Monday, October 7, 2013

How to Get Your 401(k) Ready for Retirement / Here's a six-step plan for investors within 10 years of leaving the workforce

Michael A Pollack for the Wall St Journal writes:  While employer-sponsored savings plans such as 401(k)s usually are a great place to stash money during most of your working years, they may not be as great if you're getting ready to call it quits.
Although plans are broadening their menus of investment options, many are still heavy on stock funds and don't offer many conservative choices to preserve wealth. That is critical after a multiyear run-up for stocks and at a time when traditional bond investments are looking quite risky, too.
What to do? Here's a six-step plan to address your 401(k) if you're within, say, 10 years of retirement:

1: If you haven't done it lately, review your 401(k) investment mix.
Typically after people enroll in employer-sponsored plans and make initial investment choices, they forget about how their money is allocated in the plan—sometimes for years. In the interim, a portfolio may become heavily skewed toward stocks. "As you approach retirement, you want to become more diversified and more risk-averse," says Donna Norwood, a senior executive in Fidelity Investments' defined-contribution business.
Peter & Maria Hoey
Unsure where to start? Take a look at target-date funds, which are widely available but not always used. A Vanguard Group survey found that although 84% of the plans it manages offered target-date funds at the end of last year, only about half of plan participants owned them.
Target-date funds are managed to gradually shift money from stocks to other types of assets as fund holders approach their expected retirement dates. For example, a fund with a 2055 retirement target date may hold more than 80% of its money in stocks, while one dated 2015 likely has reduced its equity allocation closer to 50%.
For pre-retirees, if a fund dated 2015 or 2020 has more stock exposure than you feel comfortable with, pick one with a date that has already passed, such as a 2010 target-date fund. It probably holds a larger portion of bonds and other assets that typically don't move in sync with stocks.

2.: Beware of the rate sensitivity of fixed-income funds you own in your 401(k).
Bonds traditionally were the safe-haven choice for near-retirees, and many 401(k) plans long have offered an intermediate-maturity bond fund as an option.
But yields have risen in reaction to expected changes in Federal Reserve policy, and medium- and longer-maturity bonds pose more risk than ever. Bond prices and yields move inversely, and as rates rise, bonds and bond mutual funds can lose principal value.
How much? A fund that focuses on intermediate maturities might have an interest-rate sensitivity, or so-called duration, of around five years. Using basic bond math, if rates were to rise broadly by one percentage point, that fund's principal value could drop by as much as 5%.
Richard Jackson, a Dallas-based principal at advisory firm Schlindwein Associates LLC, suggests aiming for an average rate sensitivity of less than three years in any bond funds. He believes interest rates are headed higher, and when that occurs, people who own longer-maturity bonds "could experience more pain than they expect."
Shift some money into a short-maturity fund if one is available. Or reduce the overall rate sensitivity of your fixed-income holdings by mixing a bond fund with a money-market fund or stable-value fund. While money funds pay near-0% yields today, rates will rise quickly if and when short-term rates in the marketplace climb. Stable-value funds, which provide for guaranteed return of principal, may pay annualized rates ranging from more than 1.5% to 3%, says Anton Bayer, principal of Up Capital Management Inc., Granite Bay, Calif.

3: Look for greater variety within your 401(k).
When advisers construct portfolios for clients, they often include a mix of U.S. and international stocks, multiple types of bond exposure and, increasingly, "alternative" investments such as commodities and a variety of hedge-fund-like strategies.
Check the lineup of funds in your 401(k) for offerings that might possibly zig when conventional stocks and bonds zag. For example, a fund that holds real-estate securities or Treasury inflation-protected securities might make sense as a small holding that helps round out your portfolio.
Also, look inside any target-date funds your plan offers. In recent years, fund companies have added some more varied fare inside those all-in-one funds, and that could be a reason to use one.

