Health. Wealth. Wisdom.

Health. Wealth. Wisdom.

May 30, 2023

Coaching Decision

Consider Working with Your Plan Advisor to Help Improve Your Financial Health


Your 401(k) plan’s advisor helps your employer manage your company’s retirement plan. They help select and monitor investment options, manage the relationship with your recordkeeper, keep the plan in
compliance with rules and regulations, design the enrollment and education program, and many other things. In addition, many plan advisors work one-on-one with employees. They help them identify their
priorities and guide them toward achieving all of their financial goals—including retirement. Here are three reasons why seeking their professional advice and guidance about your financial future may be a
smart move:


1. Objectivity. Sometimes, your emotional biases can make it difficult to look at your financial situation clearly. A common example: people know they need to save for retirement but often have
difficulty sacrificing present consumption because of a lack of self-control. Your plan advisor can help provide an outside perspective, objective accountability, and recommendations for changes
in behavior that may be necessary for you to achieve your goals.


2. Personalization. Each person has a unique set of circumstances, and general financial advice—like the kind you get in this newsletter—can’t possibly consider all of your unique variables. Your plan
advisor can help you recognize when you may need to adjust your spending, balance personal needs versus wants, and identify ways to be more mindful about your finances.


3. Answers. Your plan advisor can help answer questions you have right now, including:

  • Is the amount I’m saving enough to manage my retirement income needs?
  • Should I be making Roth contributions or pretax contributions?
  • How can I manage things such as inflation, market volatility, and other risks in my investment strategy?
  • What can I expect from social security benefits?
  • How can I best plan for health care expenses in retirement?


Connecting With Your Advisor


For more information or to request an initial meeting, please feel free to contact your plan advisor at
your convenience via email or phone. Here are some questions to ask:

  • What services do you provide?
  • What types of clients do you work with?
  • How often do you meet with clients?
  • How are you compensated (e.g., fees, commission, or both)?


You’re also encouraged to visit Investor.gov to perform a background check on any advisor you’re considering working with.

Do Not Remove


Tapping Your Retirement Account for Other Financial Needs Can Have Costly Consequences According to a December 13, 2022, article in The New York Times, hardship withdrawals from workplace
retirement accounts are rising—“another sign, along with rising credit card debt, that many Americans have been feeling financial pain from inflation.”


At some point, many people find themselves in a situation where they need to access cash quickly. If that happens to you, you might consider taking money out of your retirement plan account through a
loan or distribution. Although those are available options, they might affect your long-term goals.


Hardship Withdrawals


Hardship withdrawals can be taken for “immediate and heavy” financial need, according to the IRS. But while a hardship withdrawal may solve a short-term issue, it may have a costly impact. Check out the
following chart to see the financial implications before removing funds from your account. If you’re younger than 59½, you may get hit with ordinary income taxes and an additional 10 percent federal
income tax penalty.1

  • Amount of withdrawal $40,000
  • Ordinary income taxes ($9,600)
  • Early withdrawal penalty tax ($4,000)
  • Leaves you with just $26,400


Please note: The above assumes the account holder is younger than 59½ (and no exception to the 10 percent additional tax applies) and has a 24 percent effective federal income tax rate. Additional state and local income taxes may be levied, if applicable.


Plan Loans


When you take out a plan loan, there are no income tax or early withdrawal penalty consequences; however, you generally have up to five years to repay any loan from your retirement plan account.
Leaving your job (or losing it) before the loan is repaid may mean you have to pay the money back in full right away. If you don’t, the amount that still needs to be repaid may be considered a distribution
and subject to federal and state income taxes (if applicable), as well as the additional 10 percent federal income tax penalty if you are younger than 59½ (unless an exception applies).


Missing Potential Growth Opportunities


As much as you may need the money now, taking a distribution or borrowing from your retirement account undermines the potential for the funds to grow through tax-deferred compounding—on both
the money you have invested as well as any growth from that money’s earnings. This could make it more difficult for you to reach your retirement goals.


If you’re thinking about taking a distribution or loan from your retirement plan account, consider consulting with a financial advisor. (Your plan’s advisor also may be able to help.)

It’s All About the H2O

Start Your Day with Water (and Keep It Coming)


When was the last time you reached for a glass of water first thing in the morning—instead of getting your caffeine fix? You probably already know that staying properly hydrated throughout the day is a
basic rule of a healthy lifestyle. It balances chemical processes in the brain, keeps your organs functioning properly, and aids in recovery after a tough workout. In addition, there may be something
extra beneficial about drinking a glass of water immediately after you wake up.


Top of the Morning


Your body can’t produce enough water through metabolism to meet its daily needs, which is why we need to drink enough to function properly.2 When you sleep 6–8 hours, that’s a long
time to go without water. When you wake up, your brain may be wired to think of coffee; instead, consider retraining yourself to drink water first.


Boost Your Morning Workout


If you work out in the morning, drinking water first thing can help you ward off breakfast hunger. It can also help you burn fat. This is partly due to water’s thermogenic effect, which
has to do with the energy required to warm up cold water in the digestive tract after consumption. Multiple studies have shown that water-induced thermogenesis has the potential to increase the body’s metabolic rate by 24 percent–30 percent in adults, with the effect lasting about one hour.


Improve Your Mental Performance


If you are even a little dehydrated when you wake up, it can result in brain fog. Unfortunately, a double shot of espresso probably won’t clear things up much (or at least, only temporarily).
Water, however, has been shown to increase alertness and short-term memory. Drinking it before you start your day is a great way to combat fatigue and improve concentration.


Achieve Better Gut Health


Consistently drinking water throughout the day will help your body naturally filter out toxins via your kidneys. This doesn’t mean you have to drag a two-liter jug with you everywhere you go.
Just take a good, long, satisfying drink once every couple of hours or so (to help, set a reminder on your smartwatch or phone). By hydrating more, you’re getting rid of bad bacteria in your
system, which allows the good bacteria in your gut to grow and thrive. According to the Mayo Clinic, there’s no one-size-fits-all recommendation for how much water is needed every day but starting with a full glass of water can have real benefits.


Retirement in Motion

Tips and Resources Everyone Can Use
Knowledge Is Retirement Power


Although we’ve all experienced a few tough years of higher inflation, it’s important to keep things in perspective. According to the Bureau of Labor Statistics, inflation has averaged just 2.41 percent from
2000 to 2023. Conventional wisdom says you should consider keeping an appropriate amount of your retirement savings allocated to stock and bond mutual funds to help offset inflation risk. Although past
performance is no guarantee of future results, historical average stock and bond returns have stayed ahead of inflation over the long term.


Q and A


Do I have to wait until retirement to open a social security account?
No matter where you are in the retirement planning process, you should open a social security account as soon as possible. Creating an account gives you the control to check your annual
social security statement for accuracy, change your address, verify your reported earnings, estimate your future benefits, and much more. You can visit ssa.gov to open your account. In fact,
the Social Security Administration has recently launched a redesigned homepage to help users find what they need more easily.


Quarterly Reminder


Do you expect a tax refund this year? If so, consider creating an emergency fund with some (or all) of it. It’s important to have this money available when something unexpected comes up, such as a car,
refrigerator, or dishwasher breaking down. Here are the key features of an emergency fund:


• Aim for 3–6 months of living expenses saved
• Keep separate from your checking account
• No (or low) transaction fees; no penalties for withdrawals
• Interest earnings on the balance (a little something is better than nothing)


Tools and Techniques


You may feel differently about money you earn from your job versus money gifted to you through a will, trust, or other circumstance. And you may have a different feeling toward the money you save through
your retirement account—especially when the account is growing versus experiencing losses. You might say everyone has a “money personality” that affects how we think about and manage our
finances. Take a few minutes to try Fidelity’s money personality quiz to find out which type you are, how that affects your financial decisions, and common pitfalls to avoid.


Corner on the Market


Basic Financial Terms to Know
Leading economic indicator—Typically, investors and economists pay attention to leading economic indicators because they can help predict or forecast economic growth, corporate earnings, and stock
prices. Some leading indicators include unemployment claims, consumer confidence, building permits, inventory changes, and stock prices. Changes in these numbers can signal what short-term changes
are likely to occur in the broader economy.


1 There are a few exceptions to the 10 percent penalty, including birth or adoption, terminal illness, or a qualified disaster. Check with a tax professional to confirm which expenses are exempt from the 10 percent early withdrawal penalty.

2 Fun fact: Water makes up 95 percent of the human brain, 90 percent of lungs, 83 percent of blood, 76 percent of muscles, and 22 percent of bones. Sources: U.S. Geological Survey (U.S. Department of the Interior); National Center of Biotechnology Information (National Institutes of Health); Mayo Clinic; Kmotion Research.

Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network.