National Life Insurance Awareness Month
September is National Life Insurance Awareness Month, so it’s a great time to review your coverage.1 If you don’t have any life insurance, you’re not alone. Life insurance is one of those ‘someday’ things for many people, but the cheapest time to buy it is probably today.
There are two kinds of life insurance: term and permanent. Additionally, there are three kinds of permanent life insurance: whole, universal, and variable.
How do these forms of life insurance differ, and how do you find out which type of coverage is right for you? The way to find out is to look at where you are in life, so that you can assess your current insurance needs. Have you reviewed your insurance lately? Don’t think you need life insurance? If so, consider the following potential factors that may make it a good idea:
You have a spouse or partner
You have children
You have an aging parent or disabled relative who depends on you for support
Your household depends heavily on your income
Your retirement savings or pension won’t be enough for your spouse or partner to live on should you pass away
You own a business, either solely or with partners
You have a substantial joint financial obligation, such as a personal loan for which another person could be legally responsible after your death
In any of these circumstances, you may require life insurance. If you have coverage, changes in your life may demand an update.
The affordability of life insurance may surprise you. Many people think it is expensive, and so often, it is not. A 20-year term life policy with $500,000 in death benefits can cost you less than $70 a month.2 Life insurance is intended to help your loved ones financially after you die. The proceeds from a life insurance policy may help your spouse, partner, or family members manage finances if they have to adjust to life without your income. The death benefit may also be used to meet funeral costs and other final expenses, which may run into the tens of thousands of dollars.
Are you still unsure about buying life insurance, or do you suspect that your current insurance coverage needs to be updated? Our team would be happy to assist you in evaluating all the factors and help you choose an appropriate policy.
1. Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
2. ValuePenguin.com, 2023. Based on a male in excellent health.
SECURE 2.0: Catch-Up Contributions
With SECURE 2.0’s increased catch-up contribution limits set to take effect next year, it’s time for 401(k) plan sponsors to brush up on the rules and consider how to administer the changes. Under the current rules, 401(k) plans may allow participants to make catch-up contributions when they are age 50 or older. For 2024, the catch-up contribution limit is $7,500.
SECURE 2.0 creates a window of increased catch-up contribution limits for participants ages 60 – 63. Below are key questions 401(k) plan sponsors are asking about this change:
Are the changes mandatory?
Plan sponsors are not required to offer catch-up contributions. However, if a plan allows for catch-up contributions, it is important to check with the plan’s recordkeeper to determine whether or not opting out of the increased catch-up contribution limit will be permitted.
When do the changes take effect?
The new limits take effect for tax years beginning after December 31, 2024.
Which participants are eligible for the increased limit?
Participants are eligible for the increased limits for the years in which they attain ages 60, 61, 62, and 63.
What is the increased limit?
The increased catch-up contribution limit for eligible participants is the greater of: (a) $10,000, subject to cost-of-living adjustments starting in 2026; or (b) 150% of the limit in effect for 2024 (i.e., $11,250).
While the change seems straightforward, administration may be complex. For example, plan sponsors should consider how to track eligibility for the increased limits, in addition to tracking eligibility for regular catch-up contributions. Plan sponsors should also consider how to re-impose the lower catch-up contribution limits when participants age out of the higher limits. Employers may need to work with their payroll teams and update their existing processes (e.g., payroll codes) to implement these changes.
Finally, keep in mind that the increased catch-up contribution limits are separate from the SECURE 2.0 Roth catch-up rule for certain high-earning individuals, which the IRS delayed to 2026.
Essential Cybersecurity Practices
In an age where digital threats are just a click away, understanding how to protect yourself online isn’t just advisable – it’s essential. This guide is your first step toward mastering the essentials of cybersecurity, providing you with the knowledge to shield your personal and financial data from the evolving dangers of the digital world.
The Foundations of Cyber Safety
Embarking on a journey towards comprehensive cyber safety starts with mastering a few fundamental practices. By adopting the four simple steps outlined below, you can significantly enhance your digital security. These measures are designed to fortify your identity and sensitive data against the myriad threats that lurk online. Each step serves as a pivotal building block in constructing a robust defense for your personal and professional digital environments.
Multifactor Authentication (MFA)
Also known as Two Factor Authentication, Two Step Factor Authentication, MFA, or 2FA, they all refer to the same concept: choosing to add an additional verification step when trusted websites and applications require confirmation that you are indeed the person you claim to be when logging into their system. MFA adds a critical layer of security by requiring two forms of identification before access is granted. This method significantly reduces the risk of unauthorized access, even if a password is compromised, because the likelihood that an attacker also has the secondary authentication factor is minimal.