4: Use IRAs and other accounts to complement your 401(k).
If you've switched jobs, you may still have a significant amount of money in a past employer's 401(k) or in an IRA to which you transferred those savings. IRAs can be particularly handy in providing access to types of assets that aren't available in your 401(k).
"If there aren't good fixed-income options inside your plan, you might hold all of your equity exposure there, while having all of your fixed-income allocation outside it," says Mark VandeVelde, a partner at Hefty Wealth Partners, Auburn, Ind. For example, you might use an IRA to own a "strategic income" fund, a type of fund that can invest in any area of the bond market and shift its investment holdings to limit rate risk, he says.
You may even be able to transfer some dollars from your current 401(k) to an IRA before you retire. Many plans permit withdrawals—sometimes called "in-service distributions"—usually after age 59½, though you may be able to withdraw funds at 55 if you have left a job. You might be able to roll those dollars into a new IRA without having to pay tax or any penalty, but any withdrawals should be planned carefully to avoid unintended tax consequences, advisers caution.
One trade-off for the greater investing variety of an IRA: Mutual-fund fees may be higher than the fees on the institutional-class fund shares offered in larger 401(k)s.
"Make sure you look at the big picture and that every investment, regardless of where you hold it, adds up to the overall allocation you want," Mr. VandeVelde cautions.

5: Check whether your 401(k) plan includes a brokerage window, or self-directed account.
A self-directed brokerage window is an account within a 401(k) plan that allows the user to trade virtually anything that can be traded, including individual stocks and low-cost exchange-traded funds, which aren't widely available as investment options in workplace-savings accounts. This is another avenue to add different types of investments to your portfolio, including alternative funds.
There are, however, extra fees associated with using these brokerage accounts. There's also the temptation to speculate on hot stocks with your hard-won retirement savings—which is one reason why some plan sponsors don't offer this option.
Brokerage windows are available in about a third of Fidelity-managed plans and 60% of the plans overseen by the retirement-plan-services unit of Charles Schwab Corp.SCHW +2.03% Despite the potential for abuse, most people who tap that option in Fidelity-managed plans are more savvy investors who understand how to use it effectively, says Fidelity's Ms. Norwood.

6: Consider getting professional advice.
At both Fidelity and Vanguard, you may be able to get a complete financial plan at no charge.
Fidelity representatives will coach plan participants without charge on using its Web-based tools to create a plan, either by phone or at its walk-in investment centers.
Participants in Vanguard-run plans can get financial-planning assistance at no charge if they are 55 or older and if their employer has contracted for the option.
Typically such financial plans take into account all of the assets an investor owns, including those outside of a 401(k) plan, as well as the investor's financial circumstances. It is important to also consider things such as how long the investor plans to work and how much people have saved ahead of retirement, says Catherine Gordon, head of the institutional research and advice team of Vanguard Investment Strategy Group.
Some plan sponsors enable participants to get custom advice for an additional fee—sometimes ranging from about 0.5% to 0.75% of assets annually—from an advisory service such as Financial Engines Inc. FNGN +3.28% or GuidedChoice Inc. Hiring your own adviser or planner is another option.
Advice may be worth the cost as you enter that final stretch of retirement investing, when it is particularly important to hold on to what you've saved.
Retirement saving "is kind of like flying—the most dangerous parts are the takeoff and landing," says William Simon, a managing director at investment firm Brinker Capital, Berwyn, Pa.
Posted on 8:08 AM | Categories:

QuickBooks Support Slashed, Intuit Deathwatch 6 ( 6th in the series of articles)

