Today’s Retirement

Table of Contents

Chapter 1 - Facing Financial Reality		1
	Tough Economic Times	1
	Inflation and Retirement	2
	Inflation Definitions	2
	What exactly is inflation?	3
	Hyperinflation and deflation	3
	Measuring Inflation	5
	Chart	5
	Calculating Annual Inflation Rates	6
	Causes of Inflation	6
	Quantity Theory of Money	7
	Consequences of Inflation	9
	Unanticipated Inflation	10
	Do the Math	12
	Insufficient Planning	13
	Longevity	14
	Retiring Too Soon	17
	Retirement Funding	19
	Rising Medical Costs	19
	Medical Issues	20
	Long-Term Care Insurance Policies	23
	Selecting the Appropriate Insurance Policy	25
	Preserving Retirement Plans	26
	Debt	26
	Debt Affects Insurance Rates	28
	Saving for the Future	29
	An Aging Nation	32
	Finding the Right People	34
	Compounding Power	36
	Retirement Income	36
	Social Security Benefits	37
	Age of Benefit Collection	37
	Supplementing What We Have Saved	38
	Women Live Poorly in Retirement	38
	Primary Insurance Amount (PIA)	39
	PIA Definition	39
	PIA Formula Bend Points	40
	PIA Formula	40
	Benefit Based on PIA and Age	40
	Average Indexed Monthly Earnings	41
	Special Minimum Benefits	42
	Old-Law Benefit Tables	42
	Summary	42
	Monthly Benefit Amounts	43
	Old Computing Methods	43
	Computation	43
	Employer Pension Benefits	44
	Tax Deferred Retirement Benefits	45
	Individual Savings	45
	Managing Income in Retirement	45
	Pre-Retirement Income	46
	Retirement Shortfalls	47
	Chart for retirement age	47
	Getting a Return on Savings	49
	Receiving Income from Investment Vehicles	51
	Taxation	51
	Withdrawals Prior to Age 59½	52
	The age-55 Penalty Exception	52
	The Five-Year Rule for 72(t) Payments	53
Chapter 2 - Individual Retirement Accounts		54
	IRAs are legal due to the IRC’s	54
	IRA Choices	54
	Tax-Free Retirement	56
	Differences Between the Roth and Traditional IRA	57
	Roth Advantages	57
	Roth Disadvantages	59
	Double Taxation	60
	Roth IRA Eligibility	61
	Conversion Limits	61
	Traditional IRA Advantages	61
	Traditional IRA Disadvantages	62
	Transfers versus Rollovers	63
	IRA Loans	63
	Coverdell Education Savings Account	64
	IRA Funding Limitations Exist	64
	IRA Investments	65
	Fund Distributions	65
	Bankruptcy	66
	Creditor Protection	67
Chapter 3 - Employer Sponsored Pension Plans		68
	Private Pension Plans	68
	Requirements for a qualified plan	69
	Flat Amount & Flat Percentage Formula	71
	Changing Plan Designs	72
	FSA	74
	Flexible Spending Accounts	75
	Benefit Plans for Retirement	77
	Defined Benefit Plans	77
	Defined Contribution Plans	78
	401(k) Plans	78
	Topic 424 – 401(k) Plans	81
	Topic 412 – Lump-Sum Distributions	82
	Topic 413 – Rollovers from Retirement Plans	83
	Funding	84
	401(k) Plan Contributions	86
	Annual Compensation	87
	Example	89
	401(k) Tax Consequences	90
	Fund Withdrawals	91
	Minimum Distributions Required	92
	Highly Compensated Employees (HCE)	93
	401(k) Plans for Small Businesses or Sole Proprietorships	93
	Initial Actions when setting up a 401(k) Plan	94
	(1) Adopt a written plan	94
	(2) Arrange a trust fund for the plan’s assets	95
	(3) Develop a recordkeeping system	95
	(4) Provide plan information to eligible employees	95
	Participation	96
	Contributions	96
	Traditional 401(k) Plan	96
	Safe Harbor 401(k) Plan	97
	SIMPLE 401(k) Plan	97
	Vesting	97
	Nondiscrimination	98
	Investing 401(k) Monies	98
	Fiduciary Responsibilities	98
	Limiting Fiduciary Liability	99
	Hiring a Service Provider	100
	Prohibited Transactions and Exemptions	101
	Bonding	101
	Disclosing Plan Information to Participants	101
	Summary Plan Description (SPD)	101
	Summary of Material Modification (SMM)	102
	Individual Benefit Statement (IBS)	102
	Summary Annual Report (SAR)	102
	Blackout Period Notice	102
	Reporting to Government Agencies	102
	Form 5500 Series	102
	Form 1099-R	103
	Distributing Plan Benefits	103
	Terminating a 401(k) Plan	103
	Compliance	103
	Simplified Employee Pension Plans (definition)	104
	Rules Governing SEPs	106
	SEP Advantages	107
	SEP Terms	107
	Establishing the Plan	108
	Operating the SEP Plan	109
	SEP Contributions	109
	Employee Communications	110
	Reporting to the Government	110
	Distributions	111
	Monitoring the Trustee	111
	Terminating the Plan	111
	Owners Benefit Less than Non-Owner Employees	111
	Divorce and Retirement Accounts	112
	IRAs and SEPs	114
	Women are Receiving More These Days	114
	Keep Premarital Assets Separate	115
	Protect Your Inheritance	115
	After the Divorce	115
	Dividing Other Investments	116
	Good News for Attorneys	116

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