Recently promoted to her outgoing manager’s job, Rhianna often compares herself to her new peers — five women she looks up to. She wonders if she belongs in this room of senior executives, but there is no doubt in her manager’s mind about her qualifications. Rhianna has a PhD, has won awards in her field, has built a strong team, and is loved by her clients. Nevertheless, she is filled with self-doubt. When left unchecked, her thoughts devolve into demons of imaginary disasters.
Recently, Rhianna suggested a new idea during a leadership team meeting. No one responded. The conversation moved on. But Rhianna remained stuck in place, telling herself she wasn’t smart enough, her idea was insipid, and wasn’t this the case with all her contributions? They weren’t interesting or strategic enough to impress her colleagues. Such thoughts made her remain silent for the rest of the meeting and hesitant to speak up thereafter.
Many of my clients — successful executives in positions of authority — mask their inner scripts of doubt and fear. Their internal lashing is often the result of being overly calibrated to others’ reactions or too frequently comparing themselves to what they see of others. As a result, they edit their contributions, robbing themselves and the team of ideas and hiding their true feelings, which fester into further doubts and resentment.
Self-doubt can afflict anyone. Successful strategies to confront it need to help no matter the cause or context. On the basis of my work with Rhianna and other clients, I’ve identified four strategic ways to sidestep self-doubt in the moment and make your contributions count in meetings.
Claim space with an announcement. It’s easy to go unnoticed when everyone is excited about a topic. Owing to her natural diffidence, Rhianna would start speaking either too softly or too fast and lose her audience before she completed the first sentence. To avoid that pitfall, announce your contribution before launching into your subject. For example, you might ask, “Can we pause to look at this from the customer’s perspective?”
“Let’s step back and take a longer-term view of these metrics,” or “How might we think differently about our actions if we viewed them in the context of market microtrends?” We create a drumroll by first announcing what we’re going to cover – it turns people’s attention our way, and they don’t miss the initial sentences of our idea. By framing the concept, we not only claim space for our contribution but also help focus the discussion.
Name your idea. Before sharing your thoughts, give your point of view a name. Because she wasn’t convinced of her own value, Rhianna shied away from taking up space; her body language, infrequency of speaking up, and paucity of words when she did made her blend into the background. Rhianna has since adopted techniques to name her thoughts, such as reviewing meeting notes for patterns. She looks for underlying themes and tries to come up with an acronym or find a wordplay on a common phrase.
During a recent meeting, phrases like “North America only,” “cultural blindness,” and “high-growth markets” allowed her to name her underlying idea “ROW together,” standing for “Rest of the world together.” Use the name to anchor yourself — or if you want to, share it. Speak it out loud, and for wordplay like “ROW together,” present it with a little humor to alleviate your tenseness. It’s not always easy to do on the spot, but naming your thought will define it better, give it more weight, and allow it to take up more space.
Explain your idea. Articulate only the skeleton of your proposal once you have announced and named it. Like a frame around a painting, this focuses your audience’s attention where you want it. Then, as you flesh out the thought, explain why it is important, and why now. Every idea vies with our calendars. Amid busy schedules, why should we care about this topic?
One of Rhianna’s ideas that she had not yet articulated related to the return to a hybrid work environment. Her company is debating various options, and her contribution, if acted on immediately, would address a common employee concern. Without a sense of timeliness, expect a polite golf clap but no momentum. When your audience is convinced that they need to act now, your suggestion will receive more attention.
Entertain feedback. When we doubt ourselves, we yield to our colleagues’ cues if they don’t follow up on what we’ve said. That was certainly true of Rhianna. The lack of response from others confirmed her worst fears: that her suggestions weren’t interesting and she wasn’t smart enough.
Before you relinquish the floor, offer a hook to involve others. Explicitly ask for feedback with questions like, “How many of you feel this way?” “What are your thoughts on this topic?” or “What stands out to you?” When you issue an invitation with an open-ended question, others can pause to appreciate and think more deeply about what you just shared.
As Rhianna has practiced these strategies, she’s been surprised. Even before examining her underlying fears more deeply, she says she’s found her voice. She’s no longer afraid to propose ideas and speak up in meetings and finds greater success when she does. By implementing techniques to land her perspectives, she’s found first-hand evidence that it wasn’t her ideas that lacked stickiness; it was her delivery, shaded by her self-confidence.
After altering how she presented her thoughts, she gained greater purchase on self-worth. Once colleagues adopted her proposals, she naturally adopted a more confident stance. When we doubt our own minds, digging deeper inside exposes more of the same faulty logic. By taking external action, we can liberate ourselves from the web of self-castigation and clear space for our creativity and that of our audience.
In 1903, TheNew York Times predicted it would take between 1 million and 10 million years to develop airplanes. The Wright Brothers took flight just nine weeks later. In 2023, the same levels of ambition, determination, and innovation will make green flight a reality, and the first commercial passenger planes fueled by hydrogen will take to the skies.
Aviation is the world’s fastest-growing contributor to climate change. According to a report by the International Coalition for Sustainable Aviation, by 2037 we will see an estimated doubling of air passengers to 8.2 billion. And by 2050, the sector could be responsible for as much as 22 percent of our total carbon emissions. We know that we have to cut global emissions in half by 2030—and that means addressing the rising contribution of the aviation sector, and quickly.