Mike Block of Quickbooks-Xero Blog writes: Get ready for extra long waits for QuickBooks phone support. We now know Intuit QuickBooks support was slashed, resulting in this Intuit Deathwatch 6.
NillaKig commented:
Intuit laid off just over 350 employees this past July, including about 1/3 of the support team, so be prepared long waits if you plan to call them.
WOW!
So much for Intuit's recent supposed dedication to professional accountants. We heard that often before. It was never true. I do not yet know how many slashed were QuickBooks ProAdvisor, tax or regular QuickBooks support techs. However, regular QuickBooks support is in India and tax support jobs rarely involve July cuts. I also know NillaKig's approximate location, so the QuickBooks support slashed  is ProAdvisor support.
These were the only Intuit support people who knew QuickBooks. Other Intuit QuickBooks support is in India, even for QuickBooks Enterprise. I have very good inexpensive remote assistants, including CPAs (Chartered Accountants), in India, Pakistan, Indonesia, the Philippines, Texas and Arkansas. Therefore, I am not deriding QuickBooks support because it is in India. I deride it because no Intuit Indian support people need know (and usually do not know) QuickBooks.
 I initially shrugged off long ProAdvisor support waits. However, today I got a hang up after being told to call after 3 PM Pacific time when it was after 3 PM Pacific. We can expect terrible waits from late December throught January or later. That is sure to turn off many professional accountants, which Intuit needs to stop big QuickBooks user losses. QuickBooks desktop lost 17% of users and QuickBooks add-ons lost 70% of Google web links in 21 months. Many important QuickBooks and CPA firm consultants were with me at a recent San Francisco Xero show. Most seemed ready to move many clients to Xero, so this is Intiuit Deathwatch 6. 
Intuit lost $320 million (50%+ of 2012 after tax net income) when it sold part of its financial and medicical service divisions. It is selling these divisions like it sold its web site, real estate, Quicken Loans and other divisions. Intuit will use the $1 billion of division sales proceeds, plus other amounts, for $2.43 in billion stock buybacks. Prior buybacks ($4 billion) were more than cumulative earnings (since 1983). The $2.43 billion is more than 2012 adjusted net capital (adjusted for the financial service loss) or four times net 2012 income. Stock buybacks mainly benefit insiders, who sold $4 billion of stock in four years, buying only option stock.This means Intuit is already effectively liquidating. This adds many more reasons to my 15 Reasons Why QuickBooks is the Worst Place for Your Data.
We now see near daily evidence that the 40 year old Intuit Titanic is not keeping up with Xero and is sinking fast. The next Intuit Deathwatch 7 involves Quicken, which already has har less users than it once did. 

Posted on 8:08 AM | Categories:

10 Questions to Ask When Choosing an Online Payroll Provider

 KIM LACHANCE SHANDROW  for Entrepreneur writes: The use of traditional, painstakingly manual payroll systems are on the decline, and for good reason -- they're repetitive, complicated and prone to human error.


If you're tired of slogging your way through payroll by hand, it might be time pass the tedious task off to an automated online service. Switching to a cloud-based payroll solution can reduce costs, minimize mistakes and free you up to focus on growing your business, says Joshua Reeves, co-founder and chief executive of ZenPayroll, a cloud-based payroll solution provider headquartered out of San Francisco.
Here are 10 essential questions to ask when shopping for the right online payroll provider for your company's needs:
1. What specific payroll services do you provide? 
There are more than a dozen cloud-based payroll services to choose from, with additional providers arriving on the market relatively often. To choose a service that's a strong fit for your company, identify your specific payroll requirements and search for a vendor that delivers everything you need.
Most of the leading cloud-based payroll providers, including Intuit QuickBooksADPPAYCHEX and ZenPayroll, for example, provide an array of automated online payroll services, complete with access to a range of customized, one-click accounting reports.
A reputable, full-service vendor should provide the following:
  • Pay hourly, salary and contract employees via direct deposit. Some vendors enable you to print paychecks on site as well. Others, including PAYCHEX and ProPayroll, can also mail printed checks to you.
  • Handle new employee reporting.
  • Track paid time off (PTO) accrual and use, including vacation and sick days.
  • File accuracy-guaranteed payroll taxes.
  • Deduct benefits, including health and insurance benefits.
  • Deduct 401(k), Flexible Spending Account (FSA), Individual Retirement Account (IRA) and Health Savings Account (HSA) contributions.
  • Handle various earnings and deductions, like bonuses, reimbursements, commission, tips and garnishments.
2. What is your pricing structure? 
The majority of online payroll providers charge a base monthly subscription fee, which can generally range between approximately $12 per month to upwards of $200 per month, depending on the breadth of services you opt for. On top of your monthly fee, you can also expect to pay anywhere between $1.50 and $5 per month per employee.
Several providers offer free trials, which typically range from one to two months in duration. That way you can test-drive the service before committing your hard-earned cash.
3. How will I get set up? 
Once you decide on and sign up with an online payroll vendor, you should be able to immediately log in to your user dashboard, configure your account, and add employees and users. You should also have the ability to access your account and run payroll from any internet-enabled device, including your laptop, tablet or smartphone.
4. How does your service handle payroll taxes? 
In addition to payroll processing services, a good online payroll service should also handle all of your payroll tax compliance needs accurately and on time, Reeves says. That includes federal and state income and unemployment tax and state unemployment insurance.
The vendor should also process your year-end 1099 and W-2 forms for your employees.
Reeves cautions that business owners should be "wary of providers that charge extra fees for calculating, paying and filing your payroll taxes or require you to go into their applications to do all of these actions on your own."
Instead, he suggests seeking out a full-service provider that can take care of all of your government tax compliance requirements, including state and federal tax payments, quarterly and annual filings -- automatically and paperlessly -- with no actions required on your end.
5. How secure is your service? 
Being completely confident that your company's private accounting information stays out of the hands of hackers is paramount when it comes to storing your sensitive, critical payroll data in the cloud. You'll want to verify that vendors keep data safe using the highest encryption standards available, including something called 256-bit Advanced Encryption Standard encryption, which helps defend against login and password theft.

Most modern online payroll solutions leverage the same security technology that online banking services use, Reeves says. All of your account information, including passwords, social security numbers and personally identifiable information should also be protected by firewalls and two-factor authentication. Additionally, it should be continuously backed up to multiple secure locations throughout the day, every day to ensure that your information is available no matter what.
6. Where is your data center and how safe is it? 
It's important to know how a potential online payroll provider protects its data centers -- which will hold your sensitive financial information -- from break-ins and natural disasters.
They should have multiple layers of security, including biometric scanning for controlled access, as well as keycard, retina scan and PIN number restrictions. Also, security cameras should monitor all of the provider's locations around-the-clock, along with onsite staff to protect against unauthorized entry.
7. What customer support services do you offer? 
Business owners should expect live, real-person support via email, phone and chat, in addition to detailed online FAQs and tutorials, Reeves says. If you expect 24/7 customer service, even on holidays, be sure to ask if the vendor can accommodate that.
However, if you're calling a support line on a regular basis, then that means the product is not doing its job, Reeves warns. "If you choose an online payroll solution that's designed to be simple and has an easy-to-use interface, payroll should just work."
8. Will my employees and contractors be able to access their payroll information? 
They absolutely should be able to, without exception. Online payroll providers usually give employees and contractors personal portals where they can access their pay stubs, Reeves says.
ZenPayroll, for example, offers employees self-onboarding, lifetime employee accounts so they can access their pay details forever, and the ability to edit their own employee details.
9. Will I be able to integrate my existing accounting systems with yours? 
Most online payroll solutions should quickly, seamlessly integrate with today's most widely used small-business accounting software systems, such as Sage 50Xero  and Quicken.
You should be able to connect your existing accounting software directly from your online payroll provider's user dashboard. Once it's integrated, you won't have to manually enter or reconcile payroll again.
10. Can your service scale up to meet my business needs? 
Your payroll needs will grow proportionate to your business and staff growth, so you'll want to make sure that your online payroll vendor offers the ability to add additional users and employees to your account.
To ensure that the vendor can handle your needs over the long haul, ask which added services can be offered over time and for how much.

Posted on 8:07 AM | Categories: