Vestwell adds Morningstar Investment Management’s 3(21) Fiduciary Services to Further Support Financial Advisors in their Retirement Plan Decisions

Addition of Morningstar Investment Management’s curated fund menu enhances investment flexibility for financial advisors and plan sponsors

NEW YORK, NY, January 17, 2018 –  Vestwell, a digital retirement platform, announced today that it will be offering a select list of investment options under Morningstar Investment Management LLC’s 3(21) fiduciary services program to Vestwell clients.

Vestwell provides a platform that automates and digitizes the client recordkeeping and administrative experience so that advisors and plan sponsors can focus on developing a retirement plan that best suits their employees. The integration of Morningstar Investment Management services seeks to benefit financial advisors and plan sponsors by enabling them to address their fiduciary responsibilities while creating their own investment product lineup from menus of funds that Morningstar* has performed due diligence screening on.

“Equipping advisors and clients with a digital retirement experience that helps alleviate administrative and fiduciary burdens has been, and always will be, a top priority for Vestwell as we continue to expand our offering,” said Aaron Schumm, founder and CEO, Vestwell. “We’re delighted to integrate Morningstar Investment Management’s 3(21) fiduciary services program, which complements our offering and provides advisors with a diverse, highly customizable set of retirement solutions for their clients.”

Advisors will have access to a list of investments curated by Morningstar* that cover various asset classes and fund types, all of which follow strict guidelines centered on management, style and performance consistency, with an eye on expenses. The maintained list is embedded into the Vestwell platform, allowing advisors and plan sponsors to serve participants across various workforce demographics.

“Vestwell’s offering provides advisors with a modern, streamlined approach to retirement services,” said Brock Johnson, Head of Workplace Retirement Solutions, Morningstar. “We’re pleased to support Vestwell’s commitment to providing advisors with the retirement technology tools and services they need to assist plan sponsors.”

About Vestwell Holdings, Inc.

Vestwell Advisors, LLC is a SEC registered investment advisor, a wholly owned subsidiary of Vestwell Holdings, Inc., specializing in 401(k), 403(b) and other defined contribution and benefit retirement investment management services. Built by an experienced team led by CEO Aaron Schumm, Vestwell can assume 3(38) or 3(21) investment management and ERISA3(16) fiduciary responsibility on the behalf of advisors and their plan sponsor clients. Learn more at Vestwell.com and on Twitter @Vestwell.

This is not an offer, solicitation, or advice to buy or sell securities in jurisdictions where Vestwell Advisors is not registered. An investor should consider investment objectives, risks and expenses before investing. More information is available within Vestwell Advisors’ ADV.  There are risks involved with investing. Investors should consider all of their assets, income and investments. Portfolios are subject to change. All opinions and results included in this publication constitute Vestwell Advisors’ judgment as of the date of this publication and are subject to change without notice.

About Morningstar

Morningstar, Inc.’s mission is to help investors reach their financial goals. We were founded on the simple idea that when people have good investment information, they make better choices that lead to better outcomes. Our advocacy for the individual investor extends to the workplace market, where the responsibility for investing and saving for retirement now rests with employees and where we’re committed to helping those employees achieve financial freedom. The products and services of Morningstar and its affiliates range from advice and managed accounts to custom models, target-date solutions and fiduciary services. Our Workplace business includes Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc.

Vestwell Advisors makes available advisory services offering investment solutions and fiduciary support from Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc., for plan sponsors. Morningstar Investment Management acts as a fiduciary under ERISA 3(21)(A)(ii) with respect to these services. Morningstar Investment Management is not acting in the capacity of advisor to individual investors. The Morningstar name and logo are registered marks of Morningstar, Inc. and Morningstar Investment Management and its affiliates are not affiliated with Vestwell Advisors.

* Investment research is produced and issued by Morningstar, Inc. or subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. Morningstar Investment Management has entered into a sub-advisory agreement with Morningstar Research Services LLC , an affiliate of Morningstar Investment Management, pursuant to which Morningstar Research Services will agree to, among other things, perform some services and/or other obligations on behalf of Morningstar Investment Management.

 

Media Contact:

Jessica Torchia

FiComm Partners

917-636-4804

Jessica.Torchia@ficommpartners.com

Solving Challenges of Small and Mid-Sized Retirement Plans

“The small and mid-sized retirement market offers exciting opportunities, but it’s not easy developing the expertise and capabilities to navigate the plan design and compliance. The good news is that you don’t have to do it yourself. Vestwell provides a streamlined, white-labeled retirement platform that acts as an extension of your advisory firm.”

