Essentials of retirement planning : a holistic review of personal retirement planning issues and employer-sponsored plans

406 Pages·2015·19.61 MB·English

by  Robbins, Eric J

THE BUSINESS Essentials of Retirement Planning Finance and Financial
EXPERT PRESS A Holistic Review of Personal Retirement Management Collection
DIGITAL LIBRARIES
Planning Issues and Employer-Sponsored John A. Doukas, Editor
EBOOKS FOR Plans, Second Edition
BUSINESS STUDENTS Eric J. Robbins
Curriculum-oriented, born-
digital books for advanced This book provides the quintessential information needed Essentials of
to u nderstand the fnancial side of the retirement planning
business students, written
coin. The reader will begin by learning about the various plan
by academic thought Retirement Planning
types e mployers may offer their employees. Topics related
leaders who translate real-
to c ompliance testing will be thoroughly discussed as well
world business experience
as s trategies used to legally shift benefts in favor of highly A Holistic Review of Personal
into course readings and
c ompensated employees (HCEs).
reference materials for
However, some employers do not sponsor a plan. In this Retirement Planning Issues and
students expecting to tackle
i nstance, retirement savers will need to understand the options
management and leadership
available within the world of individual retirement accounts Employer-Sponsored Plans
challenges during their
(IRAs). This book is intended to serve as a guide to how d ifferent
professional careers.
retirement savings vehicles function and how they can be Second Edition
POLICIES BUILT e ffectively deployed.
BY LIBRARIANS Many fnancial professionals fnd that their clients ask
• Unlimited simultaneous q uestions about all aspects of their fnancial life. For this reason,
usage this book also discusses non-investment-related topics such as
• Unrestricted downloading housing options, Social Security planning, Medicare planning,
and printing and a few other basic insurance-based issues faced by all r etirees.
• Perpetual access for a
one-time fee Eric J. Robbins is a charter fnancial analyst c harterholder.
• No platform or He  holds a Bachelor’s in accounting as well as an MBA.
maintenance fees He  b egan his professional career working for 15 years with a
• Free MARC records r egional i nvestment advisory frm. He specialized in m anaging
• No license to execute i nvestments for retirees and helping them plan for various
r etirement contingencies. During the last four years of his
The Digital Libraries are a
tenure as a full-time investment advisor, he taught corporate
comprehensive, cost-efective
f nance and retirement planning as an adjunct faculty member
way to deliver practical
at Penn State Erie. He loved teaching so much that he switched
treatments of important
his roles and now works with clients on a part-time basis while Eric J. Robbins
business issues to every
teaching full-time at Penn State Erie, The Sam and Irene Black
student and faculty member.
School of Business. He currently teaches courses in corporate
fnance, retirement planning, and investments. The course on
retirement planning is part of a program approved by the College
of Financial Planning to provide the education requirements to
For further information, a
sit for the CFP® exam.
free trial, or to order, contact:
Essentials of Retirement
Planning
Essentials of Retirement
Planning
A Holistic Review of Personal
Retirement Planning Issues
and Employer-Sponsored Plans
Second Edition
Eric J. Robbins
Essentials of Retirement Planning: A Holistic Review of Personal Retirement
Planning Issues and Employer-Sponsored Plans, Second Edition
Copyright © Business Expert Press, LLC, 2015.
All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted in any form or by any
means—electronic, mechanical, photocopy, recording, or any other
except for brief quotations, not to exceed 400 words, without the prior
permission of the publisher.
First published in 2014 by
Business Expert Press, LLC
222 East 46th Street, New York, NY 10017
www.businessexpertpress.com
ISBN-13: 978-1-63157-240-1 (paperback)
ISBN-13: 978-1-63157-241-8 (e-book)
Business Expert Press Finance and Financial Management Collection
Collection ISSN: 2331-0049 (print)
Collection ISSN: 2331-0057 (electronic)
Cover and interior design by Exeter Premedia Services Private Ltd.,
Chennai, India
First edition: 2014
Second edition: 2015
10 9 8 7 6 5 4 3 2 1
Printed in the United States of America.
Abstract
Tis book provides the quintessential information needed to understand
the fnancial side of the retirement planning coin. You’ll begin by learning
about the various plan types employers may ofer their employees. Topics
related to compliance testing as well as the strategies used to legally shift
benefts in favor of highly compensated employees will be thoroughly
discussed.
However, some employers do not sponsor a plan. In this instance,
retirement savers will need to understand the options available within
the world of individual retirement accounts. Tis book is not intended to
provide investment advice, but rather to show how diferent retirement
savings vehicles function and how they can be efectively deployed.
Many fnancial professionals fnd that their clients ask questions about
all aspects of their fnancial life. For this reason, this book also d iscusses
noninvestment-related topics such as housing options, Social Security
planning, Medicare planning, and a few other basic insurance-based
