What I do every day at work has a direct impact on both my future and my retirement savings.
Take a moment to ponder this statement. If you are employed by an employee-owned business that operates under an Employee Stock Ownership Plan (ESOP) — like Two Rivers Marketing — your hard work can significantly influence your retirement, affecting both the timing and the amount you’ll have saved.
October marks Employee Ownership Month, often called “ESOP Month.” It presents an ideal opportunity to recognize the advantages of employee ownership and ESOPs in securing long-term retirement savings.
What Is an ESOP?
An ESOP is a profit-sharing financial program designed to assist employees in saving for their retirement. ESOPs empower employees within a company to become partial owners of the company they work for. Companies that adopt an ESOP contribute company stock shares to a dedicated financial account, often structured as a trust fund. When a company achieves profitability, these profits are distributed to employees as shares. The allocation of shares can be based on factors such as an employee’s salary, years of service, or other predetermined criteria.
Two Rivers Marketing is an ESOP company dedicated to promoting the advantages of employee ownership. Two Rivers Marketing is part of VGM Group, which is celebrating 15 years of employee ownership this year. Our employee-owners are actively engaged and reap the rewards of being part of an ESOP.
And because our associates are financially tied to the success of the company, we are committed to the success of our agency and consistently delivering our best work, which in turn is a benefit for our clients.
When a company performs well and employees receive annual contributions, their ESOP accounts can experience substantial growth. Employee-owners can increase their balances both when their company makes contributions and when the share price appreciates. Over time, this can amass a significant sum in an employee’s retirement portfolio. It also creates a sense of pride and the motivation for employee-owners to contribute to the company’s continued success. This can translate into a benefit for our agency clients because associates have a vested interest in doing excellent work to keep the agency successful.
The funds within the employee’s ESOP account grow tax-free until the employee reaches retirement age and elects to initiate withdrawals. At that point, the funds may be subject to taxation, depending on the state income tax regulations, and can be used as a source of income throughout retirement.
If an employee chooses to leave a company, the employee can roll over an ESOP share value into an individual retirement account (IRA). Doing so means the money is still not taxed and can continue to grow until the employee reaches the minimum retirement age to make withdrawals without a penalty.
Why I Like ESOPs
Allow me to transition from some heavy financial terminology to my personal experience with ESOPs. Currently, I’m enrolled in my third ESOP, while working 21-plus years at Two Rivers Marketing. Our agency was purchased in 2008 and again last year. Each time, I rolled my ESOP share value into an IRA for my personal retirement plan.
I’m 46 and thinking much more seriously about retirement than I did 20 years ago. My goal is to retire when I’m 62, which means I’ve already worked more than half of my professional career. Sixteen years doesn’t seem that far off.
My current ESOP enrollment at VGM Group is just one part of my retirement portfolio. Since I started my first full-time job after college, I also have been saving in a 401(k) for my eventual retirement.
I’m on track to retire when I’m 62 because I’ve followed two basic principles of investing: discipline and consistency. Is it any coincidence that these are two of my top five CliftonStengths themes?
While I can’t control the stock market and what happens daily in my mutual fund investments, I can choose to give 100% when I come to work. Every day, I can contribute to our company’s financial success and, in turn, my financial well-being. That’s the beauty of working for an employee-owned company.
I am a firm believer in providing exceptional customer service to our clients. In doing so, I believe our clients will continue to do business with us, thereby providing financial stability for our company and generating profits that are shared among employee owners. Research shows that employees working for an ESOP company are more likely to keep working there than employees at other types of companies.
I’m a VGM Group and Two Rivers Marketing ESOP Ambassador. Why? It’s because I’m passionate about the benefits of an ESOP and the importance of saving for retirement. I promote employee ownership and its benefits to my colleagues and our clients.
One thing is certain: no matter how much we enjoy our jobs, we will all eventually want or need to retire. When the time comes, make it your decision and know that you have the financial savings to retire on your timeline.
Learn more about what makes Two Rivers Marketing a great place to work because of our employee ownership and our collaborative culture.