1 / 7

Module 1.4

Module 1.4. Retirement Pensions. Questions to ask a potential employer “ When do company contributions start? ” “ When will my account be credited with 100% of company ’ s contributions as my own? ” “ Does your company do a graduated or cliff vesting schedule? ”. Retirement Pensions.

quintessa
Download Presentation

Module 1.4

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Module 1.4

  2. Retirement Pensions Questions to ask a potential employer “When do company contributions start?” “When will my account be credited with 100% of company’s contributions as my own?” “Does your company do a graduated or cliff vesting schedule?”

  3. Retirement Pensions Defined-Benefit Plan Traditional company pension plan; ultimate retirement benefit is definite and determinable as a dollar amount Example is a military retirement pension • Funded mostly by the employer • Responsibility for payment of the benefit & risk on funds invested rests with the employer • Like separation pay & unemployment pay, it is considered a type of compensation

  4. Retirement Pensions Defined-Contribution Plan A qualified retirement plan in which the contribution is defined yet the ultimate benefit to be paid is not Examples are 401(k) and 403(b) plans, Roth 401(k), Thrift Savings Plan (TSP), SIMPLE IRA, SEP, Employee Stock Ownership (ESOP), and profit sharing • Contributions are from the employee • A portion may/may not be matched by employer • Each participant has an individual account • The benefit at retirement depends on amounts contributed + investment performance of account • Investment risk may rest solely with the employee due to opportunity to choose from a number of investment options

  5. Thrift Savings Plan (TSP) Options • Leave funds in TSP account (if balance is more than $200) • Roll your TSP into another eligible account i.e., IRA, annuity, civilian 401(k) • Withdraw your TSP funds completely Some funds may include tax-exempt contributions! Contact ThriftLine (1-TSP-YOU-FRST) www.tsp.gov

  6. Early TSP Withdrawal Example Member @ 42 withdrawals $10,000 balance from TSP Before 59 1/2 Penalty Taxes Factor in a minimum 20% tax rate that will cost $2,000 Not waiting will cost a minimum of $3,000! A premature withdrawal penalty costs $1,000

  7. Cutting Taxes While Investing • Tax-deferred accounts allow the investor to delay paying taxes on earnings. • Immediate benefit is that the contribution is deducted from paychecks before income taxes are calculated, so taxable pay is reduced today.

More Related