Regular Software Updates
Keeping software up to date is not just about accessing new features but primarily about securing devices from vulnerabilities that hackers exploit. Updates often include patches for security flaws that, if left unaddressed, could allow hackers easy access to your system. We recommend taking it one step further by enabling automatic updates on your operating systems, which will ensure you’re protected as soon as these fixes are available.
Think Before You Click
Over 90% of successful cyberattacks start with a phishing email. These deceptive messages are designed to look legitimate to trick you into giving away sensitive information or downloading malware. Always inspect emails for unusual language or out-of-place requests and verify the authenticity of the message through other communication channels if possible.
Use Strong Passwords
A strong password acts as the first line of defense against unauthorized access. Use long, unique, and randomly generated passwords for different accounts to prevent cross-site breaches. Password managers such as LastPass or 1Password can help manage the complexity of storing and remembering different passwords, enhancing your overall security posture while maintaining convenience.
Vigilance Against Phishing Attacks
Phishing attacks remain one of the most common and pernicious threats in cybersecurity. These attacks often involve fraudsters masquerading as reputable entities to deceive individuals into providing sensitive data.
Identifying Phishing Attempts
Phishing emails or messages often contain suspicious links, urgent requests for information, and slight inconsistencies in email addresses, links, or formatting. Being aware of the possible threat, along with recognizing the signs is crucial in avoiding phishing.
Preventative Measures
Handle unexpected requests for personal information with skepticism. If you receive such a request, do not respond immediately. Instead, verify the sender by contacting the organization through official channels, such as their verified contact number or email address found on their official website.
Education and Training
Educate yourself about the latest phishing tactics through online resources, safety courses, or webinars. Staying updated on new phishing strategies and learning practical tips can enhance your ability to protect your personal data.
Use of Technology
Employ reliable email filtering tools that can screen out suspicious emails. These filters can significantly reduce the number of phishing attempts that reach your inbox, adding an essential layer of security.
By proactively enhancing your knowledge, understanding the basics, and implementing these strategies, you can significantly lower your risk of falling victim to cyber attacks.
Considerations During Medicare’s Open Enrollment
How long has it been since you’ve reviewed your Medicare policy? With open enrollment fast approaching, there are a few questions you may want to ask yourself before you renew, add, drop, or switch coverage.
Have you switched doctors, or is your doctor no longer accepting your current plan? Or maybe your prescription drug needs have changed, and your Medicare plan doesn’t cover everything you need. Maybe you’re paying too much for your coverage and need to make adjustments. If you’ve reviewed your Medicare plan and realized you don’t quite have the coverage that you want, you can make changes during the fall open enrollment period. From October 15 – December 7, 2024, you can add, drop, or switch Medicare plans. Any changes will be effective on January 1, 2025, as long as the changes are submitted by the deadline.
Reviewing your Medicare coverage is an important part of your financial and insurance strategy. If you have any questions or need help navigating this process, reach out to the Shepherd Financial team.
SECURE 2.0: RMDs
SECURE 2.0 brought significant changes to retirement planning and distributions, including updating the Required Minimum Distribution (RMD) requirements. As background, RMDs are the minimum amounts that individuals who attain their ‘required beginning date’ must withdraw from their retirement accounts each year.
SECURE 2.0 introduced several changes to the rules on RMDs, including the following:
Delaying the Age for RMDs
The age for starting RMDs has been raised from 72 to 73 years. This increased age provision phases in over time, with the final adjustment taking effect in 2033 to age 75. The change recognizes that many Americans are working and saving for retirement for longer periods, and the later distribution requirement allows for more flexibility in managing retirement assets.
No RMDs from Roth Accounts
Starting with the 2024 calendar year, participants are no longer required to take RMDs from their retirement plan Roth accounts. This change aligns the RMD rules for Roth accounts in retirement plans with the rules applicable to Roth IRAs.
Decreased Penalties for Missed RMDs
The excise taxes for failing to take an RMD have been decreased from 50% to 25% of the RMD amount not taken. The penalty may be further reduced to 10% if the RMD is corrected in a timely manner.
Remember Who Comes First
After attending a recent conference and thinking about the company culture we’re striving to build at Shepherd Financial, this quote from Richard Branson kept running through my head:
‘Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.’
