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What are the Most Common 401(k) Mistakes that Sonoco Products Employees Make?

Healthcare Provider Update: Healthcare Provider for Sonoco Products Sonoco Products, a global packaging solutions company, collaborates with various healthcare providers to manage the health benefits of its employees. While specific providers may vary by location and plan selections, many large employers like Sonoco typically partner with prominent insurance carriers such as UnitedHealthcare, Anthem, and Cigna. Potential Healthcare Cost Increases in 2026 In 2026, healthcare costs for employees of Sonoco Products may experience significant increases due to anticipated premium hikes related to the Affordable Care Act (ACA). With projections indicating that premiums could rise by as much as 18% to 66% in certain states, many employees may face sharp out-of-pocket costs, particularly if enhanced federal subsidies expire. These increases will be driven by soaring medical costs and insurers' need to adjust for both economic inflation and the potential loss of critical financial support, raising concerns about accessibility and affordability for many subscribers. Click here to learn more

The real test for Sonoco Products 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.

'Sonoco Products 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 Sonoco Products 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 Sonoco Products. 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 Sonoco Products 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 Sonoco Products employees in order to guarantee a comfortable and secure retirement also requires the same degree of attention.

Additional Fact:

One major mistake that Sonoco Products 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 Sonoco Products 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, Sonoco Products 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 .

In the context of the retirement benefits provided by Sonoco Products Company, what are the different scenarios that could lead an employee to choose either the Normal Retirement Benefit or the Early Retirement Benefit, and what factors should be considered in making this decision? Additionally, how do these benefits interact with the vesting service and benefit service calculations specified by Sonoco Products Company?

Normal Retirement Benefit: Available at age 65, provides full monthly pension calculated by a predetermined formula. Early Retirement Benefit: Available from age 55 with 15 years of service, but monthly payments are reduced to account for the longer payment period. Employees must weigh the reduction in monthly benefits against the potential need or desire to retire early. Considerations: The choice largely depends on personal financial needs, health status, and employment circumstances. Early retirement reduces monthly benefits, which could impact long-term financial stability.

Considering the details about tax implications in the Sonoco Pension Plan, what steps should employees take to ensure they understand the taxation of both monthly annuity payments and lump sum payments when they retire from Sonoco Products Company? What resources does Sonoco offer to assist employees in navigating these tax obligations effectively?

Monthly Annuity Payments: Subject to federal income tax; state and local taxes may also apply. Employees can choose whether or not to have taxes withheld. Lump Sum Payments: Subject to mandatory 20% federal withholding if not rolled over into another qualified plan. Employees must consult with tax professionals to understand the taxation and potential penalties, especially if under age 59½. Resources: Sonoco provides access to benefits specialists through their Benefits Center and recommends consultation with tax advisors to manage tax obligations effectively.

How does Sonoco Products Company define and calculate the "Maximum Plan Benefit," and what impact do IRS limits have on the benefits that employees may receive upon retirement? Furthermore, how does this ensure that employees understand their entitlements under the plan?

Defined by IRS limits, which cap the annual benefits an employee can receive. For 2018, the limit was $220,000. Impact: Ensures high earners are aware of the maximum pension they can draw annually, and helps in planning additional retirement savings if necessary.

For employees at Sonoco Products Company who may be considering reemployment after retirement, what are the potential impacts on their pension benefits, and what guidelines does the company provide regarding how these benefits are recalculated upon re-entering the workforce?

Pension benefits cease during reemployment and resume upon re-retirement, recalculated based on additional service. This could affect decisions on returning to work post-retirement. Guidelines: Sonoco outlines how benefits are recalculated and emphasizes consulting with the Benefits Center to understand the specific impacts.

In what ways can employees of Sonoco Products Company calculate their required service years to determine pension eligibility, and what nuances exist in the vesting and benefit service calculations? How do these calculations affect the retirement planning process for long-term employees?

Vesting Service: Determines eligibility for a pension. A minimum of five years is required for a vested pension benefit. Benefit Service: Used to calculate the amount of pension. It includes periods of employment but may exclude certain leaves or breaks in service. Implications: Understanding these definitions helps employees plan their career and retirement timing to maximize benefits.

Employees at Sonoco Products Company are often curious about the various forms of payment they can choose for their pension. What are the available options, and how do these options differ in terms of financial implications for the retiree and their beneficiaries?

Options: Single life annuity, joint and survivor annuities (50%, 75%, 100% survivor benefits). Financial Implications: Each option impacts the monthly benefit amount and the security it provides to beneficiaries, necessitating careful consideration based on marital status and financial needs.

Understanding the process of applying for plan benefits can be complex for many employees. What are the specific steps that Sonoco Products Company employees need to follow to apply for their pension benefits, and what resources are available to help streamline this process?

Process: Initiated via Sonoco Benefits Center, involving choosing a retirement date, understanding benefit options, and completing necessary paperwork. Resources: Detailed support through retirement specialists aids in navigating the process smoothly.

Many employees may not be aware of their rights under ERISA as participants in the Sonoco Pension Plan. What specific rights and protections do employees have, and how can they assert these rights if there are disputes or issues regarding their pension benefits at Sonoco Products Company?

Provides specific rights regarding plan information, appeal processes for denied claims, and protections against plan abuses. Asserting Rights: Outlines steps to take if there are disputes over pension benefits, including the right to sue after exhausting administrative remedies.

If a Sonoco Products Company employee experiences a significant life change, such as divorce or a domestic relations order, what procedures must they follow regarding their pension benefits, and how does Sonoco manage such situations under the guidelines laid out in the plan documentation?

Procedures: Employees must follow specific procedures for dividing pension benefits in the event of divorce, under a Qualified Domestic Relations Order (QDRO). Management: Sonoco’s Benefits Center provides guidance and necessary documentation to ensure compliance with legal requirements.

For employees looking to learn more about their retirement options and benefits at Sonoco Products Company, what contact information is available for them to reach out for assistance? How can employees utilize these resources effectively to gain a clearer understanding of their retirement planning?

Available through the Sonoco Benefits Center, offering comprehensive support for retirement planning and benefit queries, essential for effective retirement planning.