Financial terms can get murky at times. So let’s clear some critical ones up. Specifically:

• Estate
• Beneficiary
• Benefit Salary
• Vesting

Finance-to-English Translation Guide

Estate

Your estate is the collection of property and money left behind when you die.

Beneficiary

This is a person or an organization (like, say, a charity) that you choose to receive money, or even property, after you die.

It’s critical to declare a beneficiary (or multiple beneficiaries) for all of your accounts and policies. Life insurance is the most obvious policy that needs a beneficiary. But what if you have money in a savings account, like a 401(k) or HSA? You’ll want to make sure you declare where that money is supposed to go. (You can even declare your own estate as a beneficiary. Though you may want to have other plans in place for how your estate itself will be handled.)

It’s also pretty wise to double-check every year to make sure you have everything set to go where you want it to. Relationships can change, and it may make sense sometimes to adjust your beneficiaries accordingly.

You register your beneficiaries for all your plans by going to WatersBenefitsNow.com, www.401k.com, for your 401(k) and HSA beneficiaries, and www.Fidelity.com for any Waters Equity Plans you may have.

You can enter, review, or update your beneficiary choices at any time.

Benefit Salary

Salaries can change over the year; for example, you might get a raise. And sometimes, depending on the type of company you work for and your position, a salary can be made up of different types of pay, like base pay, bonuses, commissions, and overtime.

The trick is, certain benefits are based off of the amount of your salary. And in order to account for all the kinds of variability a salary can have, you need a defined way of calculating what your salary is. That defined way of calculating your salary is called your “benefit salary.”

At Waters, your benefit salary is:

• Your base pay, as of the prior September 1st (or as of your first day, if you started after September 1st)

Plus-if applicable-either:

• Your average annual commission in the two, full calendar years prior to September 1st

… or…

• Your target bonus under the Waters Annual Incentive Plan

Vesting

In certain situations, your company may give you money (like a match to a savings account) or other assets (like stock options), but require you to work for the company for a certain amount of time before you qualify to keep the money or assets. This process is called vesting.

Sometimes vesting comes in multiple steps, qualifying you to keep a growing percentage of the money or assets, year after year.

Vesting can also come in just one step, meaning that you go from 0% vested to 100% just by reaching a single milestone.

And in some cases, vesting is immediate, from the day you start. Meaning you are 100% vested from the day you begin working for the company.

401(k)

A 401(k) helps you save for retirement through powerful tax benefits and a range of investment options. They can come in two types: a traditional 401(k), and a Roth 401(k), both of which are available to you at Waters.

Advantages – traditional 401(k)

First, there are the tax advantages, which apply to any traditional 401(k), no matter which company is offering it:

• The money you contribute to your 401(k) is taken out of your paycheck before federal taxes. If you figure you pay an average of about 23% in federal income tax, that means for every $100 you invest in a 401(k), you could only invest $77 in most other types of accounts. (Since you can’t contribute to most accounts until after your federal taxes have been taken out.)
• The money isn’t taxed as long as it stays in the account. (And that includes money you earn from 401(k) investments.) Normally, you pay taxes every year on the profit you make from investments. But in a 401(k), the profits aren’t taxed (as long as you keep them in the account), leaving you with more to invest the next year than you would have with most other accounts.
• As long as you wait until you are 59 and-a-half or older to withdraw the money, you’ll just pay the regular income tax rate on the funds.

Advantages – Roth 401(k)

Waters also allows you to invest in a Roth 401(k), which has different tax advantages than a traditional 401(k).

• Instead of contributing money into the account pre-tax, you contribute post-tax money, which means that you pay the taxes upfront. So, unlike the traditional 401(k), putting $100 into a Roth 401(k) means you’ll be seeing $100 less in your take-home pay–however, that’s the last you’ll see of federal taxes on the money.
• When you withdraw the money in retirement, you don’t pay federal income tax on the funds, including any interest the account has earned (this is the exact opposite of the traditional 401(k), where you only pay federal taxes when the money is withdrawn).

But whether you choose the traditional 401(k) or the Roth, in addition to the standard advantages, Waters will match any contribution you make, dollar for dollar, up to 6% of your salary per year. That’s a 6% bonus you can give yourself just for being smart about your future. And you are immediately 100% vested in that match contribution.

To help decide which 401(k) to contribute to, check out www.401k.com.

Requirements

You’re eligible to contribute to your 401(k) from day 1 at Waters.

Depositing Funds

You can set up or adjust your 401(k) at any time during the year with Fidelity, at www.401k.com.

If you are a new hire and do not actively enroll in the 401(k) within 31 days of your start date, Waters will auto-enroll you at 3% of your yearly salary. (Though you are allowed to opt out.)

Once you have been auto-enrolled, you will be set up for an automatic 1% annual increase to your contribution. (Again, unless you opt out.)

If you have any retirement savings in other qualified accounts, like prior employer plans, you can consolidate those accounts into the Waters plan without losing any tax benefits. (call Fidelity at 1-800-835-5095 for assistance.)

Additionally, if you consolidate your retirement savings, you’ll be able to use those funds toward Waters’ College Tuition Benefit program, which is linked below.

Contribution Limits

There is a yearly limit to how much you may contribute to the account each year, determined by the IRS.

This year, the limit is $22,500. Both Traditional pre-tax contributions and after-tax Roth 401(k) contributions count toward this IRS annual contribution limit.

And if you happen to be 50 or older, you can deposit an extra $7,500 in catch-up contributions. (Even if you turn 50 on December 31st, you can still add that extra .)

Investing Your 401(k) Money

Don’t worry. You don’t have to have a have a background as a hedge fund manager to handle your 401(k). There are a number of investment funds to choose from, including those geared toward brand-new investors.

Though…if you actually were a hedge fund manager (or close enough), there’s a self-directed brokerage account option for a more hands-on approach to managing your money.

Withdrawing Money

You can start withdrawing money from the account once you turn 59 and-a-half, with no penalty. At that time, you’ll just pay federal income tax.

If you withdraw money from the account before you turn 59 and-a-half, per government regulation, you will pay an extra 10% penalty fee on the amount withdrawn, on top of federal income taxes.

In the event of your death, your saved money will go to your beneficiary. So don’t forget to declare a beneficiary on 401k.com and to double check whom you’ve got set as your beneficiary every year.

Questions?

Fidelity will mail to your home a welcome kit in your first few weeks at Waters. To learn more, go to www.401k.com, or call 1-800-835-5095.