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Planning for Retirement

Planning for Retirement. #14. Learning Goals. Role of Retirement Planning. Set Your Goals At what age do you want to retire? How much money will you need?. Three Biggest Pitfalls in Retirement Planning. Compounding magnifies these pitfalls. Estimating Income Needs. Sources of Income .

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Planning for Retirement

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  1. Planning for Retirement #14

  2. Learning Goals

  3. Role of Retirement Planning Set Your Goals At what age do you want to retire? How much money will you need?

  4. Three Biggest Pitfalls in Retirement Planning Compounding magnifies these pitfalls

  5. Estimating Income Needs

  6. Sources of Income

  7. Social Security See it as an insurance system not a retirement plan Benefits provided by payroll taxes employee and employer pay Amount of benefits may not be sufficient at retirement

  8. SS Retirement Benefits

  9. SS Retirement Benefits Basic Social Security benefits include:

  10. Pension Plans and Retirement Programs Employer-sponsored retirement programs Self-directed retirement program

  11. Employee Sponsored Programs

  12. Defined Contribution company guarantees contribution, but not a return on it or a retirement benefit Defined Benefit company guarantees retirement benefit regardless of pension fund performance Employer-Sponsored Programs

  13. Supplemental Plans

  14. Supplemental Plans Evaluating Employer-Sponsored Pension Plans

  15. Self-Directed Retirement Programs

  16. Types of IRA’s

  17. Self-Directed Accounts and their Investment Vehicles • Individual makes own investment decisions • Fund with income-producing assets outside retirement account • Growth-oriented securities are more risky • Cannot write off losses from sale of securities in IRA or Keogh

  18. Annuities

  19. Annuities Before Retirement: Accumulation Period annuitant purchases annuity by paying premiums into the account During Retirement: Distribution Period insurance company makes payments to annuitant. Portion not returned to annuitant prior to death goes to beneficiaries

  20. Single Premium vs. Installments one lump-sum payment or a series of payments to purchase annuity Fixed vs. Variable investment grows at low guaranteed fixed rate or possibly a higher variable rate with no guarantee of return Classification of Annuities

  21. Types of Annuity Contracts

  22. Deposition of Proceeds

  23. Fixed versus Variable Annuity Fixed-rate annuity insurance company agrees to pay guaranteed rate of interest Variable annuity monthly income from policy varies based on insurer’s actual investment experience

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