Download White Paper

3 Reasons Your Firm Should Delegate Plan Management

Written by Ezra Group

For some advisors, being successful means being busy. If you’re not working on five tasks at once and putting in 10-12 hour days, it means you’re not working hard enough.

When it comes to developing a great practice, many financial advisors eventually realize that a bigger to-do list does not lead to the improvements they were seeking.

In fact, top advisors perform a regular assessment of their internal processes and prune what they do not absolutely need. That’s what has allowed them to provide the highest quality service to their clients, even as their assets grow. In the process, these professionals discover that delivering more value can come from doing less.

In a professional practice, investment management is just one component that can be outsourced with great success. However, misconceptions about outsourcing exist, which can discourage progress and expose advisors to costly professional liability. Below, three myths about outsourcing, debunked.

Myth# 1: Your value as an advisor comes from picking the perfect investments.

Investment selection has become increasingly commoditized. From Vanguard to Betterment to Morningstar, new consumer-direct tools are available, which also allow professional investment selection at a fraction of the standard advisor fee.

Fee compression is just one side-effect of this development. Today’s advisors must prove that they are better than an algorithm that charges less, never sleeps and does not make human mistakes.

As a result, top advisors are re-framing their value proposition around helping clients get organized, define priorities, and stay accountable. This requires a shift in the workflows of the professional practice.

In order to create the space and time to have deeper client conversations, advisors must let go of the idea that they are uniquely qualified to select every client investment.

This point is equally valid for high net worth clients and 401(k) plans. The lesson of the last decade is that advisors create success through client relationships, ongoing education and proactive counseling, not through hand-selecting the “perfect” mix of mutual funds.

Myth #2: You must pick investments yourself.

Some advisors might feel that they offer no value if they are not doing the investment selection. In reality, picking investments for a plan is only a small part of what must be done. If the ultimate goal is to create optimal retirement outcomes for the plan participants and to maximize the value of the plan offering as an employment benefit for the plan sponsor, the advisor has his/her work cut out..

That includes helping plan sponsors select the right service providers, designing dozens of features to shape the plan offering and educating employees on their retirement readiness. None of those are one-time tasks that can be done at the launch of the plan and then put on a shelf for a decade!

The plan will need to morph with the changing needs of the plan sponsor. Employee education and outreach is an ongoing and labor-intensive commitment. In short, there is no risk that the advisor will run out of things to do, even if he chooses to outsource investment management!

Myth #3: A 401(k) plan is not that different from selecting investments.

Many advisors have fallen into an erroneous belief that the fiduciary standard for 401(k) account management is the same as the fiduciary standard for wealth management clients. They feel comfortable offering 401(k) management services because they think that their standard procedures address all requirements.

In reality, the decision to provide 401(k) plan management places a higher standard on the advisor. Creating, documenting and following a prudent investment process to meet the ERISA fiduciary standard is complicated. Advisors often find themselves unprepared for the amount of time and effort they must dedicate to ongoing maintenance, monitoring, and management of associated documentation. That commitment doesn’t go away as long as they remain an ERISA fiduciary, which is a tough lesson to learn after they have made a costly investment in developing the internal logistics to set up a separate workflow.

It’s not all about the time commitment. Although as long as nothing goes wrong, the advisor’s exposure is limited to the ongoing resource allocation. Should the process ever fail at any stage, the entire firm is exposed to risk and fines.

When a 401(k) plan participant or a sponsor client raises a complaint, the investment manager could be held professionally (and in some cases personally) liable. Few advisors have considered this possibility and taken the proactive step of boosting their balance sheet and reserves to the level that can handle the potential expense of a lawsuit, investigation and fines.

Time to outsource investment management

Investment management for a 401(k) plan is a necessary but time-consuming part of your practice. It does not yield high premiums, nor does it help you stand out when competing for new plan clients. Therefore, it makes sense to opt into the convenience and savings that come from buying a fully automated bundled solution for a low basis point fee.

In exchange, you receive a professional investment manager who will follow a documented prudent process, provide all plan communications and provide a layer of liability protection.

Some advisors are apprehensive about the “black box effect” of outsourcing and the possibility of giving up control over a core function of their business. Contrary to the common belief, outsourcing the day-to-day aspects of 401(k) plan management can have the effect of putting you back in control of your practice.