My company, ZeroAvia, is tackling the transition to zero-emission aviation through the development of hydrogen-electric engines for airplanes. These use hydrogen in fuel cells to generate electricity, which is then used to power electric motors to turn the aircraft’s propellers. Ultimately, we will put these engines in every type of aircraft—all the way up to large, commercial aircraft.
Why fuel cells? According to McKinsey, electric flight powered by hydrogen offers the best possible reduction in climate impact. Hydrogen fuel cells are between two and three times more energy efficient than current gas-guzzling fuel combustion engines. And the sole byproduct from these engines is water.
Alternatives, such as sustainable aviation fuel, do not tackle the problem of non-carbon emissions. Nitrogen oxides, particulates, soot, and high-temperature water vapor are all potent climate forcing agents. Combined, these have a larger climate change impact than carbon dioxide does alone. But for hydrogen-electric engines, they do not enter the equation.
What about batteries? Too heavy and too inefficient. Research from the University of Houston suggests eight airplanes would be required to carry the batteries needed to power a jumbo jet. What works for a Tesla doesn’t necessarily work for a Dreamliner.
Hydrogen is also abundant—as it can be produced from water—and it will only become cheaper to produce. According to PWC, the cost of green hydrogen will drop by 50 percent by 2030. On-site hydrogen production further lowers prices and makes the entire system zero-emission from end to end.
In 2023, we will finalize the design for the world’s first commercial hydrogen-electric aircraft engine, and we plan to enter the market by the following year. This will unlock commercial zero-emission flights of up to 300 miles, say, London to Glasgow, or San Francisco to Los Angeles. As well as powering new aircraft, hydrogen-electric engines can also be retro-fitted into existing planes, ensuring rapid market entry and enabling us to tackle the sector’s emissions sooner.
While converting the entire industry will take time, the road map is obvious. The UK’s Aerospace Technology Institute’s FlyZero project made it clear that hydrogen will be aviation’s fuel of the future. This year-long independent study commissioned by the UK government established that the first generation of zero-emission aircraft would need to include hydrogen technology by 2025.
The world’s biggest problem requires the farthest-reaching solutions, and support for hydrogen is growing in governments globally. Measures in the US Inflation Reduction Act will turbocharge the hydrogen economy, while the UK’s Jet Zero strategy aims to deliver net-zero aviation by the middle of the century. In 2023, accelerating innovation will meet this increasing political will, and hydrogen electricity will start the process of transforming aviation into a zero-emissions industry in a generation.
We all know we need to save for retirement, but it can be tricky to know which of all the various tax-advantaged accounts to prioritize with our limited savings. Making the wrong choice could cost us in higher taxes, less flexibility, or even missing out on free money. Here are some factors to consider in prioritizing your retirement savings:
Did you max out a Roth IRA?
The main advantage of a Roth IRA is that any earnings are tax-free as long as you’ve had the account open for at least 5 years and are over age 59 1/2. However, you can also withdraw the sum of your contributions for any reason with no tax or penalty in the meantime. Any earnings you withdraw before 5 years and age 59 ½ may be subject to taxes and a 10% penalty, but the contributions come out first. (Exceptions to the 10% penalty include education expenses and up to $10k for a first-time home purchase.)
Since you always have access to the contributions, they can double as part of your emergency fund. If you already have emergency savings, you can simply contribute them to a Roth IRA up to the annual limit. Just be sure to keep the Roth IRA somewhere safe and accessible like a savings account or money market fund until you’ve built up an adequate emergency fund (enough to cover at least 3-6 months’ worth of necessary expenses) somewhere else. At that point, you can invest the Roth IRA more aggressively to grow tax-free for retirement.
If you don’t have an emergency fund, having at least a few thousand dollars in cash reserves should be your first priority. Otherwise, you could find yourself raiding another retirement account (and possibly paying early withdrawal penalties) or falling behind on rent, mortgage or car payments in an emergency. Having to complete a withdrawal form to tap your Roth IRA could also discourage you from tapping it for frivolous things.
If your income is too high to contribute to a Roth IRA, you can contribute to a traditional IRA and then convert it to a Roth IRA. As long as you don’t have any other pre-tax IRA money, you only pay taxes on the earnings you convert. If you do have other pre-tax IRA money, see if you can roll them into your employer’s retirement plan by the end of the year to avoid some tax complications.
Does your employer match retirement plan contributions?
If so, maxing that match should be your next priority. Where else are you going to get a guaranteed return on your money? Don’t leave that free money on the table! Of course, you also get all the other benefits of your retirement account like pre-tax contributions or tax-free growth, possibly low cost or unique investment options, the ability to borrow against it and pay yourself the interest, and creditor protections.
Are you eligible to contribute to a health savings account (HSA)?
If you’re enrolled in a qualified high-deductible health insurance plan, you can make pre-tax contributions to a health savings account and use the money (and any earnings) tax-free for qualified healthcare expenses. Whatever you don’t spend on health care now can typically be invested and used for any purpose penalty-free after age 65 as part of your retirement savings.
The money could also be used tax-free to pay for qualified medical expenses in the future, including some Medicare and long-term care insurance premiums. When you consider that you’ll most likely have medical expenses in retirement, you might even want to try to pay for healthcare costs from other savings. This allows the HSA money to grow as long as possible to be used tax-free for healthcare costs in retirement.
Are you eligible to contribute to a 457 plan?
This retirement account is available to many public sector employees and has the same tax benefits and contribution limits as a 401(k) and 403(b). However, there is no early withdrawal penalty. This added flexibility gives it a priority over the others if you’re under age 55.
