Do you know anyone who doesn’t participate in his or her 401(k) plan at work? Perhaps it’s a family member or friend, or someone who just started working after college?

If you’re not sure, the perfect opportunity to bring up the subject is now, in celebration of National 401(k) Day, Sept. 10.

Why would you pursue this dialogue?

Simple: You can make a difference.

It’s not that hard to motivate someone to start on a path toward financial security. Sharing some key information can create enough of an incentive for one to take action.

Here is my challenge to you: Use 401(k) Day to start a conversation. Though COVID-19 is still lurking, there is no better time than now ask two very simple questions:

1) Do you have access to a 401(k) at work?

2) If you are not participating, what’s the reason?

In my experience, the reason could be based on misinformation.

1) Could people not realize that Social Security retirement benefits don’t cover all costs? (Social Security is a safety net, not intended to fully cover one’s living expenses in retirement.)

2) Could someone be holding off because he or she can’t afford to contribute? (In many cases, tax savings on pre-tax contributions and refiguring your W-4 withholding can solve that problem.)

3) Could one fail to understand that time is the single most important driver behind creating a retirement nest egg? (Starting to save and invest for retirement as early as possible maximizes the math of compounding. More on this in a moment.)

4) Could someone fail to realize that they are missing out on employer matching contributions that other employees are receiving? (Many 401(k) plans offer matching or profit-sharing contributions. According to FINRA, the Financial Industry Regulatory Authority, the most common employer match is dollar-for-dollar up to 3% of salary. You’ll want to make sure you are contributing enough to trigger the full company 401(k) match; the match is a tax-free bonus you need to claim.)

A 401(k) participant, a teacher who figured all of this out, offered this perspective:

“I’ve been told by the younger teachers that they can’t afford to contribute, and I always reply that they can’t NOT afford to! They are throwing money away if they don’t start with at least the (amount) needed to maximize the employer match. I wish someone had had this talk with me when I was much younger.”

This 401(k) participant was one of last year’s winners of the annual 401(k) Champion® Award (sponsored by yours truly). In case your circle of friends and relatives includes 401(k) fans, you can nominate them for the 2021 title of 401(k) Champion® here: 401kchampion.com. Nominations are now open, as of 401(k) Day.

Before leaving this subject, here are a few resources from FINRA.

On the topic of compounding, read about starting early (“The Time Is Now” at tinyurl.com/2aabdrvp). Importantly, this resource also includes a 401(k) case study.

To assess future needs, use FINRA’s “Retirement Calculator” at tinyurl.com/3e3wxvxs.

Another resource is FINRA’s 401(k) “Save the Max Calculator” at tinyurl.com/23brve6r. You can use it to determine how much you should save per paycheck to reach the yearly maximum amount allowed for an employee’s elective deferral.

Also look at the IRS site that provides information on limits on 401(k) contributions at tinyurl.com/38x2eb3b.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Hate homework? How about 20 minutes of homework to check the background of the financial professional you want to hire? Here’s how.

Start with BrokerCheck (brokercheck.finra.org), a free tool from FINRA (the Financial Industry Regulatory Authority). As you can guess from the name, FINRA regulates the brokerage industry.

On BrokerCheck, select the “individual” tab. Enter the person’s name. If too many results come up (there are 29 pages of John Smiths), you can narrow the search by inserting the name of the firm he or she works for.

When the search result is displayed, the top part of the page will include the person’s name, CRD number, the firm he or she works for and the firm’s CRD number. The CRD (Central Registration Depository) number is a unique identifier issued by FINRA.

If you see a light-blue circle with the letter “B,” that indicates a person is a “broker,” someone who works for a broker-dealer. A dark-blue circle with an “IA” indicates the person works for an investment adviser. If both circles appear, it means the person works for a “dual registrant,” a firm registered as both a broker-dealer and an investment adviser.

These terms define the rules the individual must live by when dealing with customers. (Two different sets of laws apply -- the subject of a future column.)

Next, you’ll find four boxes. There are sections on “Years of Experience,” “Licenses” and “Examinations,” all of which provide important background details about the person when you click on each individual box.

From my perspective, perhaps the most important box is “Disclosures.” If the box is gold, that means there have been “customer complaints or arbitrations, regulatory actions, employment terminations, bankruptcy filings and certain civil or criminal proceedings that they were a part of,” according to the BrokerCheck site.

Clicking on the gold box will give you more details about the disclosures, including the date, type and disposition of each issue. For additional information, select the “Detailed Report” link above the company name on the right side of the page.

You also can find out information about the firm that employs the broker by selecting the “Firm” tab at the top. This time, you can enter the company’s name or its CRD number, both found at the top right of the individual’s report.

The results screen looks like the individual’s screen, although only the first colored box, the one for disclosures, is identical. Again, that box is likely the one you will be most interested in.