Most importantly, outsourcing can allow you to concentrate on developing deeper relationships with your clients and creating more impact. Whether your goal is growing your practice or maintaining it at a comfortable “lifestyle” level, finding the right partner for investment management outsourcing can improve your efficiency, focus and risk management.

With a modern all-in-one solution from Vestwell, you will have the right tools to create optimal outcomes for your plan sponsor clients and their employees, no matter what your vision for your practice is.

 

 

2017 Year in Review

Last year saw plenty of activity concerning Americans’ personal finances and investments. A new president and his administration initiated sweeping changes—not just to Obama-era proposed legislation but also to longtime rules.

While this year portends possible interest rates rises, cryptocurrency controversy, and the potential rebound of global markets (particularly in China), it’s important to understand the most pertinent issues from 2017, which will impact your clients and advisory businesses not just this year but also in the years ahead.

New tax laws

Among the bigger financial developments of 2017 was the recent passage of the Tax Cuts and Jobs Act, which will result in the most significant overhaul of the U.S. tax system in more than 30 years.

While there was no direct impact on 401(k) plans, there could be a number of indirect hits ahead. Earlier tax plan proposals would have capped the pre-tax contribution amount to 401(k) plans, but thankfully rumors of this change didn’t materialize in the final version.

The DOL Fiduciary Rule

The fiduciary rule was rolled out in April of 2016, with final implementation – originally scheduled to commence on April 10, 2017 – to be finalized by January 1, 2018.

In early 2017, the Trump administration issued an executive memo instructing that the DOL review the rule. The applicability (or the commencement of the final implementation process) of the rule was moved to June 9, 2017, with full implementation now set for July 1, 2019.

Financial advisors who provide advice to 401(k) plan sponsors (and other retirement plans) already had a fiduciary responsibility predating the new rule. Much of this is rooted in the DOL’s ERISA statutes. There are a number of provisions in the new rule which effect  small 401(k) plans. Moreover, there are provisions in the rule concerning rollovers from 401(k) plans to IRAs.

401(k) plans and Roth IRAs

While there were no new rules regarding 401(k) plans in 2017, the participant contribution levels for 2018 increased to $18,500 for those under 50 years old, and up to $24,500 for those 50 or over in 2018.

Also of note, the IRS increased income limits for those wishing to participate in Roth IRAs.  Income limits increased to $135,000 in 2018 for individuals (up from $133,000 in 2017) and up to $199,000 (from $196,000) for those married and filing jointly.

The total amount that can be contributed begins to phase out at $120,000 for single filers and at $189,000 for those married filing jointly. Maximum contributions remain at $5,500 and $6,500 for those 50 and over.

The impact of the activity from 2017 will require even more attention for your clients in the coming year. Be sure to familiarize yourself with last year’s biggest changes and how they will impact the coming year.

 

About Vestwell Holdings, Inc.
Vestwell Advisors, LLC is a SEC registered investment advisor, a wholly owned subsidiary of Vestwell Holdings, Inc., specializing in 401(k), 403(b) and other defined contribution and benefit retirement investment management services. Built by an experienced team led by CEO Aaron Schumm, Vestwell assumes 3(38) investment management and ERISA3(16) fiduciary responsibility on the behalf of advisors and their plan sponsor clients. Learn more at Vestwell.com and on Twitter @Vestwell.

This is not an offer, solicitation, or advice to buy or sell securities in jurisdictions where Vestwell Advisors is not registered. An investor should consider investment objectives, risks and expenses before investing. More information is available within Vestwell Advisors’ ADV. There are risks involved with investing. Investors should consider all of their assets, income and investments. Portfolios are subject to change. All opinions and results included in this publication constitute Vestwell Advisors’ judgment as of the date of this publication and are subject to change without notice.

SOURCE Vestwell Holdings, Inc.

Related Links

http://www.vestwell.com

Vestwell Visits D.C. to talk 401(k) and Tax Reform with Congress

Vestwell Team arriving in D.C. Left to right: Aaron Schumm, Mike Shuckerow, Peter Kennedy

As the tax reform conversation gained steam in October, some lawmakers began discussing limits on individual 401(k) deductions as a way to raise government revenues.

At Vestwell, we were concerned about this development, given that Americans are already not saving enough for retirement.

The proposed legislation would worsen the problem known as the retirement savings gap, which is the difference between a person’s income and actual expenses during retirement.