It’s true. All the things we’re passionate about here (for our clients!) – creating financially healthy individuals, retirement-ready participants, and responsible plan fiduciaries – happen when we take care of our team first. While we are a young company, our growth has been rapid, and keeping this conversation about culture in the front of our minds is essential to our continued success.
Our leadership team at Shepherd has used the following questions to help guide our planning process. As you craft your own benefits package and design the structure of your retirement plan, consider asking yourself these same questions.
What is your company identity?
In other words: who are you? How did you get here? Why are you doing what you’re doing? If you can clearly articulate the answers to these questions, logical decisions about how to care for your team will follow.
What is the tie-in?
Benefits for your employees should align with what you’re trying to accomplish as a company. Consider your environment and what’s appropriate for your team – from a financial perspective, think about what you can afford, both right now and in the future. If your desire is to offer a more robust package over time, share that vision with your team.
Why do these benefits matter?
When selecting plan specifications (automatic features, vesting schedule, etc.), consider how they will be used to both recruit and retain your employees. Do your benefits meet the practical needs of the people you’ve hired? Are you putting your team members in a position to retire well? Is their hard work going to pay off in the future? How are you financially sharing corporate success with each person?
Ultimately, your retirement plan and benefits package need to reflect how you want to be seen by your employees and the community. Don’t segment your decisions – instead, consider how they impact the whole landscape of your employees’ lives. This process won’t happen overnight, but if you’re not deliberate, it won’t happen at all. Remember who comes first, and act accordingly.
Why We Give
The concept of corporate social responsibility (CSR) has been making waves, urging corporations to be – as you may have guessed – socially responsible. In other words, deliberately conducting business in a way that creates a positive impact in the community, environment, and society. The goals of CSR include the following:
- Developing innovative practices that create sustainability and minimize our carbon footprint
- Implementing fair and ethical practices with regard to our products, employees, and clients
- Caring for others through our philanthropic efforts, whether a donation of money, products, or services
As both consumers and prospective employees more highly prioritize the CSR of the businesses they choose, corporations would do well to develop relevant policies for their teams. However, CSR established merely as a public relations ploy will lack the heart needed to make a legitimate impact in the world.
But employees long to be engaged with things that matter; even smaller companies can begin to integrate CSR tenets within their culture. (Key to the conversation? A firm understanding of and commitment to the general purpose and values of the company itself.) Focus on making this concept of giving back, which can encompass all the goals of CSR, a regular part of conversations with your team.
For greater employee buy-in, ask individuals to identify businesses, causes, and projects that align with their personal interests. Highlight the importance of CSR by clearly communicating its value to your company. As an example, at Shepherd Financial, we have committed to serving together as a team every quarter, and our employees are provided with two paid days each year to volunteer where they choose.
While we are providing a benefit to someone else, these team service projects have also been a gift to us. We are able to step away from a fast-paced, demanding schedule, spend time together, and realign our priorities. Top of the list? Helping people. And whether it is through a service project, creating a plan to eliminate debt, or helping successfully usher someone into retirement, we know that genuine relationships matter. So we continue to emphasize the importance of investing in others and giving back.
Do we have room to grow in our CSR efforts? Absolutely. And we’re dedicated to continuously looking for ways we can help people, strengthen relationships, and positively impact our world.
Watch Your Language
Every group has its own lingo. When football coaches speak about designing receiver slants, hitting the A-gap, or running stunts, players quickly understand their roles. Likewise, as theater buffs converse about moving stage left, blocking, and striking, no one bats an eye. But if you’re not part of either group, it might just sound like gibberish.
The retirement industry has this problem, too. Advisors and plan sponsors use technically-correct language to describe company plans, features, and savings strategies, but the jargon is causing a disconnect. Research has revealed participants find their retirement plans to be confusing; their desire for clearer language should be a loud call for our attention. If they don’t understand their options, participants may be less likely to make appropriate decisions about their retirement plan account.
As mentioned in previous posts, different generations desire different benefits options, but they also have unique communication needs. This is true for not only how we communicate but what we communicate. A baby boomer may be looking for financial advice, while a millennial might prefer a financial coach or financial counseling.
Plan enrollment is a critical time to help employees see the big picture. Defined contribution is a somewhat clunky term – employees can be encouraged to participate in their workplace savings plan. And instead of talking about a deferral rate, employees might better understand phrases like the amount you contribute or the percentage of your paycheck that you put in the plan.