issues faced by all retirees.
Keywords
employer-sponsored plans, medicare, social security, retirement plan
compliance testing, retirement planning
Contents
Preface ��������������������������������������������������������������������������������������������������ix
Acknowledgments �����������������������������������������������������������������������������������xi
Part I Retirement Plan Overview �������������������������������������������� 1
Chapter 1 C risis of Financial Unawareness and a 30,000-Foot
View ..................................................................................3
Chapter 2 Te Retirement Landscape ..............................................11
Chapter 3 Initial Concerns in Retirement Planning .........................19
Chapter 4 D efned Beneft Plan Types and Money
Purchase Pension Plans ....................................................29
Chapter 5 Te World of Defned Contribution Plans .......................39
Chapter 6 Plans for Small Businesses and Nonprofts .......................55
Part II Retirement Plan Design ���������������������������������������������� 65
Chapter 7 Coverage, Eligibility, and Participation Rules ...................67
Chapter 8 Designing Beneft Oferings ............................................79
Chapter 9 Plan Loans, Vesting, and Retirement Age Selection ..........89
Chapter 10 D eath and Disability Planning .....................................101
Chapter 11 Plan Funding and Investing ...........................................109
Chapter 12 Fiduciary Responsibility ................................................123
Part III Retirement Plan Administration ������������������������������� 135
Chapter 13 Plan Installation and Administration .............................137
Chapter 14 Plan Terminations .........................................................145
Part IV Special Plan Types ����������������������������������������������������� 155
Chapter 15 Nonqualifed Deferred Compensation Plans ..................157
Chapter 16 Equity-Based Compensation .........................................173
viii CoNtENtS
Chapter 17 Introduction to IRAs .....................................................185
Chapter 18 IRAs in Depth ...............................................................199
Part V Comprehensive Retirement Planning ����������������������� 211
Chapter 19 A Holistic View of Retirement Planning ........................213
Chapter 20 Social Security ...............................................................225
Chapter 21 Retirement Needs Analysis ............................................243
Chapter 22 Housing, Medicare, and Long-Term Care Concerns ......255
Chapter 23 Retirement Distribution Planning .................................269
Chapter 24 Managing Distribution Options ....................................287
Questions and Answers ������������������������������������������������������������������������299
Appendix ............................................................................................369
Notes..................................................................................................371
References �������������������������������������������������������������������������������������������375
Index �������������������������������������������������������������������������������������������������381
Preface
I am an Eagle Scout. Why is that important? Well, the Boy Scout motto is
Be Prepared. And, when it comes to retirement, the sad reality is that most
people are not. Most people live their lives spending most of what they
earn and sometimes more than that. Te state of retirement in America
for the majority of people is not what Hollywood portrays in movies, and
this worries me greatly.
How do we work toward a solution? Only through education, disci-
pline, and a strategic rewrite of the status quo can we hope to reshape our
own futures and the futures of those that we, as fnancial professionals,
help. I have worked in private wealth management since 1998, and much
of that time has been spent helping those who did plan well. Individuals
in this category will need a trained fnancial professional.
It is imperative that the next generation of fnancial professionals
receives the highest level of training possible. It is also important that
they subscribe to a clear ethical standard, perhaps by becoming a Certifed
Financial Planner or perhaps by becoming a Chartered Financial Analyst
charterholder. Te industry desperately needs individuals who are willing
to leverage their training to beneft their clients frst and foremost.
I wrote this book because I was asked to teach a course on Retirement
Planning at Penn State Erie, the Sam and Irene Black School of Business.
I was immediately impressed with the rigorous program in place and the
high quality of both the faculty and the students. Te textbook being
used was Planning for Retirement Needs by Littell and Tacchino and it is
an excellent teaching tool for those students studying for the CFP exam
or for those who want a very in-depth review of retirement planning.
But some of my students were still considering their career paths and did
not require the full intensity of a CFP prep course. I chose to make this
book a thorough review of all of the major topical areas, but in a more
condensed format. My students appreciate this format and relish the fact
that the price of this textbook is so budget friendly.