The Retirement Gap is Getting Worse, and We Want to Help Fix it

The retirement gap threatens the long-term financial security of nearly all Americans, outside of what formal lobbying committees say.

That’s why we traveled to Washington D.C.  to speak with representatives about this savings crisis.

Along with our Special SEC Adviser and Chief Compliance Officer, Mike Shuckerow, and Special ERISA Adviser, Peter Kennedy, the Vestwell team met with 22 Senators, Congressional House members and their staff within the banking, finance, and technology committees.

Our goal was to educate the representatives on the ways that we can work together to help close the retirement gap.

Americans Aren’t Saving Enough (Or At All) for Retirement

The statistics are staggering; only 8% of people in all working households have enough saved for retirement, given their ages and income.

The median retirement savings for individuals aged 25 to 64 is shockingly low at only $3,000, and a mere $12,000 for those nearing retirement aged 55 to 64.

Left to right: Aaron Schumm, Perre Smalls

Defined Contribution Plans and Accounts Can Close this Gap

We already know that 75% of Americans rely on defined benefit plans and defined contribution plans, such as 401(k)s and 403(b)s, as their only sources of invested assets.

Social security is also an elephant in the room that no one is addressing; its uncertain future places even more importance on saving and investing during one’s working years.

More Than Ever, Financial Advisors Can Help Companies Facilitate and Administer the Right Retirement Plans

During my time in D.C., I underlined the importance of 401(k) plans to address savings deficiencies.

I also talked about the key role that financial advisors, empowered by technology, play in the administration of and access to retirement plans.

This is revolutionizing the way plans are administered today, as well as providing access and opportunities for companies who previously did not offer a 401(k) or 403(b) plan to their employees. In fact, up to 90% of plans with less than $50 million AUM are managed by financial professionals.

What’s more, according to the Department of Labor & Bureau of Labor Statistics, more than 500,000 companies in America do not offer retirement plans for principals and employees.

Fortunately, with technology, financial advisors are paving the way for SMBs to help their employees and principals save for retirement.


(Top) Left to Right: Peter Kennedy, Aaron Schumm, Rep. Bill Foster, Mike Shuckerow; (Left) Meeting with Congressman Huizenga, Left to right: Aaron Schumm, Bill Huizenga, Marliss McManus

“Rothification” Threatens Long-Term Savings

Finally, we discussed the long-term pitfalls of the trend toward “Rothification,” which replaces tax-deferred 401(k) plans with accounts funded by after-tax money.

Moving tax revenue up within the 10-year budget window via a Roth-type account would end up further widening the savings shortfall across the hard working Americans that need the tax benefit most to retire securely.

Our goal was not to lobby for 401(k)s, but rather to remind lawmakers about the significant impact these proposed changes would have in further weakening American retirement readiness.

 

 (Top) Meeting at Cannon House Office Building; Left to right: Aaron Schumm, Congressman Ted Budd, Peter Kennedy, Mike Shuckerow; (Bottom) Left to Right: Aaron Schumm, Congressman Ted Budd 

Real Change Takes Partnership

Since my trip, I’ve continued to communicate with lawmakers and their staffers about these issues.

We have even invited them to meet us in our New York offices so that they can learn more about what Vestwell is doing.

Congressman Ted Budd, R-NC, took us up on the offer. The passion that Congressman Budd and his Chief of Staff showed us toward helping businesses, as well as learning more about how Vestwell services the retirement landscape, was truly invigorating.

On a personal level, I found it reassuring that our elected officials see saving for retirement as a non-partisan concern. Everyone I talked to was very willing to help others. They were ready to think deeply about the issues we raised and engage with us and others, to create solutions.

Our government is not just listening, they are acting. Vestwell is mobilizing financial advisors with technology to propel retirement savings forward, and we remain hopeful the regulators remain informed and are on a path to help.

I’m excited about the potential for change and proud of our role in it.

Wishing you all a very happy holiday season and the warmest wishes for a happy New Year!

Kind Regards,

Aaron Schumm

3 year-end must-dos for your clients’ 401(k) plans

Before the busy holiday season kicks in for you and your clients, make time to add even more value as their trusted investment advisor.

Show—don’t just tell—your clients about these three simple actions to take before year-end, which can help them: 1) reduce their tax burden, 2) increase their chances of retiring comfortably, and 3) make sure their investments remain on track.

