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When Should You Stop Contributing to Your 401(k) Plan?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Unexpected personal expenses can disrupt your budget, and too much credit card spending can push your debt balance into the red — at times like these, you might consider pausing contributions to your 401(k). Although saving for retirement should always be one of your core financial goals, there are times when you may need to stop contributing to your 401(k) retirement plan. Read on, and we’ll review them all.

When your employer doesn’t offer matching 401(k) contributions

One of the biggest benefits offered by the 401(k) is matching contributions. With matching contributions, your employer matches the money you deposit in your 401(k) dollar-for-dollar, up to a certain threshold. This helps turbocharge your retirement savings at no extra cost to you.

However, not all employers offer matching contributions. You can still contribute to your 401(k) even if your employer doesn’t offer a match, but a lack of matching contributions might make you consider other retirement savings options, such as an individual retirement account (IRA), depending on your savings goals.

When your 401(k) fees are too high

If your employer doesn’t offer matching contributions, a good way to gauge whether the 401(k) plan is a good choice for your retirement savings is to look at the fees. If the fees charged by your employer’s 401(k) plan are higher than you like, consider other retirement savings options.

Fees charged by 401(k) plans fall into three broad categories: investment fees, 12b-1 fees and administrative fees.

  • Investment fees: These fees cover the cost of managing the investments and are disclosed in mutual fund or ETF prospectuses. Some funds charge a load fee, which is an industry term for a sales charge or commission. This can be charged up front, in which case it is called a front-end load. Or, it may be paid when the shares are sold, known as a back-end load or redemption fee.
  • 12b-1 fees: This is a type of investment fee, named after the Securities and Exchange Commission (SEC) rule requiring its disclosure. This fee covers a mutual fund’s marketing and distribution costs, and broker commissions. Some mutual funds charge a 12b-1 fee in place of a load fee.
  • Administrative and service fees: Typically charged as flat fees, these cover the costs of administering the plan, or special add-on costs for 401(k) loans or hardship withdrawals. Administrative fees run to a few hundred dollars per participant, per year. They may not always be disclosed.

Total fees charged on your 401(k) can range from 10 basis points to 2% to 3%. You pay the plan administrator these fees out of your investment balance, and while a few percentage points a year may not sound like much, these fees add up over the life of your 401(k).

Imagine a 29-year-old investor who contributes $19,500 per year to her company’s 401(k) and plans to retire at age 65. Her current 401(k) balance is $100,000, and fees are 3%. Just by switching to a plan that cuts fees in half, to 1.5%, she could save $845,569 by the time she retires. Instead of having $1.9 million upon retirement, she could have more than $2.7 million.

Check out the fee calculator we used to find out just how much your fees are costing you
Remember, even if your 401(k) has high fees, an employer match is still worth considering. Many times, the match will more than cover the fees.

When you have too much debt

While it’s always possible to both pay down debt and make 401(k) contributions, large debt loads charging high interest rates may require more budgetary attention. Very high APRs from your credit card issuers or a debt-to-income ratio that’s too high may mean you should prioritize paying off debt ahead of saving for retirement.

The key thing to consider is how much you’re paying in interest on your debt compared to the returns you’re getting on your investments. If you’re paying an APR of 15% to 20% to a credit card company but you’re only seeing an annual return of 5% to 8% on your 401(k) investments, you may be losing money. That said, pausing contributions to accelerate your debt payoff means you’ll need to play catch-up on your retirement savings later.

When your expenses are too high

Sometimes life gets in the way of your financial goals, especially when emergency spending disrupts your budget. We always advise our readers to build a healthy emergency fund to be prepared for large, unexpected costs or major medical emergencies, but if your fund is low or non-existent, it might be time to hit pause on your 401(k) contributions.

Think hard about expenses that are high enough to make you consider pausing your 401(k) contributions. Can you meet them by cutting out other spending, or refining your budget? Our rule of thumb for when to dip into your emergency fund holds good here as well: Ask yourself whether the expenses are unplanned and uncontrollable. Only true emergencies that are both unplanned and uncontrollable should require you to stop contributing to your 401(k).

When you retire from your job

The ultimate end point to your 401(k) contributions is when you stop working. Remember, 401(k) plans are sponsored by your employer, so when you retire and stop working, your days of making contributions to your 401(k) plan are over. However, this may not be the end of your retirement savings journey.

What happens when you stop contributing to your 401(k)?

Halting 401(k) contributions might be financially necessary, but you should keep in mind what you’re giving up in exchange.

