In class this week, retirement planning was discussed including the importance of saving for retirement early, social security, employer sponsored plans, and private accounts.
When individuals reach the age of retirement, their income source changes from earned income to employee-based retirement benefits. In order to fund one's retirement, individual's should take advantage of employer-based retirement benefits, private savings and investments, social security, etc. In order to get the most benefits out of these plans, individuals should start to save for retirement as soon as possible.
Social Security benefits should be viewed as a form of supplemental retirement income, meaning it is not wise to rely on Social Security benefits as one's only source of income in retirement. When an individual is employed, FICA taxes are withheld from wages in order to fund social security benefits today. Individuals qualify for Social Security once he/she has earned 40 credits and is at least 65 (this number will increase to 67 for younger citizens). Citizens can benefit from his/her own work history, a partner's history (50% of benefits), or as a survivor's benefit (100% of benefits). Determinants of Social Security benefits include the number of years of earnings, average level of earnings, and the age at which benefits begin to distribute.
Employee-sponsored retirement plans can exist in two forms, qualified and non-qualified plans. Qualified plans are pre-taxed and are covered by federal law. Non-qualified plans are taxed at the time of distribution. Employer-funded pension plans are advantageous to employees because the employer bears the investment risk of the plan and most are non-contributory (only the employer pays towards the pension plan). Another type of employer-sponsored plan includes defined benefit plans. These have a predetermined payment based on a formula which uses average salary, years of service, and age at retirement to calculate a monthly benefit. Limits on these plans include a lack of portability, little notification of changes to plans, a lack of adjustments for inflation, and a lack of safety.
Personal retirement accounts include IRAs, Roth IRAs, Keoghs, and SEP-IRAs. IRAs and Roth IRAs differ in their tax treatments. IRAs are taxed when the savings are distributed, while Roth IRAs are pre-taxed and grow tax-deferred. Traditional IRAs grow tax-deferred until withdrawal. Distributions prior to age 59.5 are subject to a 10% tax penalty. After turning 70.5, individuals must begin to distribute funds or a penalty of 50% the minimum annual distribution will be placed on the account.
In order to meet retirement goals, follow these steps:
Article 1 - Basics of Student Loans
Types of Student Loans
Article 2 - Identity Theft & Credit Card Fraud
A few simple and no-cost measures can be taken to protect against identity theft and fraud.
Guard online information
(November 25 - December 1)
When individuals reach the age of retirement, their income source changes from earned income to employee-based retirement benefits. In order to fund one's retirement, individual's should take advantage of employer-based retirement benefits, private savings and investments, social security, etc. In order to get the most benefits out of these plans, individuals should start to save for retirement as soon as possible.
Social Security benefits should be viewed as a form of supplemental retirement income, meaning it is not wise to rely on Social Security benefits as one's only source of income in retirement. When an individual is employed, FICA taxes are withheld from wages in order to fund social security benefits today. Individuals qualify for Social Security once he/she has earned 40 credits and is at least 65 (this number will increase to 67 for younger citizens). Citizens can benefit from his/her own work history, a partner's history (50% of benefits), or as a survivor's benefit (100% of benefits). Determinants of Social Security benefits include the number of years of earnings, average level of earnings, and the age at which benefits begin to distribute.
Employee-sponsored retirement plans can exist in two forms, qualified and non-qualified plans. Qualified plans are pre-taxed and are covered by federal law. Non-qualified plans are taxed at the time of distribution. Employer-funded pension plans are advantageous to employees because the employer bears the investment risk of the plan and most are non-contributory (only the employer pays towards the pension plan). Another type of employer-sponsored plan includes defined benefit plans. These have a predetermined payment based on a formula which uses average salary, years of service, and age at retirement to calculate a monthly benefit. Limits on these plans include a lack of portability, little notification of changes to plans, a lack of adjustments for inflation, and a lack of safety.
Personal retirement accounts include IRAs, Roth IRAs, Keoghs, and SEP-IRAs. IRAs and Roth IRAs differ in their tax treatments. IRAs are taxed when the savings are distributed, while Roth IRAs are pre-taxed and grow tax-deferred. Traditional IRAs grow tax-deferred until withdrawal. Distributions prior to age 59.5 are subject to a 10% tax penalty. After turning 70.5, individuals must begin to distribute funds or a penalty of 50% the minimum annual distribution will be placed on the account.
In order to meet retirement goals, follow these steps:
- Set Goals.
- Estimate needs to meet the goals.
- Estimate income available at retirement.
- Calculate the annual inflation-adjusted shortfall.
- Calculate the funds needed for this shortfall.
- Determine how much must be saved annually.
- Put the plan into play and save.
Article 1 - Basics of Student Loans
Types of Student Loans
- Stafford loans
- Perkins loans
- PLUS loans
- Consolidation loans
- Institutional loans
- Private & State loans
Article 2 - Identity Theft & Credit Card Fraud
A few simple and no-cost measures can be taken to protect against identity theft and fraud.
Guard online information
- Protect login names and passwords by clearing them from public and private computers on a regular basis.
- Pay for online purchases with a credit card. It guarantees the holder more rights under federal law regarding fraud than a debit card or online payment service.
- Be on alert for phishing. Don't enter personal information on pop-up adds or unfamiliar websites.
- Check statements on a monthly basis at least. Keep an eye out for purchases that are unauthorized.
- Banks require account holders to report fraudulent charges within the 30 days following the statement disbursal.
- Some identity thieves manage to complete change of address forms in an attempt to keep fraudulent transactions hidden.
- Equifax, Experian, and TransUnion are the three free credit reporting bureaus available to citizens.
- An individual can check his/her credit report from each bureau once a year. Hence, citizens can check their credit scores every 4 months by changing bureaus each time.
- Protect personal information by shredding all outdated bank statements, bills, credit card applications, junk mail, and any other documents with personal details displayed.
(November 25 - December 1)