Over the long haul, these three moves will be their holiday gifts that keep on giving, and they’ll be grateful that you checked in with them.

1. Make an extra contribution to save on taxes

Your clients have until the end of the year to make an additional contribution to their 401(k)s—which will not only boost their account balances, but also help them save on taxes for the year.

In 2017, the maximum 401(k) contribution for individuals is $18,000. You can advise them to add up their contributions to date, and then figure out how close their are to reaching that limit.

If your clients are over 50-years-old, they can make additional catch-up contributions of $6000, for a total of $24,000.

2. Increase contributions for next year

Many people take a “set it and forget it” approach to retirement savings, but it’s smart to revisit the amount deferred to retirement savings at least once a year.

Ask your clients if they received salary raises this year, and inform them that they may wish to raise their 401(k) contribution by the same percentage increase.

If a company offers an automatic escalation feature, advise them on the benefits for signing up, and their contributions will rise every year to get them closer to savings goals.

3. Check on investment performance, fees, and allocations

Advise your clients to review their investment strategies at least once a year to make sure they are on track. You can help them review all the various parts of their investments:

Performance

Show them how and where to check on performance of their investments—find out if they are happy with their investment performance relative to averages and/or benchmarks.

Fees

You should also ensure that your clients know how much they are in paying investment fees. For example, a large cap stock fund should charge no more than about 1.25% in fees; small cap funds charge a little more, averaging 1.4%.* And fees on ETFs or exchange traded funds can be even lower, around 0.53% on average.**

Help them make sure their funds aren’t eating up their returns with unnecessarily high expenses.

Allocations

You can also help your clients review their portfolios against their target asset allocations.

The stock market has done well this year, and they may have more than they expected in their stock funds. If so, help them to transfer some of the money into other asset classes to diversify and rebalance back to their target.

Helping your clients with their year-end check-up should be part of your regular annual service. Most importantly, doing so will help keep your clients’ retirement savings plans on track.

That’s one way to increase the chances that they (and you) will enjoy financially secure holidays for many years to come.

 

*Thuna, K. (2017, February 14).  Average Expense Ratios for Mutual Funds.  Retrieved from https://www.thebalance.com/average-expense-ratios-for-mutual-funds-2466612

**Why Are ETFs So Cheap? Retrieved from http://www.etf.com/etf-education-center/21012-why-are-etfs-so-cheap.html?nopaging=1

What the Nobel Prize and 401(k) Plans Have in Common

Left to their own devices, many people wouldn’t save enough (or at all) for retirement, no matter how attractive the 401(k) plan.

Statistically speaking, most Americans in their forties have saved an average of $63,000. But according to Fidelity, this may present a dangerous retirement savings gap if held to the conservative benchmark that a nest egg be three times a person’s annual salary.

Look closely, however, and you might notice participation and savings rates slowly creeping upward.

This may be due to the work of Richard Thaler, an economist and professor at the University of Chicago. He’s also the 2017 Nobel Prize winner for Economic Sciences.

Thaler is a pioneer in a field of study called behavioral economics. His research looks at the ways we, as human beings, are our own worst enemies when it comes to acting rationally and in our personal best interests. This is particularly true when it comes to saving and investing for the future.

For instance, a company may offer an employee the chance to participate in a tax-deferred retirement benefit, such as a 401(k) program. As an extra incentive to sign up and begin building financial security, the company may even offer to match the employee’s plan contributions up to a certain amount.

While you’d think that most employees would be jumping for joy and running to sign up, plan sponsors would likely tell you that this is not the case, and that getting people to participate in retirement savings programs is quite difficult, akin to pulling teeth.

Regardless of the reasons why people wouldn’t participate (Laziness? Lack of awareness or education? Misinformation?), the good news is that people can be influenced to act more rationally through mechanisms that Thaler calls “nudges.”  

Opt Out, Not In

An example of a nudge is when an employer automatically enrolls its employees into 401(k) plans from the start, and puts the onus on people to opt out rather than opt in. The results are uncanny, with a much higher number of employees saving for retirement.

This insight kicked off an industry-wide trend toward auto-enrollment. The Plan Sponsor Council of America (PSCA) found that in 2016, 58% of plans were automatically signing up workers, up from just 8.1% in 2000.

Just getting people to participate was a big step forward, but Thaler also looked for ways to influence participants to save more.

Auto-escalation locks in higher contributions   

In his paper, “Save More Tomorrow,” Thaler proposed another “nudge” to increase contributions, called auto-escalation.

