21st Century Student FinLit -Getting Personal SW

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Reflecting on… Your Risky Retirement

LET’S PRACTICE

Name: _____________________________________________________________________________

Franklin’s Road to Retirement Let’s catch up with Franklin from Chapter 1. As you’ll recall, he had lost his job with a tech company and moved back in with his mom. Times were tough, but we’re happy to report that Franklin has a brand new job and a new attitude. He is now 30 years old. He realizes his careless spending and young freewheeling ways were financially irresponsible. Now he’s looking to build a stable financial future and a comfortable retirement. He needs your help to understand what this “retirement planning” stuff is all about.

1. Franklin has heard that it’s important to save enough money so when he retires he can maintain his pre- retirement standard of living . What does that mean, and how much of an income do experts say he’ll need in order to do this? _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ 2. Franklin’s salary is $55,000. He expects a 2% salary increase per year, so by retirement age his salary will be $109,993. According to experts, in today’s dollars, how much annual income will he need to maintain his preretirement lifestyle? _ ______________________________________________________________________________ 3. Franklin’s new employer Two Techie Too (TTT) has a 401K plan . Franklin thinks he should opt out of participating until he’s 40 or so because he'd rather spend the money on traveling. Tell him why that’s not a good idea. _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ 4. The 401K brochure his employer gave him says “TTT has an 5% employer matching contribution program .” He’s got no clue what this means. Help him understand. _ ______________________________________________________________________________ _ ______________________________________________________________________________ _ ______________________________________________________________________________ PRODUCT PREVIEW

Chapter 10 | Your Risky Retirement 186

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