This budget is for each retirement plan individually. At the end of each month I will have $1,234.53 left over. or "extra". These are just very basic , necessary things that I could think to budget for.
23 March 2015
#26: Budget Revisited
This budget has some stuff added in compared to when it was first posted. Its very self explanatory, so all you've to do is look at it. Zoom in.
#25: Life Insurance Questions
(Information for question 1 and 2 is from MetLife)
1. Explain how term life insurance works.
Term life insurance is often the most affordable because it offers coverage for a specific number of years. You may want to go with term life insurance when you need help covering specific financial responsibilities like a mortgage or college expenses. Of you may want term life insurance to supplement a permanent policy or work policy. There is Simplified Issue Term Life Insurance that has a simple application process with same day approval where you can get coverage listing until you're age 90. It builds cash value nominally , no medical exam is required, and the coverage amount is anywhere from $5,000 to $100,000. Then there is Level Term Life Insurance that is affordable protection for a specific number of years (10-30) at a set price. It does not build cash value, it does require a medical exam, and the coverage among available is $100,000+.
2. Explain how whole life insurance works.
Whole life insurance features guaranteed premiums, death benefits, and cash value. Whole life insurance policies also give you the potential to receive dividends, which can increase the value of the policy when the insured is living or provide an increased death benefit for your beneficiaries. You want to purchase a whole life insurance policy if you want protection for life, payments that stay the same each year, to be able to put money into the policy on a tax-favored basis, and cash value you can use while you are living. Beneficiaries will receive at least face amount of the policy upon the death of the insured, assuming that you do not have outstanding policy loans and that the policy premiums are paid on time. Your cash value will grow each year, tax-deffered,until it matches the face value of you policy. When its needed most you will have access to your cash through loans and withdraw options. A medical exam is required and it does build cash value. Coverage amounts available are $10,000 - no maximum.
3. Explain how variable life insurance works. . What are the advantages and disadvantages of variable life insurance?
Variable life insurance is a type of permanent life insurance, it provides permeant protections to the beneficiary upon the death of the policy holder. This insurance it most of the time the most expensive form of each-value insurance because it allows you to allocate a portion of your premium dollars to separate and account comprised of various instruments and investments funds within the insurance company's portfolio such as stocks, bonds, equity funds, money market funds, and bond funds. Variable policies are considered securities contracts and are regulated under the federal securities law so they must be sold with prospectus. Variable policies allow you to participate in various types of investment options while not being taxed on your earnings. You can also apply the interest earned on these investments toward the premiums, potentially lowering the amount you pay. However, when the invested funds perform poorly , less money is available to lower the premiums meaning that you might have to pay more than you can afford to keep the policies in force. Poor fund performance also means that the cash and/or death benefits may decline. Also, you can't withdraw from the cash value during your lifetime.
5. Compare term life and whole life insurance. What are their advantages and disadvantages?
Term Life - is primarily for when people need insurance but can't afford permanent life insurance or only want coverage for a certain number of years. Term insurance has a guaranteed death benefit but no cash value and the premiums will increase at pre-determined intervals. Term conversion privileges are available with most policies. That privilege allows users to convert to a permanent policy that builds cash value , with not additional medical underwriting. Extending coverage is expensive, to continue to have coverage after your term period is up your options aren't nearly as affordable as your original term life insurance policy. Also, though there is conversion privileges a number of term life policies expire prior to the term periods midpoint.
Whole life - provides life-long insurance protection. Once you've been approved for the coverage the insurance agency cannot revoke your insurance as long as premiums are being paid when they are due. Regardless of your heart, the insurance will stay force. Whole life builds guaranteed cash value , this amount can be used in the future for any purpose you wish via a policy loan. Premiums are higher initially but remain level, regardless of age, for the life of the policy. Also, premiums are guaranteed for the life of the policy. Because whole life policies are designed to last a lifetime , the premiums are far more expensive than those for term life insurance. Also, there's no flexibility. The amount of coverage you buy at the outset is the amount of coverage you're stuck with.
6. If you die, the insurance company has to pay your beneficiaries a lot of money. How do life insurance companies make money?
