RISKS IN RETIREMENT PLANSSavings Plans, Pension Plans, and Social Security

SAVINGS PLANS

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

SAVINGS PLANS RISKS

Living too long Lack of understanding (taxes) Withdrawal penalties Not guaranteed Unexpected Expenses

RETIREMENT AGE VS. LIFE EXPECTANCY

PENSION PLANS: TWO TYPES

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

PENSION PLANS RISKS

Shortfall Assumption Company Bankruptcy Not personally managed Vested in the company

DECLINING POPULARITY OF PENSION PLANS

SOCIAL SECURITY

Government funded retirement plan offering monthly benefits based on past earnings

Not guaranteed Not sufficient for high earners Not personally managed Retirement Age

WORKERS PER BENEFICIARY

MARKET RISK

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

HISTORICAL INTEREST RATES

IN CONCLUSION

All retirement plans have

some risk so it’s good to diversify!