Bank of America employs over 15,000 people in the Charlotte area.1 As a financial advisor in Charlotte—and the husband of a former Bank of America employee—I’m acutely aware of the company’s employee benefits package and its nuances.
In this article, I’ll walk you through some simple ways to optimize your benefits, so you can make sure you’re making the most of what this large corporation has to offer.
Here’s how to optimize your Bank of America benefits package:
Get The Full 401(k) Employer Match with your Bank of America Benefits Package
Bank of America matches 401(k) contributions dollar for dollar, up to 5%. This means that if you make $100,000 a year, you can contribute $5,000 and Bank of America will throw in another $5,000 to boot. On top of this, the bank will make an annual company contribution to your 401k during the first quarter of each year. After one year of service, they contribute 2% of your eligible pay and 3% if you have at least 10 or more years of service. Keep in mind, the maximum eligible pay to determine your matching contributions and annual company contribution is $150,000
You won’t find this kind of return anywhere else in the market. If you haven’t already, adjust your paycheck withholdings so you’re contributing enough to get the full employer match. It’s a 100% return on your investment.
Take It A Step Further By Maxing Out Your 401(k) Completely
Maxing out your 401(k) is one of the easiest ways to reduce your taxable income for the year. It also gives a nice boost to your retirement savings.
For 2022, you can contribute up to $20,500 to your 401(k).2 If you’re at least 50, you can save an additional $6,500 in catch-up contributions.
Many people forget to bump up their contribution limit when they turn 50 to account for this increased limit. Set a reminder if your 50th birthday is on the horizon.
Diversify Your 401(k) Holdings
With the recent expansion of Bank of America’s employee stock awards program, even more people are receiving stock awards. This is essentially Bank of America stock. It is susceptible to volatility and large declines in value just like owning the actual stock (BAC).
If you’re holding too much of this Bank of America “stock” in your 401k or as part of the awards program, consider diversifying out of it. You’ll initially want to look at selling it in your 401k since there isn’t a tax consequence. However, don’t let the tax tail wag the dog and not consider diversifying out of the stock awards upon vesting. By doing so, you’ll mitigate your risk and ensure your wealth isn’t wiped out if the stock value decreases.
Consider Roth Contributions for your Bank of America Benefits Package
Roth accounts can play a large part in helping you minimize taxes and maximize your retirement savings. Depending on your financial situation, it may make sense to contribute to the Bank of America Roth 401(k) or implement a backdoor Roth IRA.
This step is more difficult to complete than the others, so you may need help from an expert to figure out if Roth contributions are something you should consider.
At Calamita Wealth, we help you evaluate whether to put money into the Roth component of your Bank of America 401(k). We also evaluate the viability of doing an annual backdoor Roth IRA.
Backdoor Roth IRAs, in particular, require precise timing to avoid taxes. Our team can help you figure out if they should be a part of your overall wealth plan.
Update Beneficiaries For 401(k) Plans
Many people I work with forget to update the primary and contingent beneficiaries on their 401(k) plans. We’ve seen many instances where our clients thought they had the correct beneficiaries listed. But after receiving a printed beneficiary confirmation statement, it was clear that either the wrong beneficiary was listed, no beneficiary was listed, or it was missing contingent beneficiaries.
Moral of the story? Request printed beneficiary confirmation statements for your accounts and make sure you’ve listed the correct beneficiaries.
Max Out Your HSA Contributions
If you have a high-deductible health insurance plan, you’re eligible for a health savings account (HSA). HSAs are unique because they’re 100% tax-free: contributions are tax-free, money held in the account grows tax-free, and withdrawals are tax-free. You can use them to cover most medical expenses, including prescriptions, doctor visits, and even eyeglasses.
For 2022, you can contribute up to $3,650 if you have a self-only insurance plan and up to $7,300 for a family plan.3
Bank of America also offers employer matching when you and your spouse complete a list of “activities” in your account dashboard.
Review Your Long-Term Incentive Compensation Plan from your Bank of America Benefits Package
If you’re a highly compensated Bank of America employee, you may have access to a long-term incentive compensation plan. This plan is often made up of awards, such as:
- Stock options
- Stock appreciation rights
- Restricted stock and restricted share rights
- Performance shares and performance units
- Stock awards
If you hold any of these, it may be beneficial to go over the details of each with an experienced professional who can help you optimize them.
For our clients, we typically come up with a multi-year strategy to diversify out of company stock and mitigate investment risk. We also maintain a detailed record of the terms of each award, its vesting schedule, and any potential tax consequences. We then strategize ways to minimize these taxes and even estimate taxes due so there are no surprises.
How We Help
At Calamita Wealth Management, we’ve helped many employees maximize and optimize their benefits. If you’d like professional guidance and oversight in making sure you get the most out of all your benefits packages have to offer, schedule an introductory phone call using our online calendar. Reach out to us at (704) 276-7325 or firstname.lastname@example.org.
Todd Calamita is the founder and managing principal of Calamita Wealth Management. This is an independent, fee-only wealth management company located in Charlotte, NC. Calamita Wealth serves people locally and across the country, that focuses on providing wealth management solutions to affluent individuals over age 50 and their families. He has more than 20 years of experience in the financial services industry. Todd also is passionate about helping people have a better life. He does this by designing and implementing customized financial plans that bring clarity and confidence.
Todd is a CERTIFIED FINANCIAL PLANNER™ and CERTIFIED DIVORCE FINANCIAL ANALYST® professional. His educational background includes a Bachelor of Business Administration from Ohio University. He also received a Master of Business Administration from the Weatherhead School of Management at Case Western Reserve University. Aside from planning, he authored, Plan Smart: Conquering 10 Common Money Traps, as well as numerous articles on wide-ranging personal finance topics, from taxes to retirement accounts. He featured in a Financial Boot Camp TV series as a volunteer showing people how to make smart decisions with their money. When he’s not working, you can find Todd spending time with his wife, Teresa, and their two sons, Colin and Cameron. He enjoys rock climbing, swimming, and traveling. Todd even has a black belt in Tang Soo Do, a Korean martial art. To learn more about Todd, connect with him on LinkedIn.