Insurance companies can make money by underwriting income . Underwriting income is derived from the difference between how much money is collected for all policies sold versus how much money is paid out in insurance claims for these policies in any given time period. For example, insurer "A" may collect $1,000,000 for polices issued or renewed in a given year. If they pay less than $1,000,000 in claims then they have made a profit. If they pay more than $1,000,000 in claims then they have suffered a loss. Then there is investment income. This situation allows insurance companies to invest money while its not being used. Huge profits can be reaped or loss in this situation. On a side note, insurance agencies can enter a new state and purposely charge less than their competitors and after some time raise their rates and hope to hold on to some of the business they collected.
7.Which life insurance is right for you and your family? Which one will you choose and why? For the purpose of this class, use either term life or whole life.
For my future, hypothetical family I believe that I would go with the Whole Life life insurance. I will hopefully be making a lot of money after about 10 years of working and my significant other will hopefully be working as well. That means we would be able to afford spending a little bit more for permanent coverage that will last a lifetime. Also, Whole Life has cash value and if I ever get to a desperate point in my life then I will be able to delve into that cash and use it as needed.
8. Deduct the monthly expense from your budget. Update your budget with he cost of life insurance. Your teachers have the fees for you.
This is a link to my spreadsheet
9. Calculate the amount of money you will spend after 20 years.
One year expense: $250 x 12 = $3,000
20 years expense: $3,000 x 20 = $60,000
1. Explain how term life insurance works.
Term life insurance is often the most affordable because it offers coverage for a specific number of years. You may want to go with term life insurance when you need help covering specific financial responsibilities like a mortgage or college expenses. Of you may want term life insurance to supplement a permanent policy or work policy. There is Simplified Issue Term Life Insurance that has a simple application process with same day approval where you can get coverage listing until you're age 90. It builds cash value nominally , no medical exam is required, and the coverage amount is anywhere from $5,000 to $100,000. Then there is Level Term Life Insurance that is affordable protection for a specific number of years (10-30) at a set price. It does not build cash value, it does require a medical exam, and the coverage among available is $100,000+.
2. Explain how whole life insurance works.
Whole life insurance features guaranteed premiums, death benefits, and cash value. Whole life insurance policies also give you the potential to receive dividends, which can increase the value of the policy when the insured is living or provide an increased death benefit for your beneficiaries. You want to purchase a whole life insurance policy if you want protection for life, payments that stay the same each year, to be able to put money into the policy on a tax-favored basis, and cash value you can use while you are living. Beneficiaries will receive at least face amount of the policy upon the death of the insured, assuming that you do not have outstanding policy loans and that the policy premiums are paid on time. Your cash value will grow each year, tax-deffered,until it matches the face value of you policy. When its needed most you will have access to your cash through loans and withdraw options. A medical exam is required and it does build cash value. Coverage amounts available are $10,000 - no maximum.
3. Explain how variable life insurance works. . What are the advantages and disadvantages of variable life insurance?
Variable life insurance is a type of permanent life insurance, it provides permeant protections to the beneficiary upon the death of the policy holder. This insurance it most of the time the most expensive form of each-value insurance because it allows you to allocate a portion of your premium dollars to separate and account comprised of various instruments and investments funds within the insurance company's portfolio such as stocks, bonds, equity funds, money market funds, and bond funds. Variable policies are considered securities contracts and are regulated under the federal securities law so they must be sold with prospectus. Variable policies allow you to participate in various types of investment options while not being taxed on your earnings. You can also apply the interest earned on these investments toward the premiums, potentially lowering the amount you pay. However, when the invested funds perform poorly , less money is available to lower the premiums meaning that you might have to pay more than you can afford to keep the policies in force. Poor fund performance also means that the cash and/or death benefits may decline. Also, you can't withdraw from the cash value during your lifetime.
5. Compare term life and whole life insurance. What are their advantages and disadvantages?
Term Life - is primarily for when people need insurance but can't afford permanent life insurance or only want coverage for a certain number of years. Term insurance has a guaranteed death benefit but no cash value and the premiums will increase at pre-determined intervals. Term conversion privileges are available with most policies. That privilege allows users to convert to a permanent policy that builds cash value , with not additional medical underwriting. Extending coverage is expensive, to continue to have coverage after your term period is up your options aren't nearly as affordable as your original term life insurance policy. Also, though there is conversion privileges a number of term life policies expire prior to the term periods midpoint.
