federal taxes. However, sometimes people forget, fast forward 40 years, what happens? Uncle Sam wants their money, right? So and ah you fast forward and you actually pay your taxes upon distribution. so It really is ultimately a very flexible way for us as investors to save. You're leveraging the power of what we call scale in our business, right? You're looking at HFW as a whole and and being able to pool resources together to keep the costs down as investors. So it's usually a much more cost effective way to save than for us going out on our own and opening an account at
00:03:51
HFW Industries
you know, a bank or whatever it might be. So it really is it's a nice program and there's great resources around that to help that employee navigate the journey of retirement. Yeah. And you mentioned, you know, pretext and now also Roth is a great option as well. Um, that's a newer feature, but it's a really nice one. Can we dive into that a little bit? Yeah. Roth is, is, um, the pension protection act came out in 2006 finalized in 0809, 2008, 2009, and really jump-started Roth contributions. Um, so people might be familiar with Roth.
00:04:24
HFW Industries
and and an IRA, an individual retirement account, but Roth 401k is really starting to take hold and it gives the participant, the employee, and you ultimately the opportunity to say it's a choice now. If I want to put my money in that pre-tax format we talked about earlier or the alternative is I could actually do an after-tax Roth contribution into my 401k plan.
00:04:47
HFW Industries
It's the same plan. You don't need to open up a separate account. It's all going into one retirement program in your name, but now you have a choice. And how Roth works is when you do make that contribution on a per pay period basis, which is weekly, you can choose to do pre-tax or an after-tax or a combination thereof. And Roth is just like it sounds. You pay your taxes today on your contribution. So whatever your current tax rate is,
00:05:14
HFW Industries
You're paying your taxes on the contribution amount, so a dollar's going in. It's costing you a dollar today because you're absorbing the tax at the federal and state level. here's the cat Here's the beautiful thing about Roth, is that money is invested for you. It grows, grows, grows, grows, grows. and
Financial Planning Strategies
00:05:30
HFW Industries
Fast forward 40 years, when you go to retire, or whatever that date is, money comes out tax-free.
00:05:36
HFW Industries
on the amount you put in, number one, and on any accumulated growth or market appreciation. So that's really a powerful tax planning tool. And we're see how we're starting to see that take off in all industries. Oh, I mean, that's, I think everything, we were just looking at my portfolio and everything's in raw, especially for a younger person.
00:05:57
HFW Industries
It's a great tool because you're ideally, ah say you're 24, 25 years old, um you're at the lower end of your earning potential now. So you're getting taxed at a lower rate and it's just going to grow over time tax free. Exactly right. We're seeing two really groups of population utilize Roth. Number one is the younger workforce. um You have the power of time. So you could have a long term of compounding. growth at a tax-free environment. And to your point, Jack, is you it might be in your just entering your career, so your tax bracket might be low right now, so take advantage of that um and certainly can make changes as as you need. The other group we're seeing is a more mature experience workforce saying, you know what, I'm looking at my balance right now.
00:06:41
HFW Industries
And maybe the light bulb goes off and says, oh, yeah, I got to pay taxes on all that money coming out. yeah So giving them self-choice and diversification, meaning we talk about diversification amongst investments, right spreading out risk yeah amongst investment vehicles. But I think this is as as a diversification of income streams. bri And Roth provides you a choice and a flexibility to say, OK, if I open up a Roth in my 401k, when I go in time to take those distributions out of my 401k plan, now I have choice.
00:07:11
HFW Industries
On the pre-tax bucket, of course, you'll pay tax. On the Roth, you won't.
Technological Advancements in 401k Management
00:07:15
HFW Industries
So now you can really come with a tax planning strategy around, you you know, for more experienced workers who've accumulated assets on a pre-tax basis, this would give them greater flexibility as well.
00:07:24
HFW Industries
So just to clarify, it's not either, or you can you can be invested in both a Roth and a pre-tax. Exactly right. So when you go into your portal um on your 401k account, you'll see your contribution. And your contribution will show your current rate, whether it's pre-tax and right below it is and ah sort of the Roth component. And yes, to answer your question, you can actually split your contribution rate. A portion go pre-tax, a portion go after-tax.
00:07:49
HFW Industries
That's great. And then just to touch real quickly on the the app, and then you you mentioned this earlier, the ease of use, it's really um I don't want to say idiot-proof, but it's very easy and they're constantly making updates to make it as easy and and understandable um for any person regardless of ah your financial knowledge, right? Yeah, I mean, the the marketplace has evolved greatly. um When I first entered the business 20 plus years ago, ah you really couldn't find a lot of tools and resources that were easy to navigate and understand. But obviously, technology has made to significant improvements and advancements.
