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cleaning deposit and any other fee - such as a pet fee - required under the lease. He may also need to pay a utility deposit.
10. He should check his 401K vesting schedule to make sure he doesn’t leave the company just before he is scheduled to vest in a substantial portion of his employer’s contributions! 11. “Roll over” means TTT will transfer the funds in his 401K to an IRA. If he takes the funds and uses them he will have taken a distribution before age 59 1/2 and will be be heavily taxed by the IRS. Franklin must follow the roll over rules or he will get a big tax bill! 12. Pensions are fading from the retirement fund world — hence his employer’s 401K. The Social Security fund is under great strain due to outflows exceeding inflows which may require a reduction in benefits and change in eligibility age by the time Franklin retires; the savings rate of Americans have plummeted — but whether and how much he saves is up to him. 13. His vesting status on his last job has no impact on his vesting status in his new job. However, some companies allow for immediate vesting of matching contributions so it’s possible he is 100% vested, although unrelated to his old job. He should check the vesting schedule of his new employer. have $983,334; If he retires at 70 he’ll have $1,398,444 15. No, Medicare does not cover home care. Also, Medicare often does not cover the full cost of medicine — co-payments and deductibles are common. Many retires spend up to 20% of their income on medical care! 16. Now a days, a 65-year-old woman has a 53% chance of living to age 85 and a 32% chance of living to age 90, so its likely she will run out of money. Short of dying early, which is no great option, Frannie can delay retirement age, increase her retirement fund contributions, or both. 17. As a general rule, employers can’t force anyone to retire. It’s considered age discrimination under the Age Discrimination in Employment Act (ADEA) of 1986. 18. A reverse mortgage is a financial arrangement whereby a homeowner borrows against the equity in their home. They are not ideal because they deplete an owner’s equity in their home, but it is a potential source of income and financial relief for her. 19. This lifestyle may hold no appeal to him when he is retired. As his earnings increase
and lifestyle upgrades he should increase his retirement savings.
20. Student’s discretion.
Franklin’s Road to Retirement “Maintaining a pre-retirement lifestyle” means not having to downsize or reduce your standard of living, such as moving to a smaller home or apartment, moving to a less expensive area, and doing without many of the things you enjoy. Experts say that to retire comfortably, you need to save 10-15% of your annual salary and build financial sources that will provide 75-85% of pre-retirement annual income. Experts recommend an income of 75-85% of his salary, so between $82,494 and $93,494. The sooner he begins participating, the longer his savings/investments will have to grow via compounding. If he starts at 50 it’s unlikely he’ll save enough to retire at 75-85% of his income. Also, he would be missing out on years of tax breaks, since 401K contributions are made via pretax dollars; he’ll be missing out on years of his employer’s matching contributions and he should not rely on social security. Many employers match the employee’s retirement contributions up to 3-8% of their salary. The amount of the match is a matter of industry standard. It’s like a source of free retirement funds. It’s a great benefit! At 55 he will be way too young to collect Social Security. He is eligible for partial benefits at age 62, but full benefits are not collectible until age 67. Also, the age of eligibility for benefits may rise by then. A vesting schedule is a time table of percentages and periods indicating what percentage of the value of the employer’s matching contribution the employee gets to keep when they leave the company. Under a graded vesting schedule the vested percentage increases each additional year the employee stays with the company. Individual Retirement Accounts (IRAs). An IRA is another popular private resource for saving for retirement. There are several different kinds of IRAs (Traditional, Roth, SEP and SIMPLE) with different rules regarding maximum contributions, taxes, and eligibility. No - Not until age 65. Social Security Quick Calculator
Gunnar and Eloise Tackle Retirement 1. An IRA is an Individual Retirement Account which is an account specifically for saving for retirement. An IRA can be opened with a bank, financial institution, mutual fund or insurance company. There is no minimum age requirement for an IRA. SIMPLE Savings Incentive Match Plans for Employee. 2. 3. No. They need to wait until they are 59 1/2 or they will pay big taxes! Tax deferred means the retirement account grows tax free, but taxes are paid on withdrawals. F 10. T 11. It’s a great source of money to be saved and invested for retirement. 12. A reverse mortgage is a financial arrangement whereby a homeowner borrows against the equity in their home. Instead of paying monthly mortgage payments to the bank, the homeowner gets tax free money every month from the bank. 4. Chart answers on the next page. 5. 75 - 85% ; $45,000 - $51,000
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14. If he retires in 30 years at age 65 he’ll PRODUCT PREVIEW 6. 7. 8. 9. T
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Are You Financially Literate? Chapter 10 Quiz
6. 7. 8.
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15; 52
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Living how you lived before retirement with the same comfort level, quality of life, food, entertainment, travel. Many people without enough for retirement are forced to move to a lesser home or area, or move in with family. Many even go hungry.
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4. 5. 6. 7.
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Yes he can open a IRA and begin saving for retirement. He can do it at his bank.
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