  • You stop reducing your taxable income. Your 401(k) contributions are made with pre-tax dollars from your salary, lowering your taxable income. This can either bump up your refund or lessen what you owe. If you aren’t making contributions, you don’t have the opportunity to reduce your taxable income. This might mean your tax return won’t be as high next year or you could end up owing money.
  • You could miss out on employer 401(k) matching contributions. If your employer makes matching 401(k) contributions, you’re missing out on the extra 401(k) pay bump. Regardless of how much or little your employer contributes, you won’t get to take advantage of the free money from matching contributions.

Keep saving when you stop contributing to your 401(k)

If you stop contributing to your 401(k), that doesn’t mean you should stop saving altogether. Keep saving in these other accounts if you have the money to spare:

  • High-yield savings account: If you want to put money away but still have access to it right away, try a high-yield savings account. APYs for these types of accounts are much higher compared to regular savings accounts: sometimes as high as 2.00% versus 0.10%, respectively. This type of account is good for building up an emergency fund or other types of savings that you can immediately tap into.
  • Certificate of deposit (CD): If you have the chance to allow savings to grow for a set amount of time, try a CD. You’ll deposit your funds into an account but won’t have access to it for a set term — sometimes six months, sometimes two years. In that time, you could earn a higher yield compared to a regular savings account or high-yield savings account, depending on the amount you deposit and where you make your deposit.
  • Taxable investment account: If you want to try out investing and have some extra cash to do so, try an investment account. A brokerage account is good for hands-on investors, while a robo-advisor is a good fit for hands-off investors or those who don’t have the time or knowledge to buy individual securities.
  • Individual retirement account (IRA): Whether you go the traditional or Roth IRA route, you can put money away into a personal retirement account that isn’t tied to your job. While the contribution limit for IRAs is lower than it is for 401(k)s, you can still put money away for retirement without using your employer-sponsored plan. This is also a good idea if you eventually leave your job (or lose your job) and need to transfer funds from your 401(k) into an IRA.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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What Are Equities and Should I Invest in Them?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Equities are shares of ownership in a company. Equity is just another way to describe stock — you’ll hear people use the terms “equity markets” and “stock markets” interchangeably. Investing in equities can be one of the best ways to build your long-term savings. This article covers the basics of what are equities, how do they work and what else you should know about investing in this market.

Equities are how you invest in the stock market

The broad equities definition is the value of a property or a business to the owners after subtracting debts. When you buy a house and begin making mortgage payments, you build home equity, which is the value of your property that you own outright.

Publicly traded companies, like Nike and Tesla, sell shares of their equity to investors to raise money. When you buy a company’s equity — aka its stock — you become a partial owner of the company. This comes with several benefits, including dividends.

Equities pay dividends

As an equity shareholder in a company, you are entitled to a share of its profits based on how much of the company’s stock you own. Companies from time to time will send their shareholders a cash payment called a dividend. The frequency of it depends on the company’s strategy.

Newer growing companies like Uber typically do not pay much in dividends because they reinvest their cash in operations to keep growing. On the other hand, established companies like Coca-Cola focus on paying more dividends to shareholders. So how do you start buying equities as an investor?

The equity market

Investors buy and sell equities from each other through the equity market. When you watch financial news and hear people talking about stock markets, this is what they mean. Some of the larger equity markets in the United States include the New York Stock Exchange and the Nasdaq.

If investors believe a company is doing well and will earn higher profits in the future, the price of its equities will go up. On the other hand, when a company runs into financial trouble, the price of its equities will fall. To access the equity markets, you sign up for a broker who will process your buy and sell trades. We list some of the best online brokers on our site you can use.

Common equity vs. preferred equity

A company can sell two types of equity to investors: common and preferred. With common equity, you earn money when the stock price goes up and when the company issues dividends. You also get the right to vote on certain company matters, like picking the board of directors.

Preferred equity has a few differences. First, preferred stock typically pays a fixed dividend rate, so you get money each year. On common stock, the company can choose when to pay dividends and it might not be every year.

Another difference is if the company ends up going bankrupt, they legally have to pay out preferred equity shareholders first — before they distribute whatever’s left of their remaining money to common shareholders. The downside of preferred equity is that it does not have voting rights. It’s also rarer. While you may be able to buy preferred stock for some companies, most shares on equity markets are common equity.

Why should you invest in equities?

Equities can be one of the most effective ways to build wealth and save for retirement. Over the past few decades, they have posted one of the highest average annual returns, better than other investments like bonds or gold.

By regularly saving money and investing in equities, your savings will benefit from compounding, which is simply where your money makes money. A dollar you put aside now could double, triple and possibly become more valuable in the future thanks to your investment gains.