Whole life - provides life-long insurance protection. Once you've been approved for the coverage the insurance agency cannot revoke your insurance as long as premiums are being paid when they are due. Regardless of your heart, the insurance will stay force. Whole life builds guaranteed cash value , this amount can be used in the future for any purpose you wish via a policy loan. Premiums are higher initially but remain level, regardless of age, for the life of the policy. Also, premiums are guaranteed for the life of the policy. Because whole life policies are designed to last a lifetime , the premiums are far more expensive than those for term life insurance. Also, there's no flexibility. The amount of coverage you buy at the outset is the amount of coverage you're stuck with.
6. If you die, the insurance company has to pay your beneficiaries a lot of money. How do life insurance companies make money?
Insurance companies can make money by underwriting income . Underwriting income is derived from the difference between how much money is collected for all policies sold versus how much money is paid out in insurance claims for these policies in any given time period. For example, insurer "A" may collect $1,000,000 for polices issued or renewed in a given year. If they pay less than $1,000,000 in claims then they have made a profit. If they pay more than $1,000,000 in claims then they have suffered a loss. Then there is investment income. This situation allows insurance companies to invest money while its not being used. Huge profits can be reaped or loss in this situation. On a side note, insurance agencies can enter a new state and purposely charge less than their competitors and after some time raise their rates and hope to hold on to some of the business they collected.
7.Which life insurance is right for you and your family? Which one will you choose and why? For the purpose of this class, use either term life or whole life.
For my future, hypothetical family I believe that I would go with the Whole Life life insurance. I will hopefully be making a lot of money after about 10 years of working and my significant other will hopefully be working as well. That means we would be able to afford spending a little bit more for permanent coverage that will last a lifetime. Also, Whole Life has cash value and if I ever get to a desperate point in my life then I will be able to delve into that cash and use it as needed.
8. Deduct the monthly expense from your budget. Update your budget with he cost of life insurance. Your teachers have the fees for you.
This is a link to my spreadsheet
9. Calculate the amount of money you will spend after 20 years.
One year expense: $250 x 12 = $3,000
20 years expense: $3,000 x 20 = $60,000
#24: Investment Questions
Pick four of the retirement plans listed . Answer questions 1-8 for the four retirement plans.
1. Describe the retirement plan.
Social Security is when , normally, 6.2% of a workers earnings is taken out of their paycheck for Social Security and 1.45% of their earning is taken out for Hospital Insurance for Medicare. The employers of these workers pay an equal amount so all together is about 12.4% for Social Security and 2.95 for Medicare. Social Security contributions are pains on earning only up to a cap, Hospital Insurance is not. The self-employed pay the employee and employer part of the contributions and they get a deduction on their personal income taxes.
2. Is this retirement plan tax deferred?
Yes, rising income can subject 50% or even 85% of Social Security benefits to taxation until a cap is met. If your combined income is below $25,000 than you will not be taxed.
3. When are you allowed to take money out of this retirement plan?
You can start receiving your benefits as earl as age 62 but the amount of benefits received will be less than your full retirement benefit amount , up to 30% less. Full retirement age is 66 years of age.
4. Is there a maximum contribution per year? What is the maximum contribution if there is?
Social security functions as tax, so the contribution is dependent upon your income. This means there is not a max contribution.
5. Do you get paid for this retirement plan for life?
While you can get money from social security for the rest of your life, it is recognized that social security is not enough to live comfortably. Most of the time people have income coming from somewhere else as well as from social security.
6. Can you leave the money in this account after retirement? If not, when do you have to close the account?
The money is social security only becomes accessible when someone becomes disabled or retires, at regiment age. The government decides how much money someone will receive from social security. You don't ever have to close the account necessarily, because after someone dies their family or whomever is signed to receive the money will continue to get money, as long as they are eligible.
7. Is there a monthly minimum amount you have to withdraw during retirement and how much is it?
No, depending on the economy at that point in time the Social Security Administration will decide how much you will be given each month. It is not up to the person receiving insurance at all.