00:08:23
HFW Industries
And the mobile application that's available on your smartphone, everyone's got a phone we can't get away from these days, right? It's wonderful. So, you know, and the things I like to hit on when I when I'm talking to participants and plans is just revisiting current contribution rates, making sure they understand how much they're saving, the impact of the employer contribution, the match and how that works within their financial picture in retirement, and then really getting into the retirement income planning tools.
00:08:50
HFW Industries
Because when you log into an application or you go to a website, one of the first things any financial services company shows you is your balance. right What's my balance? yeah But what does that mean for me, 15, 20, 25, 30 years from now, in the form of income replacement? I need to take that balance and understand what it means to me in monthly income when I'm when i retired. And these tools today do that.
Market Resilience and Risk Management
00:09:13
HFW Industries
Because that's the most important thing. For an average investor, myself included, is I need to understand, can I afford to retire at 65, 67, 70 years old, and I need to get down to my bottom line of what's my monthly income going to be. So yeah, wonderful tools and resources that you can navigate and play around with and customize for yourself. Fantastic.
00:09:32
HFW Industries
I want to look ahead a little bit into 2025, some of the limits as well as the market dynamics. We've got obviously a ah new president coming in, well, sort of new, um but a transition. We've seen some ah suggestions of potential policy. um What should people be thinking about over the coming year and and what are ah some of these dynamics that you're focused on?
00:09:56
HFW Industries
Yeah, now's a great time to kind of take a step back and just review. 2024 was really a tremendous year. If I could speak broadly about our the markets, both here domestically in the US, as well as overseas, we saw really some solid resiliency. um No matter what the climate was, what the economic challenges were, whether it's interest rates or inflation, or the geopolitical landscape, what you'll notice is we see a lot a lot of green, a lot of upward trajectory in the markets. So um For us as 401k investors, it's been a nice trip since really 2022. We're seeing double digit growth where the market right now year to date's up 26% on the S and&P 500. It's amazing. yeah so But what i you know that's kind of like a nice gravy train since 2022. The question is, can we anticipate that continued growth? So I like to get back to the basics right around the new year, and this is where we sit here today as we're in in early December, is just going back to revisiting two things.
00:10:56
HFW Industries
My personal feelings towards risk, right? We know the markets go up and down over time You know the tendency to kind of flatten out and in are positive But understanding your personal feelings towards risk and when you like I look at my mobile app or I get my statement at home How do I feel if that accounts going down right? Some of everyone's unique Some of us are aggressive some are conservative some are in the middle So we all have a risk spectrum that we need to understand where we fall on the second is your time horizon How much time do I have to go and i need to tap into my 401k to replace my paycheck? So going back to a couple of those basics is a nice housekeeping item on an annual basis. to Understand how you're invested, number one. Number two, understand how much you're saving and ask yourself, could I maybe bump up a percent this year? um But ah overall, the market performance has been very strong since 2022. Now, who knows what 2025 will bring, right? And there's change. Anytime there's change, there's uncertainty.
00:11:53
HFW Industries
um We certainly think that with the new executive branch ah policies will become less restrictive for businesses, especially in the financial institution world ah financial services sector so there could be some opportunities there. um But anytime there's change there is choppiness, looking back historically, no matter the outcome of any election.
00:12:13
HFW Industries
There usually is a period of time where people are taking advantage and buying and selling at different price points, large institutions, which impacts us as individual investors. um And there's some uncertainty around policy and procedures that could impact certain segments of the market. So I do expect some choppiness, you know, into 2025. But if you take a step back and look at the overall macroeconomic pulse,
00:12:39
HFW Industries
Things are still strong. Our GDP right now growth's at 3%. Still have record low unemployment at 4%. Consumer discretionary spending's still strong.
Resources for HFW Employees
00:12:48
HFW Industries
So if you kind of look back at the fundamentals, that's what I look at as is as an investor and an advisor, um really still are in a good position here domestically and doing certainly much better than international, for example. Absolutely.
00:13:01
HFW Industries
And I think it it speaks to, again, your your time horizon, especially for someone younger. The volatility we may see over the next year is in the grand scheme of things, you don't have to worry about that then.
00:13:12
HFW Industries
But, if you're good conversely, if you're at the other end of the spectrum, thinking about retirement, you may want to consider some um risk strategies, I guess. Yeah, it's a different conversation, depending on on where you are on your life stage, right? Absolutely. um You know, for a younger person who's got 25, 30, 40 years to go, the market volatility may not will not impact them today.
00:13:32
HFW Industries
right so it could be a buying opportunity for for a younger person but for somebody who's thinking about retirement tapping into their resources on the 401k in short order certainly risk is a big factor there in how to manage that portfolio effectively so you can avoid any large what we call sequence or returns risk meaning the unknown in the market in the year i go to retire we can't afford a drop of 35 40 when if i'm trying to tap into my 401k that same year so how do you manage those those things right and and making sure Your portfolio matches those two things we talked about, your risk profile and your time horizon. and Fantastic. Well, Todd, I want to close by, I guess, explicitly touching on some of the resources that are available to um anyone who is an HFW employee. ah You've been in here today with your team as part of that. And so can you walk through what's available um and where people can go if they need additional resources or help on any anything relating to the retirement program?
