What are the Most Common 401(k) Mistakes that M&T Bank Employees Make?

Healthcare Provider Update: Healthcare Provider for M&T Bank M&T Bank collaborates with various healthcare providers as part of its employee benefits package. Notably, they offer plans that include coverage through the Health Plan Services, which encompasses options under the Affordable Care Act (ACA). Potential Healthcare Cost Increases in 2026 As M&T Bank employees prepare for 2026, they should be aware of significant healthcare cost increases looming on the horizon. The projected rise in premiums for ACA marketplace plans, particularly in states like New York, could exceed 60%. Additionally, the potential expiration of enhanced federal subsidies may leave approximately 22 million enrollees facing a staggering 75% increase in out-of-pocket costs. With employers like M&T Bank possibly shifting a greater share of healthcare expenses onto employees, it is crucial for individuals to review their benefit options and strategize their healthcare spending as they approach a year of unprecedented financial strain. Click here to learn more

The real test for M&T Bank employees means optimizing their company-sponsored retirement plans, including match contributions, and avoiding withdrawals especially during tough economic times to harness retirement accounts' long-term growth potential.

In this article, we will discuss:

1. The significance of maximizing employer-sponsored retirement plans, including employer match.

2. The need to follow long-term investment strategies and prevent premature withdrawals.

3. The need to diversify 401(k) investments to minimize risks and guarantee better returns.

'M&T Bank employees need their 401(k) portfolios to include diverse investments because it is the best way to protect their retirement funds from market risks while building a financial safety net for the future.”This situation is complicated by financial retirement account challenges which according to a CNBC Your Money Survey – 41% of employees do not put money into a 401(k) nor plan set up by their company.

Despite clear advantages of workplace retirement programs, many M&T Bank workers fail to seize their full potential in these plans. According to Joe Buhrmann, a senior financial planning consultant at eMoney Advisor, only a small number of employees are able to use their employer-sponsored plans to build up their retirement savings. A critical element that is often forgotten is the employer match which is a critical component of retirement savings. Surprisingly, according to data from Fidelity, the leading provider of 401(k) plans in the United States, roughly 22% of plan participants do not get the full match amount. Fidelity reported that the average employer contribution to a 401(k) plan was 4.7% of an employee's salary in the third quarter of 2023, with a range of 3 to 6 percent.

As a result, partners with dual employer savings plans may gain a strategic advantage by directing their contributions to the plan that provides the higher employer match. Mike Shamrell, vice president of thought leadership at Fidelity, explains the need to make enough contributions to get the full match from the company. This could lead to tens of thousands of dollars more being deposited into retirement accounts every year. Shamrell recommends auto-escalating contributions to this end so that savings can be increased every year without having to be done so manually.

In response to these challenges, the Internal Revenue Service raised contribution limits for retirement accounts in 2024: 401(k) and IRA limits stand at $23,000 and $7,000, respectively. This modification offers a chance for more savings before the retirement of M&T Bank. However, withdrawals from retirement accounts during difficult economic times are a concerning trend that detracts from the power of compound interest. Even as the US experiences high inflation, 401(k) withdrawals have risen, according to reports.

On average, experts recommend against using this money. It is also necessary to understand the distinction between a 401(k) withdrawal and a loan if that is relevant. A 401(k) loan allows you to borrow as much as 50% of your account balance or $50,000, whichever is less, with a five-year repayment period. However, before age 59, withdrawals are taxed at ordinary rates and may be subject to a 10% tax penalty, with some exceptions for hardship withdrawals. In the future, a new provision set to launch in 2024 will permit people to take up to $1,000 per year in one transaction for personal or family emergencies as a critical resource in case of need. One final tip is to think long term. This has made Fidelity report an average balance of $107,700, which is an 11% increase from the previous year, after 401(k) account balances dropped about 25% in 2022 due to high volatility.

