Wsj3
Name: Juan P. Carrillo
Wall Street Journal: Assignment #3
This is an INDIVIDUAL assignment. Submit your answers in hardcopy at the beginning of class. Check the syllabus for the due date. Handwritten answers are NOT acceptable. Use Word to write your answers.
Chapter 5: Planning
1. There are two basic types of retirement plans available: 1) defined benefit plans, and 2) defined contribution plans. Briefly describe the two types of plans; include at least three features of each. (Not defined in book, look elsewhere)
a. Defined benefit plans: The plan identifies the specific benefit payable to retirement. The basic benefit is based in a formula with the number of years and salary. Retirement benefits are provided in the regular form of payments after the date of retirement. The periodic payments are called pension or annuity.
b. Defined contributions plans: The plan identifies the quantity wanted into the retirement plan. The quantity is a salary percentage or dollar amount. The money is invested in mutual funds. The amount you have at the end depends in your employer’s contribution to the plan, your savings in the plan, time invested, and how well the investments perform in the plan.
2. Most retirement plans today are of the defined contribution variety. An example is a 401(k) plan. Suppose your first employer after graduation from college offers a 401(k) plan and that you make contributions to from each paycheck.
a. How are the contributions treated for tax purposes today?
Contributions are tax deferred. You will owe taxes at a later date, generally once you withdraw the money.
b. When do you pay taxes on the returns you earn?
You will pay taxes for the profits you accumulate and the contributions you do.
3. People tend to change jobs more frequently today that they did in the past. Suppose you worked for five years at your first firm, then change jobs to move to a better position with another firm.
a. Why would it be a bad idea to
Wall Street Journal: Assignment #3
This is an INDIVIDUAL assignment. Submit your answers in hardcopy at the beginning of class. Check the syllabus for the due date. Handwritten answers are NOT acceptable. Use Word to write your answers.
Chapter 5: Planning
1. There are two basic types of retirement plans available: 1) defined benefit plans, and 2) defined contribution plans. Briefly describe the two types of plans; include at least three features of each. (Not defined in book, look elsewhere)
a. Defined benefit plans: The plan identifies the specific benefit payable to retirement. The basic benefit is based in a formula with the number of years and salary. Retirement benefits are provided in the regular form of payments after the date of retirement. The periodic payments are called pension or annuity.
b. Defined contributions plans: The plan identifies the quantity wanted into the retirement plan. The quantity is a salary percentage or dollar amount. The money is invested in mutual funds. The amount you have at the end depends in your employer’s contribution to the plan, your savings in the plan, time invested, and how well the investments perform in the plan.
2. Most retirement plans today are of the defined contribution variety. An example is a 401(k) plan. Suppose your first employer after graduation from college offers a 401(k) plan and that you make contributions to from each paycheck.
a. How are the contributions treated for tax purposes today?
Contributions are tax deferred. You will owe taxes at a later date, generally once you withdraw the money.
b. When do you pay taxes on the returns you earn?
You will pay taxes for the profits you accumulate and the contributions you do.
3. People tend to change jobs more frequently today that they did in the past. Suppose you worked for five years at your first firm, then change jobs to move to a better position with another firm.
a. Why would it be a bad idea to