Have you maxed out your employer’s retirement plan?
If not, this should be your next priority for all the non-match reasons given under #2. Keep in mind that even if you’ve hit your pre-tax/Roth limits, your plan may allow you to contribute after-tax. You can then convert the after-tax dollars to a Roth account so they can then grow to eventually be tax-free. Some plans allow you to do a Roth conversion while you’re working there. Otherwise, you can roll the money to a Roth IRA.
Are you investing tax-efficiently outside tax-advantaged accounts?
If you’ve maxed out all of your eligible tax-advantaged accounts, you can still save and invest for retirement in a regular investment account. Since your interest, dividends, and capital gains will be taxed each year, you’ll want to use this account for the investments that generate the least taxes. That means individual stocks and ETFs, low turnover mutual funds, and municipal bonds. Taxable bonds, high turnover mutual funds, and REITs should be held in the tax-sheltered accounts as much as possible.
If you’re not sure how to do that, it could be a good reason to hire a financial advisor or use a tax-aware robo-advisor. As you can see, knowing which accounts to contribute to first isn’t always straightforward. If you’d like additional help making this decision, consider consulting a qualified and unbiased financial professional. Don’t let this lead to analysis paralysis though. Contributing to a less than ideal account is still much better than not contributing at all.
I’m a Senior Resident Financial Planner at Financial Finesse, primarily responsible for providing financial education and guidance to employees of our corporate clients.
Since their introduction in the early 1980s, defined contribution (DC) plans, which include 401(k)s, have all but taken over the retirement marketplace. Roughly 86 percent of Fortune 500 companies offered only DC plans rather than traditional pensions in 2019, according to a recent study from insurance broker Willis Towers Watson.
The 401(k) plan is the most ubiquitous DC plan among employers of all sizes, while the similarly structured 403(b) plan is offered to employees of public schools and certain tax-exempt organizations, and the 457(b) plan is most commonly available to state and local governments.
The employee’s contribution limit for each plan is $20,500 in 2022 ($27,000 for those aged 50 and over).
Many DC plans offer a Roth version, such as the Roth 401(k) in which you use after-tax dollars to contribute, but you can take the money out tax-free at retirement.
“The Roth election makes sense if you expect your tax rate to be higher at retirement than it is at the time you’re making the contribution,” says Littell.
A 401(k) plan is a tax-advantaged plan that offers a way to save for retirement. With a traditional 401(k) an employee contributes to the plan with pre-tax wages, meaning contributions are not considered taxable income. The 401(k) plan allows these contributions to grow tax-free until they’re withdrawn at retirement. At retirement, distributions create a taxable gain, though withdrawals before age 59 ½ may be subject to taxes and additional penalties.
With a Roth 401(k) an employee contributes after-tax dollars and gains are not taxed as long as they are withdrawn after age 59 1/2.
Pros: A 401(k) plan can be an easy way to save for retirement, because you can schedule the money to come out of your paycheck and be invested automatically. The money can be invested in a number of high-return investments such as stocks, and you won’t have to pay tax on the gains until you withdraw the funds (or ever in a Roth 401(k)). In addition, many employers offer you a match on contributions, giving you free money – and an automatic gain – just for saving.
Cons: One key disadvantage of 401(k) plans is that you may have to pay a penalty for accessing the money if you need it for an emergency. While many plans do allow you to take loans from your funds for qualified reasons, it’s not a guarantee that your employer’s plan will do that. Your investments are limited to the funds provided in your employer’s 401(k) program, so you may not be able to invest in what you want to.
What it means to you: A 401(k) plan is one of the best ways to save for retirement, and if you can get bonus “match” money from your employer, you can save even more quickly.
A 403(b) plan is much the same as a 401(k) plan, but it’s offered by public schools, charities and some churches, among others. The employee contributes pre-tax money to the plan, so contributions are not considered taxable income, and these funds can grow tax-free until retirement. At retirement, withdrawals are treated as ordinary income, and distributions before age 59 ½ may create additional taxes and penalties.
Similar to the Roth 401(k), a Roth 403(b) allows you to save after-tax funds and withdraw them tax-free in retirement.
Pros: A 403(b) is an effective and popular way to save for retirement, and you can schedule the money to be automatically deducted from your paycheck, helping you to save more effectively. The money can be invested in a number of investments, including annuities or high-return assets such as stock funds, and you won’t have to pay taxes until you withdraw the money. Some employers may also offer you a matching contribution if you save money in a 403(b).
Cons: Like the 401(k), the money in a 403(b) plan can be difficult to access unless you have a qualified emergency. While you may still be able to access the money without an emergency, it may cost you additional penalties and taxes, though you can also take a loan from your 403(b). Another downside: You may not be able to invest in what you want, since your options are limited to the plan’s investment choices.
What it means to you: A 403(b) plan is one of the best ways for workers in certain sectors to save for retirement, especially if they can receive any matching funds. This 403(b) calculator can help you determine how much you can save for retirement.
A 457(b) plan is similar to a 401(k), but it’s available only for employees of state and local governments and some tax-exempt organizations. In this tax-advantaged plan, an employee can contribute to the plan with pre-tax wages, meaning the income is not taxed. The 457(b) allows contributions to grow tax-free until retirement, and when the employee withdraws money, it becomes taxable.