For a firm, the “Disclosures” category shows a total number, with a breakdown by type (regulatory event, civil event, arbitration). Again, the “Detailed Report” link is available for additional information on each disclosure.

There is one other important piece of information to review: At the top of the page, by the firm’s main address, is a blue button titled “Relationship Summary.” Selecting that will take you to the firm’s CRS (Customer or Client Relationship Summary), a key disclosure document required in 2020 by the U.S. Securities and Exchange Commission.

I am a supporter of the CRS -- if only more people were aware of it. The CRS is a two-page (four pages for dual registrants) document that allows someone to quickly compare and contrast firms. That includes a discussion of conflicts that are a part of the way the firm does business, which gives you a sense of the culture of the firm. Clearly, the CRS is worth your time when you are looking for a financial professional or reviewing your current one.

Yes, this involves doing 20 minutes of homework on your part. But it’s your money at stake, and if someone is giving you recommendations about investments, isn’t it a good idea to know who you are dealing with, and the company behind him or her? BrokerCheck and the CRS provide a good starting point.

On another note, as I mentioned in a previous column, I’m considering starting a “regular reader” email list to get your views on different topics through short surveys. If you are interested, write to me at readers@juliejason.com.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Younger people have become an attractive market for investment firms. The ease of buying stocks by the slice (fractional shares) and mobile apps are reasons for those new to investing to become involved, ready or not.

The issue of preparedness is important enough that FINRA (the Financial Industry Regulatory Authority, which regulates brokerage firms) launched a $30 million initiative this year to “explore innovative ways to reach and educate investors, especially new, self-directed retail investors who conduct transactions through online accounts or using mobile apps,” something I wrote about in July (“Beginning Today, You Can Help the Investors of Tomorrow”).

So, when Fidelity announced earlier this year that it had created the Fidelity Youth Account, “the industry’s first brokerage account designed exclusively for 13- to 17-year-old teens” (tinyurl.com/79cf4e8), I had some questions. But, I also saw some opportunities for parents to get involved.

As a proponent of financial literacy, I thought it was an interesting way to introduce the next generation of investors to the ins and outs of the stock market -- provided there were guidelines, oversight and educational opportunities, things most parents would want as part of the endeavor.

Fidelity’s FAQs (tinyurl.com/3aa4pftm) address a number of those issues.

Who owns the account? The Youth Account “is a teen-owned brokerage account. It is owned by the minor, who makes all the investment decisions.” This makes it different from a custodial account, where the adult custodian, likely a parent or grandparent, makes investment decisions on the behalf of a minor.

With Fidelity’s programs, parents are involved, but not in charge. Parents approve the opening of the account and can close it at any time. They also have “inquiry access,” which means they can review trade confirmations and transactions, including withdrawals using the debit card that comes with the account.

Kids aren’t flying solo, however. Parents are “obligated to provide supervision/oversight and to be responsible for [their] teen’s actions.” And, parents are designated as “trusted contacts,” which Fidelity describes as “someone we can get in touch with in the event we're concerned about your health, well-being or welfare (due to exploitation, endangerment or neglect)” (tinyurl.com/2999snrv). If you are thinking about going this route, be sure to read the “Fidelity Youth Account Parent Agreement” (tinyurl.com/yn49f2he).

Is there a minimum balance? No. You can start with $1. Are there upper limits? Fidelity recommends that deposits “be limited to no more than $30,000 per calendar year,” a total that is associated with the IRS gift tax policy, according to a Fidelity spokesperson. The annual gift-tax exclusion for a donor is $15,000 per recipient in 2021.

Are there limits on investments? Yes. The account is limited to most exchange-listed National Market System securities (including fractional shares) and shares of Fidelity mutual funds.

Not available are options and margin trading, international stocks, foreign currencies, the initial public offering (IPO) of a company and cryptocurrencies.

Are there limits on the debit card? The debit card has daily spending limits for transactions and cash withdrawals, with the limits listed on the Fidelity debit card page. Although a debit card is automatically created when the account is opened, a parent/guardian or teen can choose to deactivate it by contacting Fidelity.

What happens when the child reaches 18? When the teen reaches the age of legal adulthood, the account can transition to a standard brokerage account. New account paperwork will need to be signed, but no account transfers will need to be made.

What about financial education? Fidelity’s Youth Learning Center (tinyurl.com/3enmhhze) was created “to help teens learn good financial habits.” The topics include “Setting goals and planning,” “Saving and budgeting” and “Investing basics.”

This is an interesting opportunity for teens and parents to enter the world of investing together. Important lessons can be learned, and a foundation of good financial sense can be forged, especially if parents are involved in mentoring. I’d say it’s definitely worth a look.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION