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Healthcare Provider Update: Healthcare Provider for Cummins Inc. Cummins Inc. primarily administers its employee health benefits through major insurance providers, including UnitedHealthcare and Anthem Blue Cross Blue Shield (BCBS), among others. Potential Healthcare Cost Increases in 2026 As Cummins Inc. anticipates significant healthcare cost increases in 2026, employees should prepare for potential spikes in premiums driven by a combination of factors. A projected rise of up to 8.5% in employer-sponsored insurance costs, alongside the potential expiration of enhanced ACA subsidies, may lead many employees to see their out-of-pocket expenses grow considerably. With certain states experiencing premium hikes exceeding 60%, comprehensive financial planning, including the strategic use of Health Savings Accounts (HSAs), will become essential for mitigating the anticipated financial impact on individuals and families. Click here to learn more
For Cummins Inc employees, alternatives to 401(k) loans - such as liquidating non-retirement assets or exploring home equity options - 'can preserve long-term retirement savings while meeting short-term needs while preserving long-term security.'
'Cummins Inc employees nearing retirement should consider 401(k) loan alternatives, as drawing down retirement funds too early may jeopardize their financial future;' exploring unsecured loans or home equity lines of credit might give you more freedom without sacrificing your retirement goals, 'she said.
In this article we will discuss:
1. Finding alternatives to 401(k) loans for financial need.
2. Key options for getting cash fast without sacrificing retirement savings.
3. The tax consequences & advantages of each alternative.
Some people - including Cummins Inc workers - may need to tap into a 401(k) loan in times of need. But look into alternatives to 401(k) loans that may offer more benefit to your situation and long-term goals. A few options for getting quick cash while preserving your retirement savings are discussed below.
Exploring these alternatives enables people nearing retirement or already retired to make informed decisions based on their particular situation. Preservation and growth of retirement funds must be prioritized alongside immediate needs. Knowing which options exist lets individuals strike a balance between needing to access funds and preserving their retirement savings over a long period of time.
Research from the Investment Company Institute (ICI) found that more than eight out of 10 workers have taken out a 401(k) loan. Yet, by 2020 only about one in 10 people with that option had used it. This suggests people either know about the drawbacks of 401(k) loans or may need more money than a 401(k) loan can provide.
401(k) loans have one catch - IRS rules cap plan loans at 50% of your vested balance or $50,000, whichever is less. For example, you could borrow $9,000 when your 401(k) balance is about the median $18,000. Furthermore, at end 2020 the average unpaid balance of 401(k) loans was less than $8,000 and the median was just over $4,000. Thus a 401(k) loan might not cover your needs.
With limitations like 401(k) loans, here are alternatives that may be better suited for you:
Liquidate Company Stock:
If you own company stock from an employee stock purchase plan (ESPP), selling it can give you instant cash. Stopping contributions to the ESPP may also boost your taxable pay. Selling company stock may raise your tax bill, but losses could allow tax-loss harvesting. Stocks held for one year or less will have short-term capital gains tax rates that are generally higher than long-term rates.
Liquidate Other Assets:
Stocks, bonds or cryptocurrencies in a taxable brokerage account can bring in cash when you sell them. Remember the taxes involved in selling these assets. Selling non-financial assets like unused items or collectibles can also raise funds. Consider also that some payment apps like PayPal and Venmo now issue 1099-Ks - making gains harder to hide from the IRS. Collectibles also carry higher capital gains tax rates.
Reduce Retirement Contributions:
Not every option will give you an instant lump sum, but it frees up monthly cash flow that can be invested elsewhere. Reduced retirement contributions can be redirected to current spending.
Explore Unsecured Loans:
When you lack assets to sell or cannot justify selling them, unsecured loans may be an alternative to 401(k) loans. They work if you don't own a home or lack the equity to borrow against. There are 0% APR credit cards and personal loans.
0% APR Credit Cards:
You can get a 0% APR credit card and spend your money on purchases without paying interest for up to 12 months with minimum monthly payments on time. Others include no annual fees and sign-up bonuses. But failing to pay off the balance before the introductory period ends or missing a monthly payment will carry interest charges that rival those on a 401(k) loan. Those who are disciplined and organized with their money may choose this option.
Personal Loans:
Within a few business days, personal loans let you get a lump sum of $1,000 to $50,000 in several business days. They have fixed interest rates and repayment can be between two and seven years. Good credit can even get you rates on par with the highest high yield savings accounts. But borrowers with sub-average credit could pay up to 36% interest. 401(k) loans would then be more affordable.
For Homeowners 401(k) Loan Alternatives & Tips:
If you own a home with more than 20% equity, you may find borrowing money through these options more advantageous than tapping into retirement savings:
Home Equity Loan:
You borrow a lump sum at a fixed rate and pay it back in equal monthly installments over up to 30 years with a home equity loan. Home equity loans carry interest rates a couple of percentage points lower than personal loans. Note there could be closing costs of 2% to 5% of the borrowed amount. Ideally this is for a large sum with low interest rates.
HELOC - Home Equity Line of Credit:
A HELOC lets you borrow up to your credit limit. A HELOC's interest rate is variable based on market conditions; therefore, monthly payments can be somewhat unpredictable. During the draw period - up to 10 years - you may be required to make interest-only payments. The repayment period is up to 20 years and includes full amortized principal and interest payments. Some lenders waive closing costs if the credit line remains open for three years. HELOCs let you borrow a large amount or less - depending on your needs.
Cash-Out Refinance:
With a cash-out refinance, you get another, larger mortgage. That extra amount is given to you as cash. Or choose a fixed-rate loan for up to 30 years with consistent monthly payments.
Also available:
adjustable-rate loans. Like a home equity loan, closing costs will be between 2% and 5%. This is helpful if you planned to refinance anyway.
Explore these options for alternatives to 401(k) loans so that you can make sound financial decisions and still protect your retirement savings. Assess each option's advantages, including immediate availability, interest rates, repayment terms and potential tax implications. Always consult with a financial advisor or professional about which alternative is best for your long-term financial picture.
Best alternatives to 401(k) loans:
some employers - including Cummins Inc - offer an 'in-service distribution' or 'in-service withdrawal,' which lets people 59 1/2 or older take money out of their 401(k) while they work. A survey by Willis Towers Watson in 2021 found that about 56% of the top 500 US companies offer this option, giving retirees and those nearing retirement age more control over their retirement savings. Exploring this alternative can be advantageous - people can access their money without the risk of 401(k) loans (source: Willis Towers Watson, 2021).
Find best 401(k) loan alternatives like diving into a chest of financial goodies as you cruise through retirement waters. Like a seasoned sailor searching for ways out of troubled waters, Cummins Inc workers and retirees search for better financial decisions. Instead of relying on a 401(k) loan alone, use these other vessels to get you there. Selling company stock is like pulling open an ancient chest of treasure, and liquidating other assets is like pulling up old artifacts in your attic. You trim your retirement contributions so the sails are adjusted for better cash flow. Both secured loans and home equity become versatile ships that offer advantages of each kind. Having knowledge and navigation skills can help you sail toward financial security while preserving your retirement savings while meeting your present needs.
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Articles you may find interesting:
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
- 11 Questions You Should Ask Yourself When Planning for Retirement
- Worst Month of Layoffs In Over a Year!
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
- 11 Questions You Should Ask Yourself When Planning for Retirement
- Worst Month of Layoffs In Over a Year!
Sources:
1. Kiplinger Staff. 'Considering a 401(k) Loan? What You Can Do Instead.' Kiplinger , Oct. 2023.
2. Thrivent Financial. 'Borrowing From 401(K) Plans: The Basics, Pros, Cons & Alternatives.' Thrivent , Sept. 2023.
3. Forbes Advisor. 'Best 401(k) Loan Alternatives.' Forbes , Aug. 2023.
4. Citizens Bank. 'Home Equity vs. 401(K) Loan.' Citizens Bank , July 2023.
5. Best Egg. '401(K) Loan vs. Personal Loan: How to Choose.' Best Egg , Nov. 2024.
How does Cummins determine eligibility for participation in the Cummins Pension Plan, and what are the implications for employees who temporarily leave the workforce? This inquiry should delve into the specific criteria that define an eligible employee, such as citizenship requirements and exclusions, as well as the continuation of benefits and service credit during approved leaves or breaks in service at Cummins. It would also explore the complexities surrounding vesting and how service prior to a break is credited upon re-employment at Cummins.
Eligibility and Participation in the Cummins Pension Plan: Eligibility for the Cummins Pension Plan requires being an active employee, not participating in another Cummins defined benefit pension plan, and meeting certain citizenship or residency criteria. During approved leaves of absence, employees continue to accrue service credits, ensuring continuous growth in their pension benefits. Notably, vesting occurs after three years of service, securing the employee's entitlement to pension benefits upon leaving the company. The plan handles breaks in service by allowing reemployment within 12 months to count towards vesting and benefit calculations, safeguarding employee benefits against temporary disruptions in their career with Cummins.
What are the potential benefits and limitations of the forms of distribution available under the Cummins Pension Plan, and how should employees prepare for their pension benefit election? This question requires an analysis of various forms of distributions, such as lump sums versus annuities, highlighting the financial implications of each choice, particularly in relation to the IRS rules for 2024 regarding tax treatment. Employees should also consider how their family structure (e.g., marital status, dependents) may influence their decisions when electing a distribution method.
Distribution Forms and Tax Considerations: The Cummins Pension Plan offers various distribution forms, including lump sums and annuities, each with distinct tax implications under IRS rules for 2024. Employees must consider their family structure and tax status when choosing a distribution form, as these factors influence the tax treatment and financial outcome of their pension benefits. The plan provides clear guidelines on these options, ensuring employees can make informed decisions that align with their personal and financial circumstances.
In what ways do pay credits and interest credits accrue within the Cummins Pension Plan, and how can employees gauge their potential retirement benefits over time? This question will focus on the specifics of how pay credits are calculated based on an employee's compensation and service at Cummins, as well as the impact of interest credits on the total account balance and long-term retirement planning. It will also examine how employees can track these credits through the Cummins retirement resources.
Accrual of Pay and Interest Credits: The pension benefits at Cummins accrue through pay credits based on compensation and service, along with interest credits. Employees can monitor their accumulating benefits through the Cummins retirement resources, offering transparency and planning advantages. This structured accrual method supports employees in projecting their future pension benefits and making informed decisions about their retirement timing and financial needs.
How does Cummins ensure compliance with ERISA and other regulatory standards in the management of the Cummins Pension Plan, and what rights do employees have under these regulations? This query should explore Cummins' obligations as a fiduciary in managing employee benefits and highlight the key rights of plan participants. The discussion should include access to plan documents, the process for filing claims, and the significance of ERISA protections for employees retired from Cummins.
Regulatory Compliance and Employee Rights: Cummins diligently adheres to ERISA standards in managing the pension plan, emphasizing fiduciary responsibility and ensuring participants' rights are upheld. Employees have rights to access plan documents, participate in claims and appeals processes, and are protected under ERISA from any plan-related discrimination. This regulatory compliance not only secures the integrity of their pension benefits but also reinforces the legal framework protecting participant rights.
What role does the Pension Benefit Guaranty Corporation (PBGC) play in safeguarding the retirement benefits of Cummins employees, and how does this affect the perception of the plan's reliability? This question would examine the insurance coverage provided by the PBGC, what types of benefits are guaranteed, and under what circumstances benefits may not be fully covered. Employees might analyze how this federal insurance impacts their confidence in the plan, especially in light of changing economic conditions.
Role of the Pension Benefit Guaranty Corporation (PBGC): The PBGC insures the pension benefits under the Cummins Plan, providing a safety net that enhances the reliability of these benefits. Employees covered by the plan can gain confidence in the security of their pensions, knowing that even in the face of potential plan termination, the PBGC guarantees the core benefits, subject to certain legal limits and conditions.
How does the Cummins Pension Plan interface with employees' Social Security benefits, and what should retirees consider when planning for a sustainable retirement income? This inquiry will look at the coordination of benefits under the Cummins plan with Social Security, examining how pension income might influence Social Security calculations. It would require discussions on the timing of retirement elections and how they align with Social Security claims.
Interaction with Social Security Benefits: The Cummins Pension Plan is designed to integrate smoothly with Social Security benefits, offering provisions that help plan participants optimize their total retirement income. Understanding this interaction allows employees to strategically plan their retirement age and benefit commencement, maximizing their financial stability in later life.
What are the specific procedures and deadlines that Cummins employees should follow to successfully elect a distribution from the Cummins Pension Plan upon retirement? This question will necessitate a detailed look at the steps involved in initiating a benefit distribution, including the importance of spousal consent, the timing of application submissions, and any documentation that may be required. Understanding these processes can significantly affect the financial outcomes for retirees.
Procedures and Deadlines for Electing Pension Distribution: The Cummins Pension Plan outlines specific procedures and deadlines for electing a distribution upon retirement, emphasizing the importance of timely and informed decision-making. By understanding these processes, employees can avoid delays and ensure that they receive their pension benefits in the manner that best suits their post-retirement financial plans.
What are the implications of choosing to defer pension benefits and how does the Cummins Plan accommodate employees who opt not to start their benefits at the normal retirement date? This inquiry could address the potential financial consequences of deferring benefits, including eligibility requirements for such deferral and how it aligns with IRS regulations. Employees should critically evaluate their financial situations and retirement goals, weighing the allure of continued employment against starting their retirement benefits sooner.
Deferring Pension Benefits: Employees at Cummins have the option to defer their pension benefits beyond the normal retirement date, which can influence the financial value of their benefits. The plan provides guidelines on how deferral impacts benefit calculations and distributions, assisting employees in making decisions that align with their long-term financial goals.
How can Cummins employees designating beneficiaries ensure that their wishes are respected concerning death benefits, particularly in light of recent changes in the pension landscape? This question focuses on the options available to employees for designating beneficiaries, the process for updating these designations over time, and the specific forms that need to be completed to ensure compliance with the Cummins Pension Plan. It will also discuss the impact of state and federal laws on these designations.
Designating Beneficiaries and Ensuring Compliance: The plan stipulates clear processes for designating beneficiaries for pension benefits, ensuring that employees' wishes are respected and legally documented. This is crucial for planning and securing financial provisions for survivors, reflecting the plan's comprehensive approach to retirement benefits.
How can Cummins employees contact the Cummins Retirement Benefits Service Center to obtain more information about the Cummins Pension Plan and related retirement processes? This question emphasizes the various channels through which employees can reach out to the service center, the types of queries they can address regarding the Cummins Pension Plan, and the resources available online to assist with pension-related inquiries. Employees are encouraged to take advantage of these resources to make informed decisions regarding their retirement planning.
Accessing Information and Assistance: Cummins provides multiple channels for employees to access information and assistance regarding their pension plan, including online resources and a dedicated service center. This accessibility ensures that employees can obtain detailed information and personalized support, enabling them to navigate their pension benefits effectively.
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