Pros: A 457(b) plan can be an effective way to save for retirement, because of its tax advantages. The plan offers some special catch-up savings provisions for older workers that other plans don’t offer, as well. The 457(b) is considered a supplemental savings plan, and so withdrawals before age 59 ½ are not subject to the 10 percent penalty that 403(b) plans are.
Cons: The typical 457(b) plan does not offer an employer match, which makes it much less attractive than a 401(k) plan. Also, it’s even tougher to take an emergency withdrawal from a 457(b) plan than from a 401(k).
What it means to you: A 457(b) plan can be a good retirement plan, but it does offer some drawbacks compared to other defined contributions plans. And by offering withdrawals before the typical retirement age of 59 ½ without an additional penalty, the 457(b) can be beneficial for retired public servants who may have a physical disability and need access to their money.
An IRA is a valuable retirement plan created by the U.S. government to help workers save for retirement. Individuals can contribute up to $6,000 to an account in 2022, and workers over age 50 can contribute up to $7,000.
There are many kinds of IRAs, including a traditional IRA, Roth IRA, spousal IRA, rollover IRA, SEP IRA and SIMPLE IRA. Here’s what each is and how they differ from one another.
A traditional IRA is a tax-advantaged plan that allows you significant tax breaks while you save for retirement. Anyone who earns money by working can contribute to the plan with pre-tax dollars, meaning any contributions are not taxable income. The IRA allows these contributions to grow tax-free until the account holder withdraws them at retirement and they become taxable. Earlier withdrawals may leave the employee subject to additional taxes and penalties.
Pros: A traditional IRA is a very popular account to invest for retirement, because it offers some valuable tax benefits, and it also allows you to purchase an almost-limitless number of investments – stocks, bonds, CDs, real estate and still other things. Perhaps the biggest benefit, though, is that you won’t owe any tax until you withdraw the money at retirement.
Cons: If you need your money from a traditional IRA, it can be costly to remove it because of taxes and additional penalties. And an IRA requires you to invest the money yourself, whether that’s in a bank or in stocks or bonds or something else entirely. You’ll have to decide where and how you’ll invest the money, even if that’s only to ask an adviser to invest it.
What it means to you: A traditional IRA is one of the best retirement plans around, though if you can get a 401(k) plan with a matching contribution, that’s somewhat better. But if your employer doesn’t offer a defined contribution plan, then a traditional IRA is available to you instead — though the tax-deductibility of contributions is eliminated at higher income levels.
A Roth IRA is a newer take on a traditional IRA, and it offers substantial tax benefits. Contributions to a Roth IRA are made with after-tax money, meaning you’ve paid taxes on money that goes into the account. In exchange, you won’t have to pay tax on any contributions and earnings that come out of the account at retirement.
Pros: The Roth IRA offers several advantages, including the special ability to avoid taxes on all money taken out of the account in retirement, at age 59 ½ or later. The Roth IRA also provides lots of flexibility, because you can often take out contributions – not earnings – at any time without taxes or penalties. This flexibility actually makes the Roth IRA a great retirement plan.
What it means to you: A Roth IRA is an excellent choice for its huge tax advantages, and it’s an excellent choice if you’re able to grow your earnings for retirement and keep the taxman from touching it again.
IRAs are normally reserved for workers who have earned income, but the spousal IRA allows the spouse of a worker with earned income to fund an IRA as well. However, the working spouse’s taxable income must be more than the contributions made to any IRAs, and the spousal IRA can either be a traditional IRA or a Roth IRA.
Pros: The biggest positive of the spousal IRA is that it allows a non-working spouse to take advantage of an IRA’s various benefits, either the traditional or Roth version.
Cons: There’s not a particular downside to a spousal IRA, though like all IRAs, you’ll have to decide how to invest the money.
What it means to you: The spousal IRA allows you to take care of your spouse’s retirement planning without forcing your partner to have earned income as would usually be the case. That may allow your spouse to stay home or take care of other family needs.
A rollover IRA is created when you move a retirement account such as a 401(k) or IRA to a new IRA account. You “roll” the money from one account to the rollover IRA, and can still take advantage of the tax benefits of an IRA. You can establish a rollover IRA at any institution that allows you to do so, and the rollover IRA can be either a traditional IRA or a Roth IRA. There’s no limit to the amount of money that can be transferred into a rollover IRA.
A rollover IRA also allows you to convert the type of retirement account, from a traditional IRA or 401(k) to a Roth IRA. These types of transfers can create tax liabilities, however, so it’s important to understand the consequences before you decide how to proceed.
Pros: A rollover IRA allows you to continue to take advantage of attractive tax benefits, if you decide to leave a former employer’s 401(k) plan for whatever reason. If you simply want to change IRA providers for an existing IRA, you can rollover your account to a new provider. As in all IRAs, you can buy a wide variety of investments.
Cons: Like all IRAs, you’ll need to decide how to invest the money, and that may cause problems for some people. You should pay special attention to any tax consequences for rolling over your money, because they can be substantial. But this is generally only an issue if you’re converting your account type from a traditional IRA or 401(k) to a Roth IRA.
What it means to you: A rollover IRA is a convenient way to move from a 401(k) or an IRA to another IRA account. The rollover IRA may be able to improve your financial situation by offering you a chance to change IRA types from traditional to Roth or vice versa.
The SEP IRA is set up like a traditional IRA, but for small business owners and their employees. Only the employer can contribute to this plan, and contributions go into a SEP IRA for each employee rather than a trust fund. Self-employed individuals can also set up a SEP IRA.
