Retirement - Weebly

Retirement

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Section 1 Retirement Planning

• Explain the importance of

retirement planning.

• Identify types of retirement

accounts.

Daily Objectives:


Planning for Retirement Section 1 Retirement Planning

1. Set Long-Range Goals 1. Conduct a Financial Analysis 1. Review Assets


Setting Long-Range Goals Section 1 Retirement Planning

• Where do you want to live after you retire? • Beach? • Condo? • Home you purchased during working years?

• What type of lifestyle would you like to have after you retire? • Ramen noodles? • Cruises?

• Analyze your current financial situation to determine what you need to do for each of your goals.


Review Your Assets Section 1 Retirement Planning

What do you currently have that will take you into retirement? • House? • Car? • Investments? • Other Assets? • Life insurance?


Conduct a Financial Analysis Section 1 Retirement Planning

Assets- Liabilities= Net Worth

• What examples can you name of assets? • What examples can you name of liabilities? • What can you do to increase your net worth?


Inflation and Retirement Section 1 Retirement Planning

Inflation acts as an invisible tax that erodes your purchasing power meaning that your money is worth less tomorrow than it is today. How does inflation impact retirement? • Investment rates need to beat

inflation so that our money does not lose value over time.


Social Security •Provides benefits to retirees, survivors, and disabled persons

•To qualify for retirement benefits, you must earn a certain number of credits. These credits are based on the length of time you work and pay Social Security tax, or contributions, on your earnings.

•Do NOT count on Social Security as a retirement fund.


Public Pension Plans Section 2 Planning Retirement Income

• Few workers still have the option of a Pension Plan. • Public Pension Plan are common for workers of:

• Federal government • Railroad employees • Veterans Administration • State and local government

• Even some of these have cut back on benefits • Ex. Public Pension Plan to 403(b) in school system


401 (k) Plans •Salary-reduction plan

•A type of retirement savings plan funded by a portion of your salary that is deducted from your gross paycheck and placed in a special account.

•Many employers match their employees’ 401 (k) contributions up to a specific dollar amount or percentage of salary.


401(k) Match •Your annual salary: $35,000

•Your employer matches up to: 3%

•If you contribute 3% • $35,000 x .03= $1,050

•Your employer matches the $1,050

•Your 401(k) account will have • $1,050+ $1050= $2,100

contributed for the year


403 (b) Plans •If you are employed by a tax-exempt institution, such as a hospital or a nonprofit organization, that salary-reduction plan is a called a Section 403(b) plan.

•The funds in this plan are also tax-deferred.

•The 401(k) and 403(b) plans are known as tax-sheltered annuity (TSA) plans.

•The amount that can be contributed each year to 401(k) and 403(k) plans is limited by law, as is the amount of contributions to other types of defined-contribution plans.


Regular (Traditional) IRA • An individual retirement account (IRA) that allows individuals to

direct pretax income, up to specific annual limits, toward investments that can grow ***tax-deferred*** (no capital gains or dividend income is taxed)

• Allows you to make annual contributions until age 70 ½. • Contribution limits exist. • Depending upon your tax filing status and income, the

contributions may be fully or partially tax-deductible.


Roth IRA

•Similar to a Regular IRA, but ***annual contributions to a Roth IRA are not tax-deductible, but the earnings are tax-free***.

•You may contribute the same amounts as allowed for a regular IRA.

•You can continue to make annual contributions to a Roth IRA even after age 70 ½. You can also withdraw the money from the account without paying taxes or penalties after 5 years if you are at least 59 ½ years old or if you are using the money to help buy your first home.

•You may convert a regular IRA to a Roth IRA.


Rollover IRA •A rollover IRA is a traditional IRA that allows rollover, or transfer, of all or a portion of your taxable distributions from one retirement plan to another IRA without paying taxes on it.

•Commonly used to hold 401(k) or 403(b) assets so they can later be moved to a new employer’s retirement plan.


Limits on Retirement Plans Section 2 Planning Retirement Income

• With the exception of Roth IRAs you cannot keep your money in a tax-deferred account forever.

• Contribution limits exist and vary based on account type and tax filing status.

• NEVER borrow from your retirement plan!


Annuity •A contract purchased from an insurance company that guarantees a future fixed or variable payment to the purchaser for a certain number of years or for life.

•One option: purchase an annuity with the money you receive from an IRA or company pension. Decide if you want payments to start now or later...payments will be taxes as ordinary income; however, the interest you earn from the annuity accumulates tax-free until payments begin.


Annuities Section 2 Planning Retirement Income

• Immediate Annuities- People approaching retirement age can

purchase immediate annuities; they provide income payments at

once. When you reach age 65 you may decide you don’t need

all of your life insurance coverage, so you can convert it to cash

as a lump-sum payment

• Deferred Annuities- Income payments start at a future date;

meanwhile interest accumulates on the money you deposit. A

deferred annuity is purchased as a lump-sum payment and is

known as a single-premium deferred annuity. Popular because

of tax-free growth.


Check Point 1. What is the difference between a 401(k) and 403(b)?

2. What does it mean for a 401(k) to “match”?

3. What should you do with your 401(k) if you switch companies?

4. When is your money taxed for a Roth IRA?


Save early & maximize contributions!!


Date post:	18-Dec-2021
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