The employer match is also a point of confusion, but clarification is critical for increasing participants’ savings rates. Telling participants about free money and the ability to significantly increase their total amount of retirement savings resonates with their goals.1 After defining the company match, it’s important to explain how that money is vested – but very few employees have any idea what a vesting schedule is. They might, however, be very interested to hear about the rate of ownership for that free money.
Finally, it’s easy to quickly get in the weeds when it comes to investment terminology. Target date funds are the victims of plenty of industry jargon. A helpful explanation about their intent may include language about a customized strategy that is managed for you and designed to help achieve your goals.1 Talking about a glide path may illicit blank stares, while a risk-reduction path1 over the course of working years is easier to understand.
Ultimately, no language choice will be the perfect fit for all employees, but it remains essential for advisors to prioritize speaking in more understandable and relatable terms.
Addressing Multigenerational Communication Styles
As discussed in last month’s blog, employers must rethink the formation of corporate benefits packages to better attract and retain high-quality employees. The key point was creating a benefits package with different and refreshed options (or even deconstructing it to allow for greater choice and flexibility), but an equally important piece of the puzzle is effectively communicating with employees.
Remember, multiple generations make up the modern workforce, and it’s important to understand their different communication needs. Regardless of their generation, each employee may have unique preferences; these should be attuned to and included as the benefits package is created, announced, and implemented.
While the retirement plan is one slice of the holistic benefits package, it comes with its own set of challenges. For example, employee enrollment and deferral eligibility may be different than eligibility to receive employer contributions. An 18-year-old employee just starting their first job may not understand any of those terms, while a 60-year-old transitioning to a new employer might be full of questions about rollovers, in-service distributions, and more.
Will these employees learn best at a group meeting? With customized resource sheets? Working with a financial advisor in a one-on-one setting? Watching a pre-recorded, customized enrollment video? Don’t limit the possibilities, because the answer is likely a combination of several of these options; each generation will desire a range of communication channels. Technology offers more, too – consider email, text messaging, company intranet, webinars, online tools, social media, and apps. Some employees may be content with one-time efforts; others will desire constant engagement and more frequent messaging.
While carrying different expectations for relationships with their employers, commonalities abound among the generations. Employees want fair treatment, to be acknowledged for a job well done, and trust they are working in the right place. Paying attention to these desires, as well as incorporating a flexible benefits package with a healthy variety of communication channels, is ultimately a win for everyone.
Employees really do want to understand their benefits, and as an employer, it is your responsibility to effectively communicate with them. If your current methods aren’t measuring up, call the Shepherd Financial team. We’re here to help.
Rethinking the Employee Benefits Experience
Attracting and retaining high quality employees is not a new challenge, but the benefits landscape has changed dramatically in recent years, particularly since millennials entered the workforce. And now that this generation is today’s largest workforce demographic (hint: it’s your employees who are anywhere from 23 to 38 right now), employers must rethink the construction of the overall benefits package. As you consider how to add value for employees and help your company grow, do you understand what millennials actually want?
The answer is twofold: different options than previous generations required, and the ability to create a customized benefits experience.
Don’t bristle at these desires – especially because of technology, today’s workplace is fundamentally different than it was 20 years ago. It makes sense your employees have new expectations, too. (Speaking of technology, it should be standard to have always-accessible employee benefit information, often through a secure online portal.)
Aside from health insurance and retirement plans, benefit options might include the ability to work remotely, flexibility in work schedules, student loan repayment plans, opportunities for professional development, lifestyle solutions like onsite child care, and corporate investment in wellness initiatives. While some of these options require creative thinking and scheduling, the positive results speak for themselves in overall employee wellbeing and productivity.
Regarding the customized benefits experience, it is becoming increasingly popular – and practical – to offer an à la carte solution. In short, employees receive a fixed amount of money as part of the benefits offering and may decide how to allocate their employer’s contribution. Closer to retirement, a baby boomer might select a higher contribution rate to the company retirement plan and a full suite of health insurance, life insurance, and long-term care insurance; a millennial employee may earmark less money for their retirement plan but include student loan repayment and extra parental leave.
Every company is unique, and so are your employees. Employers certainly have many decisions to make about the options to include, as well as how to structure the benefits program to meet compliance regulations. To discuss ways to better attract and retain employees through the benefits program, call the Shepherd Financial team.