Contribution limits in 2022 are 25 percent of compensation or $61,000, whichever is less. Figuring out contribution limits for self-employed individuals is a bit more complicated.
“It’s very similar to a profit-sharing plan,” says Littell, because contributions can be made at the discretion of the employer.
Pros: For employees, this is a freebie retirement account. For self-employed individuals, the higher contribution limits make them much more attractive than a regular IRA.
Cons: There’s no certainty about how much employees will accumulate in this plan. Also, the money is more easily accessible. This can be viewed as more good than bad, but Littell views it as bad.
What it means to you: Account holders are still tasked with making investment decisions. Resist the temptation to break open the account early. If you tap the money before age 59 ½, you’ll likely have to pay a 10 percent penalty on top of income tax.
With 401(k) plans, employers have to pass several nondiscrimination tests each year to make sure that highly compensated workers aren’t contributing too much to the plan relative to the rank-and-file.
The SIMPLE IRA bypasses those requirements because the same benefits are provided to all employees. The employer has a choice of whether to contribute a 3 percent match or make a 2 percent non-elective contribution even if the employee saves nothing in his or her own SIMPLE IRA.
Pros: Littell says most SIMPLE IRAs are designed to provide a match, so they provide an opportunity for workers to make pre-tax salary deferrals and receive a matching contribution. To the employee, this plan doesn’t look much different from a 401(k) plan.
Cons: The employee contribution has a limit of $14,000 for 2022, compared to $20,500 for other defined contribution plans. But most people don’t contribute that much anyway, says Littell.
What it means for you: As with other DC plans, employees have the same decisions to make: how much to contribute and how to invest the money. Some entrepreneurs prefer the SIMPLE IRA to the SEP IRA – here are the key differences.
Alternatively known as a Solo-k, Uni-k and One-participant k, the Solo 401(k) plan is designed for a business owner and his or her spouse.
Because the business owner is both the employer and employee, elective deferrals of up to $20,500 can be made, plus a non-elective contribution of up to 25 percent of compensation up to a total annual contribution of $61,000 for businesses, not including catch-up contributions.
Pros: “If you don’t have other employees, a solo is better than a SIMPLE IRA because you can contribute more to it,” says Littell. “The SEP is a little easier to set up and to terminate.” However, if you want to set up your plan as a Roth, you can’t do it in a SEP, but you can with a Solo-k.
Cons: It’s a bit more complicated to set up, and once assets exceed $250,000, you’ll have to file an annual report on Form 5500-SE.
What it means to you: If you have plans to expand and hire employees, this plan won’t work. Once you hire other workers, the IRS mandates that they must be included in the plan if they meet eligibility requirements, and the plan will be subject to non-discrimination testing. The solo 401(k) compares favorably to the popular SEP IRA, too.
Traditional pensions are a type of defined benefit (DB) plan, and they are one of the easiest to manage because so little is required of you as an employee.
Pensions are fully funded by employers and provide a fixed monthly benefit to workers at retirement. But DB plans are on the endangered species list because fewer companies are offering them. Just 14 percent of Fortune 500 companies enticed new workers with pension plans in 2019, down from 59 percent in 1998, according to data from Willis Towers Watson.
Why? DB plans require the employer to make good on an expensive promise to fund a hefty sum for your retirement. Pensions, which are payable for life, usually replace a percentage of your pay based on your tenure and salary.
A common formula is 1.5 percent of final average compensation multiplied by years of service, according to Littell. A worker with an average pay of $50,000 over a 25-year career, for example, would receive an annual pension payout of $18,750, or $1,562.50 a month.
Pros: This benefit addresses longevity risk – or the risk of running out of money before you die.
“If you understand that your company is providing a replacement of 30 percent to 40 percent of your pay for the rest of your life, plus you’re getting 40 percent from Social Security, this provides a strong baseline of financial security,” says Littell. “Additional savings can help but are not as central to your retirement security.”
Cons: Since the formula is generally tied to years of service and compensation, the benefit grows more rapidly at the end of your career. “If you were to change jobs or if the company were to terminate the plan before you hit retirement age, you can get a lot less than the benefit you originally expected,” says Littell.
What it means to you: Since company pensions are increasingly rare and valuable, if you are fortunate enough to have one, leaving the company can be a major decision. Should you stay or should you go? It depends on the financial strength of your employer, how long you’ve been with the company and how close you are to retiring. You can also factor in your job satisfaction and whether there are better employment opportunities elsewhere.
Guaranteed income annuities are generally not offered by employers, but individuals can buy these annuities to create their own pensions. You can trade a big lump sum at retirement and buy an immediate annuity to get a monthly payment for life, but most people aren’t comfortable with this arrangement. More popular are deferred income annuities that are paid into over time.
For example, at age 50, you can begin making premium payments until age 65, if that’s when you plan to retire. “Each time you make a payment, it bumps up your payment for life,” says Littell.
You can buy these on an after-tax basis, in which case you’ll owe tax only on the plan’s earnings. Or you can buy it within an IRA and can get an upfront tax deduction, but the entire annuity would be taxable when you take withdrawals.
Pros: Littell himself invested in a deferred income annuity to create an income stream for life. “It’s very satisfying, it felt really good building a bigger pension over time,” he says.
Cons: If you’re not sure when you’re going to retire or even if you’re going to retire, then it may not make sense. “You’re also locking into a strategy that you can’t get rid of,” he says.
