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…)

You can retire at 62 and can consider it as early retirement, but it come with a penalty. You can also retire in the years between the earliest retirement dates and full retirement and get a bit more money with each passing year. Suppose you create a financial plan based upon the three-legged financial stool of personal savings, part-time income (by having retirement part time jobs), and getting Social Security Income (Social Security benefits). As your planned-for retirement date approaches, (more…)

This is usually referred to as the actuarial accrued liability. It is that portion of the actuarial present value of all future benefits (PVFB) that is assigned by the actuarial method to the period prior to the valuation date. present value of all future benefits is the present value of all benefits accrued and unaccrued, past and future. It is a measure of the total obligations of the plan, past and future. That portion assigned to the past is called the actuarial accrued liability. This concept will be discussed again later in the section on actuarial methods. Due to the wide variety of actuarial methods in use, the same plan and assumptions can generate Significantly different actuarial accrued liabilities. In fact, one commonly used method (Aggregate Actuarial Cost) produces a zero actuarial accrued liability by definition. It funds costs over future payrolls only. (more…)

In December 2002, the U.S. Treasury Department issued some long-awaited guidance to employers about cash balance plans. These proposed regulations, issued under Internal Revenue Code Section 411 (b)(1)(H), prohibit age discrimination employment in benefit accruals and are fairly comprehensive in nature. Although a public hearing on the regulations was held in April 2003, the rules are not yet final as this article goes to press.

In essence, the regulations generally indicate that a company cannot directly or indirectly affect a participant’s benefit accrual based on age. (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…)

The Group Retirement Account (or “GRA”) and the Group Supplemental Retirement Account (or “GSRA”) resemble the Retirement Annuity account and the Supplemental Retirement Annuity account in many respects. There are, however, some fundamental differences between the group accounts and their nongroup counterparts.

Both the RA and the Group Retirement Account are contracts with TIAA-CREF. (more…)

Older workers of today are healthier, better educated, more highly skilled, and a larger proportion of the labor market than in any previous era. Yet, many employers continue to view older workers through a lens distorted by negative stereotypes that developed during the early days of the industrialization process. High rates of unemployment and a sense that human capital, developed in early adulthood, should be sufficient to see workers through their careers made “shedding” older workers a seemingly affordable solution. The long-term costs of that “solution” are now being realized, not only in terms of the pension liabilities that encumber the finances of firms, but also in terms of the organizational loss that occurs when senior workers disappear. (more…)

As I said earlier, the amount you receive from Social Security varies based on how much you put into the system and when you start taking social security benefits. You have limited control over what you put into the system because it’s dictated by the FICA taxes that serve to allocate a portion of your earnings into the system. You do, however, have control over when you and your spouse take money retirement from the system. (more…)

Losing a job—at any age—is traumatic, even when a worker receives some severance pay. In addition to loss of income and/or employee benefits, there is a feeling of insecurity as one’s way of life is disrupted. Workers faced with involuntary retirement in later life must take stock of their financial resources, marketable job skills, and emotional readiness—or not—for retirement.

The federal COBRA (Consolidated Omnibus Budget Reconciliation Act) law provides an opportunity for continuation of health insurance for up to 18 months, at group rates plus a 2% administrative fee, until an individual policy (or new group coverage) is obtained or a worker is eligible for Medicare. (more…)

Having decided that a corporation can afford and should offer some type of employee benefits plan, the next step is to determine what type of plan or plans the company should adopt.

Employee benefit plans that provide some form of deferred benefits (that is, benefits deferred until after the employee retires) fall into two broad categories. A defined contribution pension plans provides an individual account for each participant and benefits are based upon the amount contributed by the company, or by the company and the employee, to that account, together with the investment results of the account. (more…)