R ISKS IN R ETIREMENT P LANS Savings Plans, Pension Plans, and Social Security

S AVINGS P LANS 401k: a retirement savings plan that is funded by employee contributions and (often) matching contributions from the employer IRA: a retirement plan that allows you to contribute a limited yearly sum toward your retirement

S AVINGS P LANS R ISKS Living too long Lack of understanding (taxes) Withdrawal penalties Not guaranteed Unexpected Expenses

R ETIREMENT A GE VS. L IFE E XPECTANCY

P ENSION P LANS : T WO T YPES Defined-benefit plan: the employer guarantees that the employee will receive a definite amount of benefit upon retirement Defined-contribution plan: the employer makes predefined contributions for the employee, but the final amount of benefit received by the employee depends on the investment's performance

P ENSION P LANS R ISKS Shortfall Assumption Company Bankruptcy Not personally managed Vested in the company

D ECLINING P OPULARITY OF P ENSION P LANS

S OCIAL S ECURITY Government funded retirement plan offering monthly benefits based on past earnings Not guaranteed Not sufficient for high earners Not personally managed Retirement Age

W ORKERS P ER B ENEFICIARY

M ARKET R ISK The risk that the organization’s ability to meet its objectives is compromised by fluctuations in the market value of the assets held Inflation and Taxes Government Policies Economic Performance Interest Rate Risk Affects any type of retirement plan

H ISTORICAL I NTEREST R ATES

I N C ONCLUSION All retirement plans have some risk so it’s good to diversify!