In addition, annuities are complex legal contracts, and it can be difficult to understand your rights and rewards for signing up for an annuity. You’ll want to be fully informed about what the annuity will and won’t do for you.
What it means to you: You’ll be getting bond-like returns and you lose the possibility of getting higher returns in the stock market in exchange for the guaranteed income. Since payments are for life, you also get more payments (and a better overall return) if you live longer.
“People forget that these decisions always involve a trade-off,” Littell says.
The Thrift Savings Plan (TSP) is a lot like a 401(k) plan on steroids, and it’s available to government workers and members of the uniformed services.
Participants choose from five low-cost investment options, including a bond fund, an S&P 500 index fund, a small-cap fund and an international stock fund — plus a fund that invests in specially issued Treasury securities.
Pros: Federal employees can get a 5 percent employer contribution to the TSP, which includes a 1 percent non-elective contribution, a dollar-for-dollar match for the next 3 percent and a 50 percent match for the next 2 percent contributed.
“The formula is a bit complicated, but if you put in 5 percent, they put in 5 percent,” says Littell. “Another positive is that the investment fees are shockingly low – four hundredths of a percentage point.” That translates to 40 cents annually per $1,000 invested – much lower than you’ll find elsewhere.
Cons: As with all defined contribution plans, there’s always uncertainty about what your account balance might be when you retire.
What it means to you: You still need to decide how much to contribute, how to invest, and whether to make the Roth election. However, it makes a lot of sense to contribute at least 5 percent of your salary to get the maximum employer contribution.
Cash-balance plans are a type of defined benefit, or pension plan, too.
But instead of replacing a certain percentage of your income for life, you are promised a certain hypothetical account balance based on contribution credits and investment credits (e.g., annual interest). One common setup for cash-balance plans is a company contribution credit of 6 percent of pay plus a 5 percent annual investment credit, says Littell.
The investment credits are a promise and are not based on actual contribution credits. For example, let’s say a 5 percent return, or investment credit, is promised. If the plan assets earn more, the employer can decrease contributions. In fact, many companies that want to shed their traditional pension plan convert to a cash-balance plan because it allows them better control over the costs of the plan.
Pros: It still provides a promised benefit, and you don’t have to contribute anything to it. “There’s a fair amount of certainty in how much you’re going to get,” says Littell. Also, if you do decide to switch jobs, your account balance is portable so you’ll get whatever the account is worth on your way out the door of your old job.
Cons: If the company changes from a generous pension plan to a cash-balance plan, older workers can potentially lose out, though some companies will grandfather long-term employees into the original plan. Also, the investment credits are relatively modest, typically 4 percent or 5 percent. “It becomes a conservative part of your portfolio,” says Littell.
What it means to you: The date you retire will impact your benefit, and working longer is more advantageous. “Retiring early can truncate your benefit,” says Littell.
Also, you’ll get to choose from a lump sum or an annuity form of benefit. When given the option between a $200,000 lump sum or a monthly annuity check of $1,000 for life, “too many people,” choose the lump sum when they’d be better off getting the annuity for life, says Littell.
Cash-value life insurance plan .Some companies offer insurance vehicles as a benefit. There are various types: whole life, variable life, universal life and variable universal life. They provide a death benefit while at the same time building cash value, which could support your retirement needs. If you withdraw the cash value, the premiums you paid – your cost basis – come out first and are not subject to tax.
“There are some similarities to the Roth tax treatment, but more complicated,” says Littell. “You don’t get a deduction on the way in, but if properly designed, you can get tax-free withdrawals on the way out.”
Pros: It addresses multiple risks by providing either a death benefit or a source of income. Plus, you get tax deferral on the growth of your investment.
Cons: “If you don’t do it right, if the policy lapses, you end up with a big tax bill,” says Littell. Like other insurance solutions, once you buy it, you are more or less locked into the strategy for the long term. Another risk is that the products don’t always perform as well as the illustrations might show that they will.
What it means to you: These products are for wealthier people who have already maxed out all other retirement savings vehicles. If you’ve reached the contribution limits for your 401(k) and your IRA, then you might consider investing in this type of life insurance.
Unless you’re a top executive in the C-suite, you can pretty much forget about being offered an Nonqualified deferred compensation plans (NQDC) There are two main types: One looks like a 401(k) plan with salary deferrals and a company match, and the other is solely funded by the employer.
The catch is that most often the latter one is not really funded. The employer puts in writing a “mere promise to pay” and may make bookkeeping entries and set aside funds, but those funds are subject to claims by creditors.
Pros: The benefit is you can save money on a tax-deferred basis, but the employer can’t take a tax deduction for its contribution until you start paying income tax on withdrawals.
Cons: They don’t offer as much security, because the future promise to pay relies on the solvency of the company.
“There’s some risk that you won’t get your payments (from an NQDC plan) if the company has financial problems,” says Littell.
What it means to you: For executives with access to an NQDC plan in addition to a 401(k) plan, Littell’s advice is to max out the 401(k) contributions first. Then if the company is financially secure, contribute to the NQDC plan if it’s set up like a 401(k) with a match.
Gaslighting is a form of psychological abuse where an individual tries to gain power and control over you by instilling self-doubt. Allowing managers who continue to gaslight to thrive in your company will only drive good employees away. Leadership training is only part of the solution — leaders must act and hold the managers who report to them accountable when they see gaslighting in action. The author presents five things leaders can do when they suspect their managers are gaslighting employees.
