1 Chapter 1: Introduction to Retirement Planning Retirement Planning and Employee Benefits for Financial Planners

2 Interested Parties  Employees  Employers  Professionals  Government

3 Employees  Money work instead of you Financial independence  View benefits as part of overall compensation.  Would rather pay costs with pre-tax dollars.  Include retirement plans and benefits in their overall financial plan. Defined benefit versus defined contribution

4 Myths and Facts  Myth – 70% say they plan to work in retirement. Fact – Only 28% of retirees actually work.  Myth – 25% want to retire at age 65, 25% want to retire at age 66. Fact – Average individual retires at age 62.  Myth – Only 13% expect Social Security to be their largest source of retirement income. Fact – 44% of current retirees report that Social Security is actually their largest source of income during retirement.

5 Employers  View retirement plans and employee benefits as part of overall compensation costs.  Costs add an additional % to payroll expenses. Benefits a large part of this (health insurance and vacation)  Use employee benefit plans to recruit, hire, and maintain qualified workers.

6 Interested Institutions  Approximately $18 trillion in tax- deferred accounts (2011)  Sticky money  Banks  Mutual Funds  Insurance Companies  Financial Advisors

7 Government  Promotes social change through tax legislation.  Sponsors the Social Security and Medicare systems which act as a safety net for individuals.  Has a vested interest in taxing deferred accounts. Sooner rather than later?

8 Perspective of the Text: A Financial Planner  To provide clients with appropriate retirement planning, the financial planner must have a thorough knowledge of: Retirement Funding and Forecasting Qualified Plans  Shift from defined benefit to defined contribution plans Tax-Advantaged Plans Nonqualified Plans Medicare, Social Security Employer-Provided Fringe Benefits