Refer to page 466, "Your Retirement Housing." Prepare a 1-page paper on your retirement housing plans. Tell me where you are going to live. Are there any tax benefits for choosing your retirement location? Will you rent or own your home Be sure to include the size of your home (For example: 2 bedrooms, 2 baths, 1 car garage, single story) Don't forget to consider additional costs as you age: o Will you need help cleaning your home o Will you need help getting around town, shopping, going to doctors appointments. Remember there will come a time when driving is no longer safe for you or the people around you. o If you live in a cold climate, will you need help shoveling snow or cleaning out your gutters or racking the lawn or even landscaping in general? Page 466 Your Retirement Income The four major sources of retirement income are employer pension plans, public pension plans, personal retirement plans, and annuities Employer Pension Plans LO14.2 A pension plan is a retirement plan that is funded, at least in part, by an employer. With this type of plan, your employer contributes to your retirement benefits, and sometimes you contribute too. (See the nearby Figure Ii Oull feature.) These contributions and earnings remain tax-deferred until you start to withdraw them in retirement Determine your planned retirement income and develop a balanced budget based on your retirement Income Private employer pension plans vary. If the company you work for offers one, you should know when you become eligible to receive pension benefits. You'll also need to know what benefits you'll receive. Ask these questions during your interview with a prospective employer and start participating in the plan as soon as possible. Most Copy prospective employer and start participating in the plan as soon as possible. Most employer plans are one of two basic types: defined contribution plans or defined- benefit plans. DEFINED CONTRIBUTION PLAN A defined contribution plan . sometimes called an individual account plan, consists of an individual account for each employee to which the employer contributes a specific amount annually. This type of retirement plan does not guarantee any particular benefit. When you retire and become eligible for benefits, you simply receive the total amount of funds (including investment earnings) that have been placed in your account. ACTION ITEM I'll need 70 to 90 percent of preretirement earings to live comfortably during my retirement Yes No Figure It Out! Saving for Retirement Calculate how much you would have in 10 years if you saved $2,000 a year at an annual compound interest rate of 10 percent, with the company contributing $500 a year. 500.00 Company annual contribution matching $0.50 of 5% of the salary 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year noun your 9th year 10th year Total Page Several types of defined contribution plans exist. With a money-purchase plan, your employer promises to set aside a certain amount of money for you each year. The amount is generally a percentage of your earnings. Under a stock bonus plan, your employer's contribution is used to buy stock in the company for you. The stock is usually held in a trust until you retire. Then you can either keep your shares or sell them. Under a profit-sharing plan, your employer's contribution depends on the company's profits. In a 401(k) plan . also known as a salary-reduction plan, you set aside a portion of your salary from each paycheck to be deducted from your gross pay and placed in a special account. Your employer will often match your contribution up to a specific dollar amount or percentage of your salary. For example, as one of the retirement benefits, McGraw-Hill Education (the publisher of your textbook) offers its employees a 401(k) savings plan. Under this plan, employees can contribute up to $18,000 in 2017. The company matches up to the first 6 percent of the employee's pretax contributions. The funds in 401(k) plans are invested in stocks, bonds, and mutual funds. As a result, you can accumulate a significant amount of money in this type of account if you begin contributing to it early in your career. In addition, the money that accumulates in your 401(k) plan is tax-deferred, meaning that you don't have to pay taxes on it until you withdraw it. In a 401(k) plan, your account balance will determine the amount of retirement income you will receive from the plan. While contributions to your account and the earnings on your investments will increase your retirement income, fees and expenses paid by In a 401(k) plan, your account balance will determine the amount of retirement income you will receive from the plan. While contributions to your account and the earnings on your investments will increase your retirement income, fees and expenses paid by your plan may substantially reduce the growth in your account, which will reduce your retirement income. The following Page 466 example demonstrates how fees and expenses can impact your account. Refer to page 466, "Your Retirement Housing." Prepare a 1-page paper on your retirement housing plans. Tell me where you are going to live. Are there any tax benefits for choosing your retirement location? Will you rent or own your home Be sure to include the size of your home (For example: 2 bedrooms, 2 baths, 1 car garage, single story) Don't forget to consider additional costs as you age: o Will you need help cleaning your home o Will you need help getting around town, shopping, going to doctors appointments. Remember there will come a time when driving is no longer safe for you or the people around you. o If you live in a cold climate, will you need help shoveling snow or cleaning out your gutters or racking the lawn or even landscaping in general? Page 466 Your Retirement Income The four major sources of retirement income are employer pension plans, public pension plans, personal retirement plans, and annuities Employer Pension Plans LO14.2 A pension plan is a retirement plan that is funded, at least in part, by an employer. With this type of plan, your employer contributes to your retirement benefits, and sometimes you contribute too. (See the nearby Figure Ii Oull feature.) These contributions and earnings remain tax-deferred until you start to withdraw them in retirement Determine your planned retirement income and develop a balanced budget based on your retirement Income Private employer pension plans vary. If the company you work for offers one, you should know when you become eligible to receive pension benefits. You'll also need to know what benefits you'll receive. Ask these questions during your interview with a prospective employer and start participating in the plan as soon as possible. Most Copy prospective employer and start participating in the plan as soon as possible. Most employer plans are one of two basic types: defined contribution plans or defined- benefit plans. DEFINED CONTRIBUTION PLAN A defined contribution plan . sometimes called an individual account plan, consists of an individual account for each employee to which the employer contributes a specific amount annually. This type of retirement plan does not guarantee any particular benefit. When you retire and become eligible for benefits, you simply receive the total amount of funds (including investment earnings) that have been placed in your account. ACTION ITEM I'll need 70 to 90 percent of preretirement earings to live comfortably during my retirement Yes No Figure It Out! Saving for Retirement Calculate how much you would have in 10 years if you saved $2,000 a year at an annual compound interest rate of 10 percent, with the company contributing $500 a year. 500.00 Company annual contribution matching $0.50 of 5% of the salary 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year noun your 9th year 10th year Total Page Several types of defined contribution plans exist. With a money-purchase plan, your employer promises to set aside a certain amount of money for you each year. The amount is generally a percentage of your earnings. Under a stock bonus plan, your employer's contribution is used to buy stock in the company for you. The stock is usually held in a trust until you retire. Then you can either keep your shares or sell them. Under a profit-sharing plan, your employer's contribution depends on the company's profits. In a 401(k) plan . also known as a salary-reduction plan, you set aside a portion of your salary from each paycheck to be deducted from your gross pay and placed in a special account. Your employer will often match your contribution up to a specific dollar amount or percentage of your salary. For example, as one of the retirement benefits, McGraw-Hill Education (the publisher of your textbook) offers its employees a 401(k) savings plan. Under this plan, employees can contribute up to $18,000 in 2017. The company matches up to the first 6 percent of the employee's pretax contributions. The funds in 401(k) plans are invested in stocks, bonds, and mutual funds. As a result, you can accumulate a significant amount of money in this type of account if you begin contributing to it early in your career. In addition, the money that accumulates in your 401(k) plan is tax-deferred, meaning that you don't have to pay taxes on it until you withdraw it. In a 401(k) plan, your account balance will determine the amount of retirement income you will receive from the plan. While contributions to your account and the earnings on your investments will increase your retirement income, fees and expenses paid by In a 401(k) plan, your account balance will determine the amount of retirement income you will receive from the plan. While contributions to your account and the earnings on your investments will increase your retirement income, fees and expenses paid by your plan may substantially reduce the growth in your account, which will reduce your retirement income. The following Page 466 example demonstrates how fees and expenses can impact your account