Transcript Mascaro Company 401(k) Plan
Sample XYZ Company Employee 401(k) Retirement Plan
Transamerica Insurance & Investments
Your Social Security Benefit
The Social Security Administration will give you a benefit estimate at your request. Call
(800) 772-1213
and ask for a “Request for Earnings & Benefit Estimate Statement”. Fill out the form and mail it back. The Social Security Administration will send you a report (in three to four weeks) that shows your employment history and an estimate of your benefits.
WHAT IS IT?
• IRS regulations allowing for employee income deferral before taxes.
• An employee benefit.
• A vehicle available to employees which provides for long-term growth of retirement income.
WHAT DOES IT MEAN TO ME?
• Accumulative savings for retirement.
• Current year income tax reduction.
• No tax on earnings as they grow.
• Future tax advantages when you receive your income.
• Competitive investment yields with Transamerica.
HOW DOES IT WORK?
• You elect a deferral of your income in the form of a percentage of pay (1%-15%).
• Your company may match a percentage of the salary you defer on a discretionary basis.
• Your annual taxable income reported to the IRS is reduced by your elected deferral.
• Your deferred income is owned by you and will accrue at a competitive current rate of interest, tax-deferred, with Transamerica.
Sample XYZ Company 401(k) Plan Highlights
1) Plan Effective Date: 2) Maximum Deferral: 3) Company Contribution: April 1, 1997 15% of Salary Discretionary 4) Eligibility Requirements: Age 21 and 12 Months of Service 5) Monthly Entry Dates: 6) Change in Investment Mix: 7) Normal Retirement Date: 8) Early Retirement Date: 9) Vesting of -Elective Contributions: -Employer Contributions: Years of Service Less than 3 3 but less than 4 4 but less than 5 5 but less than 6 6 but less than 7 7 or more 10) Death/Total Disability: January 1 st , & July 1 st Daily Age 65 Age 55 and 10 Years of Service 100% Immediate Begins from Date of Hire Vested Percentage 0% 20% 40% 60% 80% 100% 100% Vesting 11) Hardship Withdrawals: 12) Loans: of Your Elective Deferrals Permitted Permitted with a Minimum of $1,000 13)
24-Hour Fund Performance Hotline-- Call (800) 382-8661
14)
Transamerica’s Website Address: www.ta-retirement.com
Does 401(k) Cut my Pay?
Assuming you are saving now on an after tax basis; your net take home pay will actually increase. Here’s how: Assumes a $20,000 Annual Salary Without 401(k) With 401(k) Current Pay 401(k) Deferral (6%) Taxable Income Tax (20%) Net Pay Personal Savings Net Take Home Pay $20,000 ______ $20,000 4,000 $16,000 960 $15,040 $20,000 1,200 $18,800 3,760 $15,040 _______ $15,040 Tax Savings Plus your 401(k) Savings Plus Employer Match TOTAL SAVINGS $ -0 -0 -0-
$ 960
$ 240 1,200 0
$ 1,440
The Benefit of Investing Early
Annual Accumulative # of years Total Age Contribution in plan Contribution value @ 65 Participant A Participant B 20 $2,000 30 $2,000 9 36 $18,000 $72,000 $465,168 $404,141
Part. A Part. B $0 $100,000 $200,000 $300,000 $400,000 $500,000 Acc. Value Ttl. Contribution
Assumes an 8% Annual Rate of Return
How Should I Invest My Plan Contributions?
Good question. Especially when you consider the difference just a few percentage points of additional investment return can make on your accumulated balance, as this chart shows:
Investment of $100 per Month
6% Assumed Investment Return 8% 10% 12% Years
10 20 30 40 $16,470 46,435 100,954 200,145 18,417 59,295 150,030 351,428 20,655 76,570 227,933 637,428 23,234 99,915 352,991 1,188,242 The right answer for you depends on a number of factors in your own personal situation. These include: How many years until you need to liquidate your account? What other investments do you have? What is your investment goal? What level of risk are you willing to take?
Before you try to analyze your answers to these questions, remember a basic theory of investing: over time, you should be rewarded for taking greater risk. For example, despite its ups and downs, over any ten year period in the last 70 years- the stock market has outperformed any other investment category.
This is not to say that everyone should invest in the stock market. Every individual is different and has different risk tolerance levels. One way to lower your risk but still participate in the market is to diversify your investments... the old “don’t put your eggs in one basket” theory. With this strategy, even if one type of investment does poorly, the other types are likely to do better.
Asset Classifications
•
CASH
Investing money in very short term securities such as T-Bills •
BONDS
Lending Money to Governments or Corporations •
STOCKS
Owning a piece of a company
Types of Risk
• Market Risk -Short Term -Risk of losing money due to market fluctuations • Inflation Risk -Long Term -Risk that your investments won’t earn enough to maintain purchasing power
Risk Classifications
Examples of Three Investment Strategies
Conservative
5% Cash 55% Bonds 40% Stocks
Moderate
5% Cash 30% Bonds 65% Stocks
Aggressive
15% Bonds 85% Stocks Whatever strategy is right for you, remember, you have the flexibility to change it if your situation or goals change. The keys to successful investing are knowing your risk tolerance, planning a long-term strategy and diversification.
Where Do You Fit In?
Your Investment Options
A broad range of investment funds!
Your Investment Options
Sample XYZ Company Selected Funds TA PBHG Emerging Growth TA Janus Worldwide Fund Transamerica Equity Fund TA Brandywine Transamerica Equity Index TA Fidelity Equity Income II TA Putnam Asset Allocation: Growth TA Putnam Asset Allocation: Balanced Transamerica Bond Transamerica Cash Management
Aggressive Moderate Conservative Examples of Three Investment Strategies
Conservative
5% Cash 55% Bonds 40% Stocks
Moderate
5% Cash 30% Bonds 65% Stocks
Aggressive
15% Bonds 85% Stocks Whatever strategy is right for you, remember, you have the flexibility to change it if your situation or goals change. The keys to successful investing are knowing your risk tolerance, planning a long-term strategy and diversification.
Assess Your Financial Picture
• How Much Have I Saved?
• How Much Money Will I Need?
• Risk Tolerance Market & Inflation Risk • Time Horizon How many years until I retire?
Your Game Plan
• Assess your Financial Picture • Save Early on a Pre-tax Basis • Save Regularly - Dollar Cost Averaging • Understand Basic Investment Concepts • Expect Years With Losses!
• Develop a Long Term Game Plan • Review that Plan Periodically
Questions?
Service Contact @ Penco
: Customer Service 800-999-9999 [email protected]
Sample XYZ Company Contact
: Employer Contact Sample XYZ Company
Transamerica Contact
: Mark L. Shaffer, Pension Specialist Executive Benefit Plans, Inc.
1-800-622-2411 [email protected]
www.benefitplans.com/client
www.benefitplans.com/client