Those workers who have been consistent with their investments over the past 15 years have watched their average balances grow from $56,300 in 2008 to $448,800. Therefore, it is crucial not to alter the contribution rate and to keep the right asset allocation regardless of market volatility. This should not be the case for 401(k) changes as manipulating short-term market trends may result in missing out on growth or unintentionally exposing the account to risk. When retiring, especially at age 60, the consequences of Required Minimum Distributions (RMDs) from 401(k) plans are an important factor that must be considered. From 401(k)s, RMDs are required starting at age 72 and are based on the account balance and life expectancy. This can have a significant impact on retirement income planning and tax planning. The Internal Revenue Service announced in 2023 that failure to withdraw these distributions will incur a substantial 50% excise tax on the amount that should have been withdrawn. Therefore, it is crucial that M&T Bank retirees implement good RMD strategies to

In brief, the following are important aspects of financial stability and retirement planning: The importance of long-term investment strategies and the caution in retirements funds withdrawals; The understanding and optimization of employer-sponsored retirement plans. Managing a 401(k) plan is like being a captain during a long journey. Just like how experienced sailors need to know weather forecasts, boat details, and how to adjust sails to make the most of the wind, those near retirement also need to have a good understanding of the nuances of their 401(k) plan.

This is similar to a good wind:

it takes you without you having to put in more effort. This is similar to saving resources for the time when they are actually needed instead of using emergency funds unless the situation is really bad. Finally, making provisions for RMDs (Required Minimum Distributions) is like planning for your route; you won’t be caught out by tax demands you can’t meet.

Just as there is the need to maintain and make changes to the map for a successful journey, the management of a 401(k) account for M&T Bank employees in order to guarantee a comfortable and secure retirement also requires the same degree of attention.

Additional Fact:

One major mistake that M&T Bank workers make with their 401(k) plans is not diversifying their investments. According to the Retirement Planning Institute, this year's survey found that a large number of employees are likely to put too much of their money into their company's stock, which is dangerous when the company is not doing well. This is important in reducing risk and guaranteeing the steady growth of the retirement savings over the years. This neglect can result in high concentration of risk which, as has been the case in the past, can put retirement savings in danger. This paper therefore urges M&T Bank professionals to consult their 401(k) statements with a financial advisor at least once a year to check on their asset diversification across the various categories.

Added Analogy:

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This paper has found that failing to diversify a 401(k) is like sailing with the right equipment but only using one type of sail. Just as using one sail can be hazardous in changing winds and weather, this means that retirement savings are exposed to market volatility and company-specific risks. A wise sailor carries many sails – the spinnaker, jib, and main sail, to manage the different conditions and to maintain a smooth and steady journey. Therefore, M&T Bank employees should make their 401(k) investments across various sectors to ensure that they can take on any financial challenges and transition smoothly to retirement.

Sources:

1. 'One in Four Workers Miss Out on Full 401(k) Match.'   Society for Human Resource Management (SHRM) , SHRM, 2024,  www.shrm.org/resourcesandtools/hr-topics/benefits/pages/one-in-four-workers-miss-out-on-full-401k-match.aspx .

2. '401(k) Limit Increases to $23,000 for 2024, IRA Limit Rises to $7,000.'   Internal Revenue Service (IRS) , U.S. Department of the Treasury, 2024,  www.irs.gov/newsroom/401k-limit-increases-to-23000-for-2024-ira-limit-rises-to-7000 .

3. 'Considering a More Equitable, Efficient 401(k) Match.'   Vanguard , Vanguard, 2024, institutional.vanguard.com/VGApp/ii/401kplan/plan_details.v;jsessionid=1db3070b6f0159a26f5da0b95bfcff72.

4. '401(k) Matching Example: Potential Growth Over Time.'   Empower , Empower Retirement, 2024,  www.empower-retirement.com/participants/tools-resources/401k-matching .

5. 'How Does a 401(k) Match Work?'   Fidelity Investments , Fidelity, 2024,  www.fidelity.com/viewpoints/retirement/how-does-a-401k-match-work .