Participants would start at first by allocating 3% of income to retirement. Then, with every salary raise, their investment contributions would automatically increase.

Auto-escalation has taken hold among larger plan sponsors. Callan’s 2017 Defined Contribution Trends survey found that 63% of large and mega plans offer an auto-escalation feature, up from 46% in 2015.

Thaler’s insight into why people don’t save and how to get them to do better laid the foundation for a more stable, secure retirement system—and all it took was a little nudge.  

How Tax Reform May Impact the Investment Industry

 

How Tax Reform May Impact the Investment Industry

The Senate recently passed its version of the GOP’s tax reform legislation.

The legislation isn’t final, however, as the House and the Senate must hammer out a final version of the bill that reconciles their differences.

Until that happens, you should be aware of the major changes proposed, and how they may impact your clients.

Exemptions and deductions

Under both proposals, personal exemptions would be eliminated. Both proposals would also eliminate the state and local income tax or sales tax deduction for individual taxpayers, though the standard deduction will nearly double.

The deduction for property taxes will now be capped at $10,000 (as there was no federal cap before).

While the impact on individuals will vary by situation, this could result in many investors having less cash flow to invest in their 401(k) plans and elsewhere.

No changes to 401(k) deferrals

One provision that was discussed early on in the process was limiting employee pre-tax contributions to 401(k) retirement plans.

This ultimately was not part of the package, and the IRS has increased 401(k) contribution limits to $18,500 (with $24,500 for those 50 and over) in 2018.

For those who lose the ability to itemize deductions via the changes in the tax bill, such as the increase in the standard deduction, the ability to make pre-tax retirement contributions becomes even more valuable.

It is important to remind your clients and prospects to max out their contributions if they aren’t already doing so, if this is an appropriate strategy for their situation.

For small business owners who were on the fence about starting a small business retirement plan, the ability to contribute to one for themselves might be an even better incentive under the new tax rules.

Impact on the markets

While trying to predict the direction of the stock market is always a fool’s errand at best, part of the premise of the plan is to lower corporate tax rates in an effort to spur growth.

This could well be a stimulus for the markets, but of course there are many factors that come into play here.

Be a resource

Even if you aren’t a tax expert, become knowledgeable about the features of these new rules that will impact your clients and prospects. Incorporate more knowledge into your advice to existing clients and your marketing to prospects.

Vestwell does not offer tax advice, please consult your tax professional, as necessary, related to any tax-related topics.

The “Rothification” of the Investment Industry

 

 

Even before President Trump’s tax reform legislation was finalized, rumblings of limits to 401(k) contribution amounts gave credence to “Rothification” impacting the investment industry.

If such proposals had passed, this would have reduced the amount of pre-tax money that people could contribute to their 401(k) plans, while freeing up spending money for the government.

But the industry is already seeing a rise in the conversion from some or all traditional defined contribution plans to Roth-like plans, hence the movement being coined Rothification. The results have sparked a debate about the pros and cons of moving in this direction.

Pros

Proponents of the increased reliance on Roth 401(k)s and IRAs point to the tax benefits later in life for retirement savers.

These savers will sacrifice a tax break today, so that they can avoid paying taxes when the money is withdrawn from their savings in retirement.

There are also estate planning benefits, because there are no required minimum distributions (RMDs) on Roth IRAs. Roth 401(k) accounts rolled over to Roth IRAs would also receive such benefits.

Cons

Many financial advisors fear that Rothification would lead to reduced retirement savings at a time when Americans can ill-afford to do so.

The loss of the income tax deduction would cause worker’s take-home pay to be reduced.

This could, in effect, limit the cash-flow available for 401(k) contributions and other retirement savings.

Consider Taxes

Roth accounts certainly offer solid options for retirement saving. While the benefit of tax savings down the road in retirement can seem distant, the reality is that many retirees may find themselves in a higher income tax bracket in the future.

Many also see Roth accounts as a way for retirement savers to diversify their retirement accounts’ tax profiles, in efforts to be prepared no matter what tax rules are passed in the future.

In the Meantime

Financial advisors should consider how Roth accounts can make sense for 401(k) plan sponsors and their employees.

We haven’t seen the last of the Rothification movement, so it’s best to first be educated, and then be prepared for what’s next.

Vestwell does not offer tax advice, please consult your tax professional, as necessary, related to any tax-related topics.