“We missed you at the leadership team meeting,” our executive vice president messaged me. “Your manager shared an excellent proposal. He said you weren’t available to present. Look forward to connecting soon.”
In our last one-on-one meeting, my manager had enthusiastically said that I, of course, should present the proposal I had labored over for weeks. I double-checked my inbox and texts for my requests to have that meeting invite sent to me. He had never responded. He went on to present the proposal without me.
Excluding me from meetings, keeping me off the list for company leadership programs, and telling me I was on track for a promotion — all while speaking negatively about my performance to his peers and senior leadership — were all red flags in my relationship with this manager. The gaslighting continued and intensified until the day I finally resigned.
Gaslighting is a form of psychological abuse where an individual tries to gain power and control over you. They will lie to you and intentionally set you up to fail. They will say and do things and later deny they ever happened. They will undermine you, manipulate you, and convince you that you are the problem. As in my case, at work, the “they” is often a manager who will abuse their position of power to gaslight their employees.
Organizations of all sizes are racing to develop their leaders, spending over $370 billion a year globally on leadership training. Yet research shows that almost 30% of bosses are toxic. Leadership training is only part of the solution — we need leaders to act and hold the managers who report to them accountable when they see gaslighting in action. Here are five things leaders can do when they suspect their managers are gaslighting employees.
Believe employees when they share what’s happening.
The point of gaslighting is to instill self-doubt, so when an employee has the courage to come forward to share their experiences, leaders must start by actively listening and believing them. The employee may be coming to you because they feel safe with you. Their manager might be skilled at managing up, presenting themselves as an inclusive leader while verbally abusing employees. Or they may be coming to you because they feel they’ve exhausted all other options.
Do not minimize, deny, or invalidate what they tell you. Thank them for trusting you enough to share their experiences. Ask them how you can support them moving forward.
Be on the lookout for signs of gaslighting.
“When high performers become quiet and disinterested and are then labeled as low performers, we as leaders of our organizations must understand why,” says Lan Phan, founder and CEO of community of SEVEN, who coaches executives in her curated core community groups. “Being gaslighted by their manager can be a key driver of why someone’s performance is suddenly declining. Over time, gaslighting will slowly erode their sense of confidence and self-worth.”
As a leader, while you won’t always be present to witness gaslighting occurring on your team, you can still look for signs. If an employee has shared their experiences, you can be on high alert to catch subtle signals. Watch for patterns of gaslighting occurring during conversations, in written communication, and activities outside of work hours.
Here are some potential warning signs: A manager who is gaslighting may exclude their employees from meetings. They may deny them opportunities to present their own work. They may exclude them from networking opportunities, work events, and leadership and development programs. They may gossip or joke about them. Finally, they may create a negative narrative of their performance, seeding it with their peers and senior leaders in private and public forums.
Intervene in the moments that matter.
“Intervening in those moments when gaslighting occurs is critical,” says Dee C. Marshall, CEO of Diverse & Engaged LLC, who advises Fortune 100 companies on diversity, equity, and inclusion strategies. “As a leader, you can use your position of power to destabilize the manager who is gaslighting. By doing so, you signal to the gaslighter that you are watching and aware of their actions, and putting them on notice.”
If you see that a manager has excluded one of their employees from a meeting, make sure to invite them and be clear that you extended the invitation. If a manager is creating a negative narrative of an employee’s performance in talent planning sessions, speak up in the moment and ask them for evidence-based examples. Enlist the help of others who have examples of their strong performance. Document what you’re observing on behalf of the employee who is the target of gaslighting.
Isolate the manager who is gaslighting.
If this manager is gaslighting now, this likely isn’t their first time. Enlist the help of human resources and have them review the manager’s team’s attrition rates and exit interview data. Support the employee who is experiencing gaslighting when they share their experiences with HR, including providing your own documentation.
In smaller, more nimble organizations, restructuring happens often and is necessary to scale and respond to the market. Use restructuring as an opportunity to isolate the manager by decreasing their span of control and ultimately making them an individual contributor with no oversight of employees. Ensure that their performance review reflects the themes you and others have documented (and make any feedback from others anonymous). The manager may eventually leave on their own as their responsibilities decrease and their span of control is minimized. In parallel, work with human resources to develop an exit plan for the manager.
Assist employees in finding a new opportunity.
In the meantime, help the targeted employee find a new opportunity. Start with using your social and political capital to endorse them for opportunities on other teams. In my case, the manager gaslighting me had a significant span of control, and my options to leave his team were limited. He blocked me from leaving to go work for other managers when I applied for internal roles. I didn’t have any leaders who could advocate for me and move me to another team. I was ultimately forced to leave the company.
In some cases, even if you can find an internal opportunity for the employee, they won’t stay. They will take an external opportunity to have a fresh start and heal from the gaslighting they experienced from their manager. Stay in touch and be open to rehiring them when the timing is right for them. If you rehire them in the future, make sure that this time they work for a manager who will not only nurture and develop their careers, but one who will treat them with the kindness they deserve.
During the “Great Resignation,” people have had the time and space to think about what’s important to them. Allowing managers who continue to gaslight to thrive in your company will only drive your employees away. They’ll choose to work for organizations that not only value their contributions, but that also respect them as individuals.
Mita Mallick is the head of inclusion, equity, and impact at Carta. She is a columnist for SWAAY and her writing has been published in Harvard Business Review, The New York Post, and Business Insider.
