If your employer is AMITA Health and you are eligible for the Charles Schwab 401(k) plan, this article is for you.
From AMITA’s employer match to the available investment funds to choose from, I will walk through key points to make sure you best utilize your retirement account. Our team works with many healthcare professionals throughout the country, most notably AMITA Health in Illinois where we are the experts in their 401(k) for doctors and nurses.
As an independent CERTIFIED FINANCIAL PLANNER™ we specialize in serving the healthcare field with its unique financial needs.
1. 401(k) Basics
As a refresher, the AMITA Health 401(k) is an employee benefit that allows you to contribute either pre-tax or after-tax “Roth” dollars towards your own retirement account.
Money inside the 401(k) grows tax-deferred meaning you do not pay tax each year on any gains. Taxes are then due upon withdrawals from this account and taxed as ordinary income if withdrawn from the traditional pre-tax 401(k).
The “Roth” 401(k) option works the exact opposite of the traditional 401(k), money contributed to your “Roth” does not get a tax deduction unlike a traditional 401(k). When withdrawing funds from this “Roth” as long as the participant is over 59 ½ years old, no Federal taxes will be due.
To avoid early withdrawal penalties, it is best to wait until you reach 59 ½ years old to take qualified withdrawals. There are a few exceptions to this so consult with your financial professional on these.
Money grows inside your 401(k) based on the investment funds you select. It is the employee’s responsibility to choose which funds to invest in.
401(k) owners are required to withdraw money in the form of Required Minimum Distributions (RMD’s) from their account starting at age 70 ½ years old unless they meet the “still-working” exception. More info can be found on our website blog titled, “401k & IRA Owners – Avoid these RMD Mistakes”.
2. AMITA Health 401(k) Specifics
This retirement account if used correctly can be a key retirement asset. AMITA currently offers an employer match of 50% on the first 4% of employee contributions. This means AMITA will match you 50 cents on each $1 the employee saves up to 4% of your pre-tax contributions.
(Example – Primary Care Physician Salary of $200,000:
4% 401(k) contribution = $8,000 employee savings + $4,000 AMITA match = $12,000 Total Contributions)
Those that contribute less than 4% into this 401(k) are making a HUGE mistake. If not saving at all into the 401(k), it may cost that employee potentially a few thousand dollars each year.
An employer match can be looked at as “free money”. It is unwise to leave this money on the table.
Upon an associate reaching 1,000 hours of eligible service, each quarter AMITA will lump sum your matched funds into your account.
AMITA offers a great benefit in the After-Tax “Roth” 401(k) option. The main reason someone would choose this option is to benefit from tax-free withdrawals in retirement. The key drawback is there is no tax deduction on contributions going into the Roth 401(k) unlike the traditional Pre-Tax 401(k).
There are approximately 28 investment funds you may select to invest inside your 401(k). From strong fund providers like Vanguard to the Schwab Target Retirement Date funds, employees can get overwhelmed on what to select.
3. How We Add Value
Our team helps AMITA employees best utilize their 401(k) and other employee benefits. We make recommendations on the appropriate amount to contribute into your 401(k), either Pre-Tax or After-Tax contributions, fund selection and lastly how to best use other AMITA benefits such as disability and life insurances.
We carefully consider which 401(k) type is best for you based on your current tax bracket, outside retirement accounts and age. For high income earners, the traditional Pre-Tax 401(k) may be a strong option to defer taxes and reduce your tax bill today. If over 50 years old, catch-up contributions may be best.
For young professionals not in their prime earning years just yet, the After-Tax Roth 401(k) option may be wise to accumulate tax-advantaged gains given their longer time horizon before retirement.
Our role as your trusted advisor is to screen all current and new investment funds that become available inside the 401(k). We analyze various factors including fund fees, performance, manager track record, etc. and provide an outlook on which funds may be advantageous to invest in over the short and long term.
Overall, there are dozens of things to consider regarding your AMITA Health 401(k) and other employee benefits. Our team’s goal is to provide a comprehensive overview of how all your AMITA benefits should be used to give you the highest probability of success.
Many other AMITA Health doctors and nurses find it valuable use of time to get professional advice on how to best use these benefits and take a big picture overview. As the old saying goes, “having no plan is planning to fail.”
As an independent CERTIFIED FINANCIAL PLANNER™ that is legally obligated to act as a fiduciary for your best interest, I am glad to provide that much-needed second opinion over a no-cost review.
The above article is informational in nature only. Individuals should always consult with their tax advisor regarding their personal tax situation.
This publication is no way affiliated with nor endorsed by AMITA Health. Employees should consult with their Human Resources Department for further information on plan details including eligibility and questions regarding any additional benefits not covered in this article.
More about the Author
As an independent CERTIFIED FINANCIAL PLANNER™ in Bartlett, IL (a western suburb of Chicago) my practice serves three specific professions:
Healthcare professionals, Federal employees and Business owners.
My team and I help grow your retirement nest egg and solve for ways to best withdraw it tax-efficiently throughout retirement. We do this through comprehensive financial planning which includes evaluating your specific employee benefits, tax implications, RMDs and more.
Our goal is to save you precious time, stress and your hard-earned money versus tackling all this alone. Let a skilled team of experts like us, already familiar with your employer benefits, unique needs and goals guide you through the constant changes in your life towards financial independence.
Dustin Javier, CFP® AWMA®
CERTIFIED FINANCIAL PLANNER™
President | Dean Johnson Advisory, LLC
[Email] [email protected]
Securities and investment advisory services offered through Ausdal Financial Partners, Inc. Member FINRA/SIPC. 5187 Utica Ridge Rd., Davenport, IA 52807. (563) 326 2064. www.ausdal.com Dean Johnson Advisory and Ausdal Financial Partners are independently owned and operated.