Retirement. This word can provide a range of emotions for most people. While some prepare themselves for a smooth transition towards retirement, others find themselves stressing and scrambling to provide a hopeful future for themselves.
While there are many options for retirement, one stands out for California residents and business owners.
CalSavers is California’s state-managed retirement savings program designed for private-sector employees who currently do not have access to a workplace retirement plan. Employers with one-four employees have until Dec. 31, 2025, to register in CalSavers. According to CalSavers, “Businesses that do not employ any individuals other than the owners are exempt from the expansion of the mandate.”
The State Treasurer started to send emails in March based upon businesses with active EDD Employer Payroll Tax Accounts. These emails assign a unique access code to login to the CalSavers website to either register or apply for an exemption.
Employers that do not offer their own retirement plan must register in CalSavers. Sponsoring a qualified retirement plan, such as a 401(k) or SIMPLE IRA among other plans, will exempt a business from needing to register.
Start Planning for Your Retirement Today
You work hard to earn your income—now let your money work for you. Social Security alone may not provide enough funds for a comfortable retirement. Even modest savings now can grow significantly over time.
Example: Contributing $125 per month from age 24 could potentially grow to around $250,000 by age 65.
How to Manage your Retirement
For most people, 33% of their retirement will come from Social Security while the remaining 67% will come from Personal Assets and Workplace Retirement (such as CalSavers). Here’s some tips to control your account and make the most out of that 67%:
- Customize your account settings to best fit your goals & needs.
- Select from a menu of investment options that you feel great about.
- Set up automatic contributions from your bank account to streamline investing.
- Only make withdrawals when there are no penalties involved.
- Choose what to opt in or what to opt out based on what you find important
Standard Savings Choices with CalSavers
Your account will be a Roth IRA. Contributions into a Roth IRA are made after-tax so you don’t pay taxes on your contributions when you make a withdrawal. Any earnings on those contributions could be tax-free if you meet certain IRS criteria. You also have the option to recharacterize your contributions to a Traditional IRA.
In a Traditional IRA, you generally contribute on a pre-tax basis, depending on your income. When you withdraw money from a Traditional IRA, you generally pay taxes on money withdrawn.
The standard contribution savings rate is a set a 5%. However, you can change it at any time. Unless you choose a different rate, your contributions will automatically increase 1% annually until it reaches a maximum of 8%
Your initial contributions will be invested in the CalSavers Money Market Fund for 30 days. After this period, your existing savings and future contribution will be invested in a CalSavers Target Retirement Fund based on your age. You can decide at any time whether to keep your investment in this fund or choose from a simple menu of other investment options, including an environmentally and socially conscious fund, a bond fund, or a global equity fund.
Getting started through your employer. CalSavers is now open for employer registration and employee enrollment. If your employer does not offer a workplace retirement plan, they must register for CalSavers by certain deadlines. When an employer registers, they must submit their roster of eligible employees to CalSavers. Added employees will then receive a notification from CalSavers and will have 30 days to decide to customize their account, opt out of the program, or be automatically enrolled with the standard savings choices. Paycheck contributions will begin after this 30-day period.
Make it Stress Free
Setting up, optimizing, and managing a CalSavers account can be challenging especially if this is all brand new to you. Most California residents and business owners consult with a financial profession to ensure that every retirement account is catered their specific goals and needs. This way you not only have a retirement plan, but instead you feel thrilled about it!
Here’s what to look for when working with a financial professional:
- Initial Setup of CalSavers account
- Uploading the initial employee roster
- Integrate accounting software with CalSavers website
- Setting up accounting software Chart of Accounts
- Monthly/employee contributions submissions
- Enrolling of new hires
- Managing opt-outs and contributions changes.
Luckily, IQ-CPA is proficient in all of these areas! If you’d like to schedule a consultation maximize your retirement or simply to just setup your CalSavers account, you can book a time with the link below:
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Feel confident about your financial future and reap the benefits of a coordinated Retirement Plan. Your peace of mind is important and IQ-CPA makes it as stress free as possible!