Financial security refers to having the assurance that you can cover your expenses and be resilient during a financial crisis. This involves spending less than you earn, maintaining healthy debt management practices, and building savings accounts.
Financial wellness can help reduce stress, improve health and ease mind. To get there, start with setting a budget then follow these steps:
Payroll Deduction
Payroll deductions are amounts taken out of an employee’s paycheck for mandatory expenses such as taxes or garnishments, or voluntary benefits like retirement savings plans and health insurance contributions. Their amount and types vary based on company policies, state/local laws, withholding allowances of employees, as well as tax tables provided by the IRS to determine how much is withheld from certain deductions.
Many payroll deductions are conducted using pre-tax dollars, helping employees reduce their income tax burden. After deductions have been taken out, their net or take-home pay will remain unaffected. All payroll deductions should always be documented on an employee’s pay stub with details such as amount per paycheck taken and purpose of each deduction taken. A written authorization stating name, date and amount taken needs to be secured before taking place.
Many businesses utilize payroll deduction plans as a means of providing employee benefits and investments, including retirement and health insurance premiums as well as investment accounts such as traditional or Roth Individual Retirement Accounts (IRA). Employees may also choose to participate in employer stock purchase plans where part of each paycheck goes toward purchasing shares of common stock at discounted prices.
Mandatory payroll deductions include those required by law, like federal income and FICA taxes, withholding allowances, number of dependents and eligibility for medical flexible spending accounts (FSAs). Other mandatory deductions could include child or alimony support payments as well as court ordered debt payments or expenses such as uniforms and tools.
Voluntary payroll deductions can be set up for TSP loans, TreasuryDirect savings accounts, Combined Federal Campaign contributions and union dues. The payroll office facilitates these deductions via allotments of pay that require written authorisation from employees. When initiating TreasuryDirect deductions an allotment is not enough; you will also require an Instruction letter/SF-1199-A form as a minimum requirement.
Paid Time Off
PTO (paid time off) allows employees to take days off work while being paid; it provides them with a valuable work-life balance benefit, particularly if they need more time for personal matters such as caring for loved ones or personal matters. While PTO may not be legally required in every state, offering this benefit can attract and retain top talent.
Many businesses utilize various forms of paid leave, including vacation, sick and bereavement leave. Employers may either allow employees to accrue a set amount for each type of leave over time or allot a fixed number each year that resets on an event like January 1st or an employee’s hire date. They may also implement policies combining paid time off (PTO) with floating holidays so employees have some control over how their time off should be used.
The three primary forms of paid leave include sick, bereavement and vacation leave. Sick leave typically refers to health-related matters when an employee falls ill or becomes injured; bereavement leave can be used after the death of a family member or close friend and while most employers only allow employees a limited number of paid days off in this regard, some companies allow more generous policies regarding bereavement leave for employees who need extra time off during bereavements.
Vacation leave is one of the most sought-after types of paid leave, providing employees with an opportunity to rest and recharge during a set period of time. While employees may feel guilty using up all their vacation time, studies have proven that those who fail to use PTO become less productive at work.
Giving employees access to enough PTO can both boost morale and retention rates. Turnover can be costly for businesses, from the costs associated with advertising and interviewing candidates through to lost productivity during training – offering generous PTO packages is a great way to show that you value their contributions to your organization.
Management of multiple leave and pay types can be an administrative hassle for HR teams, but Freshteam provides user-friendly software to create policies and workflows for all your benefits.
Retirement Benefits
Learn the fundamentals of saving for retirement, such as 401(k) plans and individual retirement accounts (IRA or Keogh). Also discover what savings vehicles are available to employers and how these differ from defined benefit or cash balance plans.
An essential aspect of retirement planning is understanding how your earnings impact Social Security benefits. Learn about how bonuses, vacation pay and commissions count toward your Social Security earnings limit as well as how working after retirement might alter benefit payments. Furthermore, find out whether special payments from employers such as severance pay or lump-sum death payments might alter those benefits as well.
In 2021, the SIPP included new questions on ownership of 401(k)-style and Keogh accounts as well as employee and employer contributions to such accounts. According to its results, baby boomers are most likely to own retirement accounts while men as well as non-Hispanic white and Asian individuals are most likely to contribute money into them.
Many private-sector employees benefit from defined benefit plans that guarantee monthly benefits at retirement based on salary history and length of service, making these plans particularly popular among large employers and public agencies. If you have questions or are searching for missing pensions, the Pension Benefit Guaranty Corporation provides answers as well as search directories that can assist in their management.
California public-sector employees have two retirement benefit programs to choose from. The CalSTRS Defined Benefit Program features a formula to calculate retirement benefits based on service credit, an age factor and final compensation accumulated over years and partial years worked, or “creditable activities.” Your final compensation reflects average annual earnings over 12 or 36 consecutive months.
Your retirement benefit application window spans between the month you turn 62 and your full retirement age (66 to 67). Benefit payments increase the later you submit it; at full retirement age it reaches its highest value possible. After reaching full retirement age you can continue working – though any earnings above certain earnings thresholds could eat away at your benefit payments.