Abramson, Kate (2014). “Turning up the Lights on Gaslighting”. Philosophical Perspectives. 28 (1): 1–30. doi:10.1111/phpe.12046. ISSN1520-8583.
Sarkis, Stephanie (2018). Gaslighting: Recognize Manipulative and Emotionally Abusive People – and Break Free. Da Capo Press. ISBN978-0738284668. OCLC1023486127.
Stout, Martha (14 March 2006). The Sociopath Next Door. Random House Digital. pp. 94–95. ISBN978-0-7679-1582-3. Retrieved 6 January 2014.Portnow, Kathryn E. (1996). Dialogues of doubt: the psychology of self-doubt and emotional gaslighting in adult women and men (EdD). Cambridge, MA: Harvard Graduate School of Education.
You could face lifelong late-enrollment penalties if you don’t sign up for Medicare when you’re supposed to.
The rules for enrollment when you already have insurance through your job depend partly on whether your employer is large or small.
It’s important to know that once you sign up for Medicare, even if only for Part A (hospital coverage), you can no longer contribute to a health savings account.
Workers who are nearing age 65 and have health insurance through their job may want to consider how Medicare could factor into their medical coverage.
While not everyone must sign up for Medicare at that age of eligibility, many are required to enroll — or otherwise face lifelong late-enrollment penalties.
“The biggest mistake … is to assume that you don’t need Medicare and to miss enrolling in it when you should have,” said Danielle Roberts, co-founder of insurance firm Boomer Benefits.
Roughly 10 million workers are in the 65-and-older crowd, or 17.9% of that age group, according to the Bureau of Labor Statistics.
The general rule for Medicare signup is that unless you meet an exception, you get a seven-month enrollment window that starts three months before your 65th birthday month and ends three months after it. Having qualifying insurance through your employer is one of those exceptions. Here’s what to know.
The basics
Original, or basic, Medicare consists of Part A (hospital coverage) and Part B (outpatient care coverage).
Part A has no premium as long as you have at least a 10-year work history of contributing to the program through payroll (or self-employment) taxes. Part B comes with a standard monthly premium of $148.50 for 2021, although higher-income beneficiaries pay more through monthly adjustments (see chart below).
Some 43% of individuals choose to get their Parts A and B benefits delivered through an Advantage Plan (Part C), which typically includes prescription drugs (Part D) and may or may not have a premium.
The remaining beneficiaries stick with basic Medicare and may pair it with a so-called Medigap policy and a stand-alone Part D plan. Be aware that higher-income beneficiaries pay more for drug coverage, as well (see chart below).
Remember that late-enrollment penalties last a lifetime. For Part B, that surcharge is 10% for each 12-month period you could have had it but didn’t sign up. For Part D, the penalty is 1% of the base premium ($33.06 in 2021) multiplied by the number of full, uncovered months you didn’t have Part D or creditable coverage.Working at a large company
The general rule for workers at companies with at least 20 employees is that you can delay signing up for Medicare until you lose your group insurance (i.e., you retire).
Many people with large group health insurance delay Part B but sign up for Part A because it’s free. “It doesn’t hurt you to have it,” Roberts said. However, she said, if you happen to have a health savings account paired with a high-deductible health plan through your employer, be aware that you cannot make contributions once you enroll in Medicare, even if only Part A.
Also, if you stay with your current coverage and delay all or parts of Medicare, make sure the plan is considered qualifying coverage for both Parts B and D. If you’re uncertain whether you need to sign up, it’s worth checking with your human resources department or your insurance carrier.
“I find it is always good to just confirm,” said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans. Some 65-year-olds with younger spouses also might want to keep their group plan. Unlike your company’s option, spouses must qualify on their own for Medicare — either by reaching age 65 or having a disability if younger than that — regardless of your own eligibility.If your employer is small
If you have health insurance through a company with fewer than 20 employees, you should sign up for Medicare at 65 regardless of whether you stay on the employer plan. If you do choose to remain on it, Medicare is your primary insurance. However, it may be more cost-effective in this situation to drop the employer coverage and pick up Medigap and a Part D plan — or, alternatively, an Advantage Plan — instead of keeping the work plan as secondary insurance.
Often, workers at small companies pay more in premiums than employees at larger firms. The average premium for single coverage through employer-sponsored health insurance is $7,470, according to the Kaiser Family Foundation. However, employees contribute an average of $1,243 — or about 17% — with their company covering the remainder.
At small firms, the employee’s share might be far higher. For example, 28% are in a plan that requires them to contribute more than half of the premium for family coverage, compared with 4% of covered workers at large firms. Original Medicare consists of Part A (hospital coverage) and Part B (outpatient care coverage). Excluding limited exceptions, there is no coverage related to dental, vision or hearing, which can lead to beneficiaries forgoing care.
“It would be a significant improvement [to provide coverage] for people who often go without needed care because they can’t afford it and for people who pay a lot for the care they need,” said Tricia Neuman, executive director for the Kaiser Family Foundation’s program on Medicare policy. Some beneficiaries get limited coverage for dental, vision and hearing if they choose to get their Parts A and B benefits delivered through an Advantage Plan (Part C), which often include those extras. About 40% of beneficiaries are enrolled in Advantage Plans.
However, Lipschutz said, the extra coverage generally is not comprehensive. On the other hand, if expanded benefits — no matter how generous — were required under original Medicare, they’d become standard in an Advantage Plan.
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