00:14:31
HFW Industries
Yeah, I think it's a three-fold answer. I think you have a wonderful team here at HFW, obviously internally. But Dana and Tom and really had their hands around the plan administratively, so you really have some great internal resources. But when it comes to advice and guidance and support, that's of course where you have your retirement plan provider at Fidelity. Fidelity is the largest retirement plan provider in our country. um Great resources on the mobile application. They do have a dedicated call center that has customer service representatives here in the US s that can answer questions.
00:15:00
HFW Industries
But here at LALI, us locally, you know if you have questions around, hey, am I doing the right thing as I approach retirement? Is my investment allocation appropriate based on my age and risk tolerance? Roth versus pre-tax calculations and questions.
00:15:15
HFW Industries
That's where my team at Lolly and myself, that's where we can pick up. There's really more on the planning side of things. So you have a plethora of resources, ah both internally, externally, through Fidelity and the mobile application. Everything's right at your fingertips every day. And then if you need more customized planning, advice, and guidance, that's where my team at Lolly and myself can answer questions individually. And we're happy to spend a day here today and meet with a number of your your teammates here.
00:15:41
HFW Industries
Yeah, and we've got a ah great team and and those those resources are available as part of being, and anyone at HFW, and is ah those resources are available to them. That's that's a great point. um as like From our perspective, as long as they have a balance of the 401k plan or eligible to participate in the plan, that resource is always available. We're always available. I still work with a lot of retirees.
00:16:03
HFW Industries
Right. That left HFW. I didn't know that. And maintain a balance in the 401k plan. They still have access to us because we can view their account and help them. And yeah, that's exactly right. Wow. that I learned something. Did not know that. Yeah. well Fantastic.
00:16:16
HFW Industries
Well, Todd, I know we run a little bit of a time crunch, but I'd like to let my guests have the last word. any Any final pieces you'd like to add in or something we missed today? Yeah, I think there's just an upcoming in 2025. I know you had asked about some changes. The limits did change. ah They gave us a $500 raise in how much we can put into our retirement plan. So the IRS sets those limits annually. They were released about 30 days ago. So for 2025, as you're doing your planning, thinking about things,
00:16:45
HFW Industries
Personally, we can save $23,500 into our 401k. In addition to that, if you're over the age of 50, The ketchup contribution stayed the same this year for 25. It's $7,500. So basically, you can do 31 grand next year if you're over the age of 50 and you're 401k, which is a nice chunk of change to be able to put away on a qualified basis. um I also want to let people know is there's actually additional ketchup or a super ketchup contribution.
00:17:16
HFW Industries
All right, so the IRS tries to muddy the waters a little bit and make things a little bit convoluted, but here here you go. So as I just mentioned, the traditional contribution for catch up for over the age of 50 individuals is 7,500. However, if you turn age 60 to 63 in 2025,
00:17:35
HFW Industries
your catch-up contribution could be $11,250. Just giving the opportunity for that segment of the population to start putting more money towards the future because maybe they didn't have the opportunity to save when they were younger. So they're we're doing some right things fundamentally ah from top down, from our government is is allowing savings rates to go up, but still have not kept pace with inflation. um So as you're entering 2025, great opportunity to view your account Revisit your contribution rate. Ask yourself, is that a rate I'm comfortable with, or could I afford to go up 1% this year, for example? Make sure you have your beneficiary up to date on your 401K. That is critical. You update your beneficiaries for any life events during, throughout the year. That could all be done through Fidelity and the mobile app. um And then you understand your investment mix. Just revisit it. you know touch Look at your 401K.
00:18:27
HFW Industries
two to three, four times a year. You don't have to take it, check it every day. It'll drive you crazy. But if you saw this, you're engaged a little bit. I think that's the goal is to understand. so So you're not surprised by anything. And ultimately, if you have questions, you can always come to us and my team at Lolli and myself. And again, those resources that we just discussed at HFW and Fidelity as well.
00:18:46
HFW Industries
Fantastic. Well, Todd, I really appreciate um you being
Closing Remarks and Partnership Appreciation
00:18:50
HFW Industries
here now and with all of your help. ah we ah to ah Tom and Dana always speak about the the great relationship ship we have and the great program that ah we have through Lawly and Fidelity. So we really appreciate all of that. Yeah, appreciate being here and appreciate that your partnership with HFW. It's great to see everything going very well here and and look forward to seeing everybody in the future. All right. Well, we'll do this again in a year maybe. Thank you, Todd. Thank you.