You need to know how to calculate your estimated retirement benefits based on your personal financial situation. To help you calculate retirement benefits, the following is an easy-to-use retirement calculator with a case study.

The following is a seven-step guide to help you determine if you are on target to meet your retirement goal, or how much you need to save annually to meet that goal. (more…)

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…)

With respect to investments, the first task of the corporate sponsor is to set return objectives and broad definitions of characteristics for the investment portfolio that receives the corporate contribution. Setting investment objectives by the corporation for the investment manager or managers was not always considered an important function of the corporate sponsor; objective setting frequently was left to the discretion of the investment manager. However, as funds have grown in size, setting investment objectives has assumed increased importance; written objectives are prepared and then reviewed at regular intervals. Unfortunately, objectives often are stated in very vague terms, such as obtaining the maximum return consistent with prudence. Nevertheless, this problem is getting increased attention, and more specific directions may be expected in the future. (more…)

For Early Retirement Incentive Plans within a defined pension plan, the most common incentive is the addition of age or service credits in calculating pension benefits. Typically, “5 and 5”—adding five years to age and/or five years to length of service—is offered. Other incentives may reduce or eliminate the penalty for early retirement, provide cash supplements until an employee is eligible for Social Security (in the main, at age 62, though some plans bridge payments to age 65), provision of life insurance, outplacement assistance, and less often, retiree health benefits (Hewitt Associates 1997). (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…)

The treatment of investment risk probably is the least satisfactory area in the establishment of investment objectives. In spite of all the work published on risk in the investment literature of the past several years, risk tolerance often is not specified in setting investment objectives and investment performance measurement. Sometimes, statements of risk are made in general terms (e.g., the fund should not suffer a loss in any designated period) or a maximum tolerable decline in asset value is specified. Such specifications of risk are very difficult for an investment manager to deal with. (more…)

Benefit payments may be in the form of a lump sum, an annuity payable over the life of the participant or the participant and his beneficiary, or in installments for a specific time.

In a defined benefit plan, the benefit ordinarily is defined in terms of earnings, either as a flat percent of earnings or as a percent of earnings times the number of years of service. (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…)

By some estimates, the personal savings rate in America has dropped to as low as 1 percent of income in recent years. This is down from approximately 8 percent in 1980, 5 percent in 1993, and 2.2 percent in 1999, and it is a frightening statistic. We save half as much as the Europeans and one-third as much as the Japanese. Not only is the trend bad in relative terms, in absolute terms, it means most people today will have to either work longer to achieve their retirement goals or sacrifice quality of life during retirement. Some will have to do both. (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…)