1. Planning For the Future Financial Literacy Copper Hills High School

2. INSURANCE

3. Health Insurance  Provides protection against financial losses resulting form injury, illness, and disability  Provides coverage for Medical expenses, emergency and routine Hospital expenditures Surgeries Dental Vision Prescriptions  Check you parent’s or guardian’s plan to see how long you can be covered

4. HMO  Health Managed Organization  Limits the number of doctors, hospitals, and clinics you can use  Usually pays a larger portion of the bills

5. Cobra Insurance  Allows you to purchase insurance from your former employer for a period of time.  You must pay the entire premium amount

6. Future of Health Insurance  Congress is currently working on changing health insurance.  The new legislation : Requires all employers to provide health insurance Eliminates Pre-Existing Clauses by 2014 Allow individuals to stay on parents’ plan until they turn 26 Requiring states to offer health insurance

7. Life Insurance  A contract specifying a sum to be paid to a beneficiary upon the insured’s death  Term Life Insurance You are only insured for a period of time. Usually cheaper premiums that are only paid for the period of insured time  Whole Life Insurance Pay premiums until death or age 100 Insured until you die

8. Disability Insurance  Replaces a portion of one’s income if they become unable to work due to illness or injury  Must be purchased through your employer

10. RETIREMENT

11. How long will your money need to last?  65 year old man  41% chance of living to age 85  20% chance of living to age 90  65 year old woman  53% chance of living to age 85  32% chance of living to age 90 Source: Vanguard.com

12. What if there are two of you? If husband and wife are each 65 years old, the probability of one spouse living to age…7099.5% 7597.2% 8090.6% 8575.9% 9050.3% 9522.1% Source: Milevsky and Abaimova, “Applied Risk Management During Retirement,” June 19, 2005, Society of Actuaries RP-2000 table.

13. Government Funded Options

14. Social Security  A government plan where approximately 42% of your average earnings is paid to retired individuals, disabled individuals, or survivors  To become eligible, you must pay into the system  Benefits are determined by Number of years of service Your average level of earnings An adjustment for inflation

16. Disability Benefits  Disability benefits are given to those who experience a physical or mental impairment that is expected to result in Death A job situation where they can not earn more than $500 a month.

17. Survivor Benefits  Provided if the breadwinner of the family dies  Includes a small lump-sum payment to help with funeral costs.  Can include monthly payment if: Spouse is over 60 Spouse is caring for children under 16 Children are under 18 they can get a monthly payment until they turn 18

18. Private Retirement Funding Options Saving Enough to Live on In the Future

20. Employer Funded Pensions  Employees receive a promised payout at retirement  Noncontributory Plan Employees do no have to pay anything into the plan  Contributory Plan Employees help fund part of the plan  Must work at a company for a specified number of years to get the benefit  Rare to find now

21. Profit Sharing Plans  A pension plan in which the company’s contributions vary from year to year depending on the firm’s performance  The employee’s salary determines how much they will receive

22. 401(k) Plan  A tax-deferred retirement plan where both the employer and the employee put in a portion of their salary into an investment account  The money is invested in mutual funds  Incur a penalty if you access the funds before you retire  Money is not taxed until you withdrawal it

23. Keogh Plan  Self-employment retirement plan  Offered through financial institutions  Can be contributory or non-contributory

24. Individual Retirement Arrangements (IRAs)  A retirement account to which an individual can contribute up to $4000 in 2007, $5000 in 2008 and increased by $500 each year after  Usually invested in mutual funds  You are penalized if you take money out before age 59 ½  You must start taking money by at 70 ½  Contributions are not taxed  Withdrawals are taxed

25. Roth IRA  Similar to a traditional IRA  Contributions are taxed  Withdrawals are tax free as long as you have had the Roth IRA for at least 5 years

26. The Payout Options

27. Single Life Annuity  Receive a set monthly payment for your entire life  Payments stop when you die

28. Annuity for Life or a “Certain Period of Time”  Receive a set monthly payment for a fixed amount of time  Even if you die, the payments will still keep coming for that amount of time

29. Joint and Survivor Annuity  Receive payment until either you or your spouse dies  The payment amount is reduced by as much as 50%

30. Lump Sum Payment  Receive all retirement benefits in one single payment  If you are not careful, you could run out of money before you die  The rule of thumb is not to spend more than 4% of your nest egg per year for your savings to last through retirement.

31. Estate Planning What happens to your wealth after you die

32. Steps to the Process  Determine the value of your estate  Choose your heirs and decide what they will receive  Determine the cash needs of the estate Taxes, Funeral Expenses, Medical Expenses, etc.  Create a plan

33. Wills  Legal documents describing How you want your property to be transferred Your beneficiaries The executor Guardian for your children

34. Joint Ownership  When assets are owned jointly, they’re transferred to the surviving owner(s) without going through probate Probate is the process of validating the will through the court system

35. Trusts  A legal entity in which some of your property is held for the benefit of another person  Reduce the amount of estate taxes you will owe  Ensure that your wishes are granted