On the other hand, if you just kept your savings in cash or a bank account with no interest, they won’t grow. This actually decreases your future buying power because of inflation, as prices go up over time. By growing your money with equities, you put yourself in a stronger position in the future while also generating income for today with dividends.

Finally, you can receive tax benefits by investing in equities using a retirement plan, like a 401(k) or a traditional IRA. You can deduct the amount you contribute to these accounts. You save on taxes today while putting aside money for the future. These accounts also delay taxes on your gains, so you don’t owe tax until you take money out.

What is an equity fund?

As a beginner investor, it can feel intimidating figuring out which equities to buy. One way to make things easier is by buying into an equity fund, which is a mutual fund that invests in stocks. Equity funds are mutual funds that combine the money from many small investors to build a large portfolio of different equities. The portfolio is then managed by a professional to meet the fund goals. Some common types of equity funds include:

  • Index fund: Index funds look to mimic the performance of an equity market, like the S&P 500. Rather than trying to guess the top performers, they buy shares of all the companies listed to keep costs low and track the average market return.
  • Active equity fund: In an active equity fund, the manager tries to find and buy the best equity shares in a market to hopefully earn a higher return. Fees can be higher on these funds though versus index funds.
  • Growth equity fund: These funds invest in companies focused on growth, meaning they aren’t paying as much in dividends with the long-term goal to grow their stock price by more.
  • Dividend equity fund: In comparison, dividend equity funds focus more on companies that generate income. Their share price may not grow as much long-term, but they generate more consistent dividend payments.
  • Sector-focused equity fund: Equity funds can also target companies in a specific part of the economy, like energy companies or health care companies.

How does shareholders’ equity work?

Shareholders’ equity shows how much value would be left for a company’s shareholders if it used all its assets (everything it owns) to pay off everything it owes (debts/liabilities). If the company had to shut down today, they would distribute this remaining money to their shareholders.

When a company has high shareholders’ equity, it means that it has more than enough assets to cover its debts. This could be a sign that the company is profitable, shown by a high level of retained earnings on the balance sheet. On the other hand, it could also mean that the company has raised a lot of money from investors. However, if a company has negative shareholders’ equity, it is running into financial trouble because it doesn’t have enough assets to pay off its debts.

How to calculate shareholder equity

Publicly traded companies release their financial statements so investors can check their performance before buying. They list their total shareholders’ equity on the balance sheet so you can look it up there.

You can also do the calculation yourself by adding up all the listed assets, then subtracting all the company liabilities on the balance sheet. If a company has $200 million in assets and $150 million in liabilities, its shareholder equity is $50 million.

You might get equity from your employer

Besides buying shares on the markets, you could also receive equity from your employer. Sometimes they just give shares directly through an equity grant. You could also receive equity stock options, where you are guaranteed to buy shares of a company’s equity at a set price.

If the market price goes higher than that, your options make money. For example, if your employer gives you the option to buy shares at $50, then if the market price goes to $80, you could cash in your option for a $30 per share profit.

When employers offer equity in a compensation package, they usually do so to reward loyal employees. You may need to work a minimum number of years to receive all your equity grants — for example, an employer may offer 1,000 shares, but you only get 20% for every year worked, so you’d need to stay on for five years to earn it all.

If you have any more questions about what are equities, which ones you should pick or your company’s compensation package, consider speaking with a financial advisor. They can help you plan your investments and figure out what role equities should play in reaching your long-term goals.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Review of Voya Investment Management

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Voya Investment Management is a New York-based registered investment advisor that manages investments for institutions and individual clients. With 206 investment advisors, Voya Investment Management covers a wide range of investment strategies, including equity, fixed income, real estate and hard currency.

All information included in this review is accurate as of March 18, 2020. For more information, please consult the Voya Investment Management website.

Assets under management: $108,248,624,160
Minimum investment: $1,000, no minimum on some investment types
Fee structure: Assets under management
Headquarters location: 230 Park AveNew York, NY 10169
https://investments.voya.com/
212-309-8200

Overview of Voya Investment Management

Voya Investment Management got its start in 1972 when it was known as Aetna Capital Management. For many years the firm was a subsidiary of Amsterdam-based ING Holdings. But when ING began divesting its U.S. retirement, investment and insurance business in 2013, the firm rebranded to Voya, an abstract name meant to evoke the image of a “voyage.”

Today, Voya Investment Management Co. LLC is a registered investment advisor and is a wholly-owned subsidiary of Voya Holdings, which is in turn a wholly-owned subsidiary of Voya Financial Inc. (VOYA), a publicly traded company.

What types of clients does Voya Investment Management serve?

Voya Investment Management largely caters to institutional clients in its role as an advisor and sub-advisor. The firm manages the investments of other investment companies. In addition, Voya provides investment management directly to state and municipal governments, insurance companies, corporations, pensions, charitable organizations and banks and thrift institutions. Only about 2% of the amount of assets Voya manages is on behalf of individual investors.

Voya primarily charges a percentage of assets under management, though the firm also charges performance-based fees in some instances.

For institutional clients, Voya’s minimum ranges from $25 million to $100 million. Investors in R share classes, available through qualified retirement accounts, have no investment minimum. When it comes to mutual funds for individual investors, Voya typically has a $1,000 minimum.

Services offered by Voya Investment Management

For individual investors, Voya has a lineup of over 40 mutual funds covering such diverse asset classes as equities, infrastructure, real estate, hard currency and bonds. In addition, the company maintains a roster of target-date funds whose end dates range from 2020 to 2060 in five-year increments.

Alongside traditional mutual funds, many of these strategies also come in 40 variable portfolios that are available exclusively within variable annuity contracts.

Voya also provides portfolio management services to investment companies, small businesses, pooled investment vehicles, large businesses, selection of other advisors including private mutual fund managers and publications and newsletters.

For individual investors, Voya provides the following services:

  • Portfolio management
  • Selection of portfolio managers
  • Wrap programs
  • Publications of newsletters

How Voya Investment Management invests your money

Voya runs a number of index funds and strategies. For actively-managed strategies, Voya seeks to uncover value before the rest of the market. Voya uses the insights of its analysts for fundamental research into these hidden opportunities.

In addition, Voya has a number of equal-weighted funds. Unlike market-weighted portfolios, the strategy most index funds follow, equal-weighted funds allocate the same amount of assets to each name in the portfolio. The strategy is intended to minimize concentration in the market’s largest companies. Voya’s Corporate Leaders 100 and Global Perspective are two funds that employ this strategy.

In fixed income, Voya applies a macro view alongside bottom up security selection. In addition, Voya applies environmental, social and governance factors in its security selection when the managers believe it’s appropriate.

Portfolio/Fund NameInvestment Strategy
Voya CBRE Global InfrastructureInfrastructure
Voya Corporate Leaders 100Large Blend
Voya Diversified Emerging Markets DebtEmerging Markets Bond
Voya Emerging Markets Hard Currency DebtEmerging Markets Bond
Voya Floating RateBank Loan
Voya GNMA IncomeIntermediate Government
Voya Global BondWorld Bond
Voya Global Corporate LeadersWorld Large Stock
Voya Global Diversified PaymentWorld Allocation
Voya Global Equity DividendWorld Large Stock
Voya Global EquityWorld Large Stock
Voya Global Multi-AssetWorld Allocation
Voya Global Perspectives FundWorld Allocation
Voya Global Real EstateGlobal Real Estate
Voya High Yield BondHigh Yield Bond
Voya Intermediate BondIntermediate Core-Plus Bond
Voya International High Dividend Low VolatilityForeign Large Value
Voya Investment Grade CreditCorporate Bond
Voya Large-Cap GrowthLarge Growth
Voya Large Cap ValueLarge Value
Voya MidCap OpportunitiesMid-Cap Growth
Voya Mid Cap Research Enhanced IndexMid-Cap Blend
Voya Multi-Manager Emerging Markets EquityDiversified Emerging Markets
Voya Multi-Manager International Small CapForeign Small/Mid Blend
Voya Real EstateReal Estate
Voya RussiaMiscellaneous Region
Voya SMID Cap GrowthMid-Cap Growth
Voya Securitized CreditMultisector Bond
Voya Short Term BondShort-Term Bond
Voya SmallCap OpportunitiesSmall Growth
Voya Small CompanySmall Blend
Voya Strategic Income OpportunitiesNontraditional Bond
Voya Target In-RetirementTarget-Date Retirement
Voya Target Retirement 2020Target-Date 2020
Voya Target Retirement 2025Target-Date 2025
Voya Target Retirement 2030Target-Date 2030
Voya Target Retirement 2035Target-Date 2035
Voya Target Retirement 2040Target-Date 2040
Voya Target Retirement 2045Target-Date 2045
Voya Target Retirement 2050Target-Date 2050
Voya Target Retirement 2055Target-Date 2060
Voya U.S. High Dividend Low VolatilityLarge Value

Fees Voya Investment Management charges for its services

Typically, Voya Investment Management charges a percentage of AUM to manage clients’ money, though sometimes Voya has other billing arrangements in place.

