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Learning Objectives
1. Understand the changing nature of
retirement planning.
Learning Objectives
4. Choose how your retirement
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Introduction
Today, youve got to come up with
Social Security
Primary source of retirement income for
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Eligibility
95% of Americans are covered. Pay into system to be eligible and receive
credits.
Retirement Benefits
Benefits formulareplace 42% of average
earnings based on number of earnings years, average level of earnings, adjustments for inflation, income brackets.
Full benefits at the full retirement age. Reduced benefits at 62 Increased benefits if you delay retirement.
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
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breadwinner dies.
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Defined-Benefit Plans
Traditional pension plan where you receive
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Defined-Benefit Plans
Portability Vested Funded pension plan Unfunded pension plan
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their pay each year, plus a predetermined rate of interest. salary each year into an account which grows at 30-year Treasury bond rate.
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estimating how much you will need. expenses to calculate the cost to support yourself in retirement.
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Adjusted Shortfall
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retirement funding.
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year.
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Defined-Contribution Plan
You and employer or your employer alone
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Defined-Contribution Plans
Profit-Sharing Plans Money Purchase Plan Thrift and Savings Plan Employee Stock Ownership Plan (ESOP) 401 (k) Plan
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall
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Defined-Contribution Plans
How much can you contribute? Limits on the rise. $15,500 for 401(k) and 403(b) plans in
Plan
Simplified Employee Pension Plan (SEP-IRA) Savings Incentive Match Plan for Employees
or SIMPLE plan
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Traditional IRAs
Tax advantagedcontribution may or may
not be tax-deductible depending on individuals level of income and whether he/she, or spouse, is covered by a company retirement plan.
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tax free.
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spend at retirement, if both are taxed at the same rate. taxes ahead of time.
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contributions are limited to $2000 annually per child under 18. and $190,000 for couples.
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receive a payout.
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normal income.
have the distribution rolled over into an IRA or other qualified plan.
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$150,000.
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Summary
Social Security benefits are determined by
number of years of earnings, the average level of earning, an adjustment for inflation.
step process from setting goals to putting the plan in place and saving.
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Summary
Tax-favored retirement plans can be
employer-sponsored, for self-employed, or individual retirement accountswhere contributions and earnings are not taxed.
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