There is an old adage that says “numbers don’t lie.” So when it comes to figuring out how much money do you need to retire, you need to understand basic math, a few retirement concepts, and some financial retirement concepts. This is where you may wish you had paid more attention to your high school math teacher. (more…)

Employer-sponsored defined benefit pension plans in which the benefit is defined by account value rather than monthly lifetime retirement income. Cash balance plans are often referred to as “hybrids” because they have some of the characteristics of traditional “defined benefit” (DB) pension plans and some of the characteristics of “defined contribution” (DC) plans, such as 401(k). In general, traditional defined benefit plans promise qualified employees an income benefit for life (or some other period) starting at “normal retirement age,” without regard to how much (or little) the employer must contribute to the plan to fund the benefit. Defined contribution plans, on the other hand, promise only how much the employer will contribute to a qualified employee’s account from time to time until the employee retires but they make no promises with regard to investment earnings or results, let alone a monthly income benefit for life. (more…)

A company may terminate an employee benefit plan. However, a plan qualified for favorable tax treatment under the Internal Revenue Code must provide that, in effect, each affected participant becomes fully vested in his accrued benefit at the time of termination. ERISA also provides that, for defined benefit plans, the Pension Benefit Guaranty Corporation (PBGC) must be notified. (more…)

In later years, many employers have also turned to outside investment product providers and offer their services either parallel to or instead of the insurance products provided by TIAA-CREF. If you choose one of these investment products, you will not be contributing to an Retirement Annuity. You will have a separate account with the investment firm, but it will exist within the overarching structure of your employer’s retirement plan. Your employer may choose to allocate all matches to an accumulation in a TIAA-CREF Retirement Annuity, or it may choose to contribute the match to your account with the alternative investment provider. Again, this is depends on how your employer has constructed the plan. (more…)

Approximately one-fifth (20 percent) of post retirement income sources today comes from qualified retirement plan assets. Within 20 years, that number will increase to just under one-third (30 percent) of post retirement income. These are broadly defined as assets on which you have not yet paid retirement income taxes, though there is one exception in the Roth IRA. (more…)

A defined benefit plan is the granddaddy of retirement plans. Unfortunately, in the years to come, these plans will likely become the retirement equivalent of a dinosaur. In a defined benefit plan, as noted earlier, an employee’s years of loyal service are rewarded with the continuation of income post retirement based on a predetermined formula defined by the company. These formulas vary from company to company, so if you’re covered by a defined benefit plan, be certain to ask your human resources department to provide you with the information you need to review your benefits. (more…)

Classification of Pension Plans

There are two main criterions to distinguish Pension Plans. The first criterion is the asset base for the liabilities for benefits promised to plan participants or employees:

1. Pension plans without a fund ( pay as you-go plans)
2. Pension plans with a fund (funded pension plans). (more…)

Defined contribution plans have several characteristics involving the following factors:

• Some plans allow you to defer a portion of your compensation and contribute it to the retirement fund, (more…)

Once you identify your personal financial retirement profile, you can move to the next level on the financial planning for retirement. Many people accumulate different types of property for pension that can be used for retirement. The type of property one owns and its tax characteristics can be important in creating an overall retirement strategy that fits well into Level III of the financial pyramid. Let’s take a look at how to create efficiency and diversification in an integrated program. (more…)

Among the variety of retirement plans you can pursue, some qualify for tax deferral by the regulations of the federal government, and others don’t. The federal government passed the Employee Retirement Income Security Act (ERISA) regulation in 1974. This legislation and its requirements determine whether a retirement plan offered by employers or an employee organization (such as a union) qualifies for tax deferral of investment and interest until retirement age. (more…)