For individual investors in Voya’s mutual funds, fees range from around 0.50% for the target date funds to 2.00% for the Voya Russia Fund. In addition, the A shares of the firm’s funds levy a 5.75% maximum upfront commission. However, investors can have the front-end load amount reduced with higher deposit amounts.

In addition, Voya also provides wrap program services to broker-dealers. If Voya is selected to be the investment, clients will pay one fee to their broker-dealer for Voya’s service and Voya bills the broker-dealer. In those cases, Voya charges less to the broker-dealer for its services than it would normally charge. However, clients may pay more than going to Voya directly.

Equity Funds Class A Shares Commissions
Total balanceFee
Up to $49,9995.75%
$50,000-99,9994.50%
$1 million-249,9993.50%
$250,000-$499,9992.50%
$500,000-999,9992.00%
Over $1 million0.25%-0.35% 12b-1 fees and 0.25% tail fee for 13 months
Fixed Income Funds Class A Shares Commissions
Total balanceFee
Up to $100,0002.50%
$100,000-$499,9992.00%
Over $500,000N/A

Voya Investment Management’s highlights

  • Covers all bases: Voya’s investment lineup is exhaustive. In addition to typical asset classes, such as equities and fixed income, Voya also has offerings in alternative investments like real estate, global real estate, hard currency and Russian companies. Sophisticated investors who want exposure to these niche areas will be able to complete their portfolios, however, they might be assuming additional risk.
  • High customization: In separately managed accounts, Voya will tailor investments to the individual needs of its clients, such as excluding certain industries and securities if clients have an objection or emphasizing environmental, social and governance factors for those who prioritize that in their investments.
  • Best place to work: Over the years, Voya Investment Management has landed on several lists as a best place to work. For example, in 2019, the firm made it to Pension & Investment Magazine’s “Best Places to Work in Money Management” for the fifth consecutive year. In 2018, the firm was recognized as a “Best Place to Work for Disability Inclusion” by the American Association of People with Disability and the U.S. Business Leadership Network.
  • Low fees: While the gross expense ratio of Voya’s mutual funds seem high, the firm has contractually agreed to waive certain fees. As a result, many of Voya’s mutual fund fees are classified as either “below average” or “low” by Morningstar, the fund research company. On the other hand, A shares of the funds carry a 5.75% upfront commission.

Voya Investment Management’s downsides

  • Few offerings for individual investors: Voya Investment Management’s services are limited to investment management and don’t include financial planning. Further, its focus on institutional investors and high net worth clients mean that individuals who want to invest in Voya funds will first need to find a financial advisor (and pay a commission) to help them invest.
  • Collects performance fees: Voya’s use of performance fees could potentially push portfolio managers to take on additional risk in an effort to boost performance.
  • Potential conflicts of interest: Some Voya Investment Management employees are also registered representatives of Voya Investment Distributors and can receive a commission for the sale of investments managed by Voya. This creates an inherent conflict of interest since these representatives receive financial remuneration for their recommendations.
  • Could be on the auction block: Voya Financial, the parent company of Voya Investment Management, held talks to sell itself in late 2019 with several big insurance companies. Though the talks didn’t result in a sale, there’s speculation that the firm could be on the market with private equity companies in the mix of potential buyers. A sale could result in some disruption for investors as the company transitions from one owner to another.

Voya Investment Management disciplinary disclosures

In 2013, two directors of ING Pomona Private Equity, a closed-end fund of funds and a Voya affiliate, organized in Luxembourg, ran afoul of Luxembourg securities regulation when they failed to file the annual financial statement in a timely manner with the Luxembourg Commission de Surveillance du Sector Financier. The fund received a fine of 2,000 euros. The directors argued that they are not engaged in day-to-day fund activities such as filing annual statements. What’s more, since the fund is a fund-of-funds, it must first receive financial statements from the underlying portfolios in order to file its own annual statement. Besides the monetary fine, there were no other actions taken.

Voya Investment Management onboarding process

To access one of the Voya funds or strategies you’ll need to go through an intermediary, whether that’s a financial advisor or a retirement plan at work. You can get a prospectus for a Voya Investment Management fund by calling 800-992-0180.

Is Voya Investment Management right for you?

Voya has a wide range of investment options that can be the backbone of most people’s investment portfolios. It’s suite of below average and low-fee funds (after sales charges) speak favorably of the line.

However, because Voya’s primary business is institutional, individual investors can only access Voya’s investment strategies through an intermediary such as a financial advisor or in a workplace retirement plan. Advisors who sell Voya funds collect an upfront commission, giving them a financial incentive to do so. Investors need to weigh whether the added cost, plus the potential conflict of interest, are worth it.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.