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

406 Pages·2015·19.61 MB·English
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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.

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