8. What are the advantages and disadvantages of this retirement plan?
Social Security is a safety net for all citizens, regardless of who you are. Every working citizen has to pay into social security and eventually they will reap the benefits of social security when they become of age. Spouses and ex-spouses (if the marriage lasted longer than 10 years) of retirees receive benefits, as well as children: under the age 18, disabled before the age 22, and 19 while still in high school. Children, young widower, old widower, disabled widower, and parent of a diseased worker can continue to receive benefits. Also, the spouse , children, or a worker themselves can continue to receive benefits if the worker becomes disabled. The financing of social security has proven to be more problematic as time goes on. The system as designed to pay for itself as the citizens in the workforce would pay for those retired but this equation is not unreliable because the number of retirees outnumbers the numbers of workers. Another disadvantage is that, the money citizens contribute to social security in their lifetime could potentially yield higher returns if they were invested else where, privately.
1. Describe the retirement plan.
A 401K is a retirement plan that is, most of the time, sponsored from the employers to their employees. You yourself get to decide how much money you put into the account and your employer will match the amount exactly or almost exactly.
2. Is this retirement plan tax deferred?
Yes, you will not be taxed on your savings until you withdraw money.
3. When are you allowed to take money out of this retirement plan?
59 1/2 is the youngest you can start taking money out of the account, or if you leave your employer at 55 or older. If money is withdrawn before that then there will be a 10% charge alone with a regular tax charge.
4. Is there a maximum contribution per year? What is the maximum contribution if there is?
$17,500 is the max you're able to contribute if you're younger than 50 years old. $23,000 is the max contribution if you are older than 50 years old.
5. Do you get paid for this retirement plan for life?
No, you are not paid from this regiment plan for life.
6. Can you leave the money in this account after retirement? If not, when do you have to close the account?
When you turn 70 1/2 years old you have to stop putting money into the account and start withdrawing. When all the money is withdrawn from the account the account will be closed. You can move money into and IRA rollover account, move money into a new employers plan, or leave the money if the account has $5,000 or less.
7. Is there a monthly minimum amount you have to withdraw during retirement and how much is it?
The monthly minimum depends on your life expectancy most of the time. Once in a blue moon there will be an account that has a set number that has to be withdrawn every month.
8. What are the advantages and disadvantages of this retirement plan?
The money is tax deferred , and your employer is putting in money as well. So you're not using only you're money the whole time. The only disadvantage I can think of is that, you have to wait till a certain age to start taking money out.
1. Describe the retirement plan.
A Roth IRA is a retirement plan for people under the age of 70 1/2. Money is taken out of your paycheck every month and contributed to the Traditional IRA account. The account is tax deferred until you start to withdraw money from the account. A traditional IRA account belong to the retiree and the retiree only, it has nothing to do with the employer (like the 401K does)
2. Is this retirement plan tax deferred?
Yes, the Roth IRA is tax deferred.
3. When are you allowed to take money out of this retirement plan?
You can take out money from the account at any age really, but if its before 59 1/2 then you will be taxed 10%.
4. Is there a maximum contribution per year? What is the maximum
contribution if there is?
If you are younger than 50 years of age than the maximum is $5,500. When you reach over age 50 then you can start paying $1,000 more which would be a total of $6,500.
5. Do you get paid for this retirement plan for life?
This really depends on hoe much money you're putting in and saving while you're working. Once you start withdrawing money, if you can live comfortable with the amount of money you have in the account then by all means , live off it.
6. Can you leave the money in this account after retirement? If not, when do you have to close the account?
You can leave as much money in your account as you want until the age of 70 1/2, at that age you HAVE to start withdrawing money.
7. Is there a monthly minimum amount you have to withdraw during retirement and how much is it?
There isn't a monthly minimum amount of money that you have to withdraw monthly, a Roth IRA follows RMD. The RMD can be calculated by taking the total account balance and dividing it by your life expectancy.
8. What are the advantages and disadvantages of this retirement plan?
An advantage to this plan is that the money is tax deferred , also , the longer you let the money go untouched the more the money will grow because of interest. Another advantage is that you have a lot of choices of things to invest in. A disadvantage is that the max amount you're allowed to contribute into the account each year isn't very big. Another disadvantage is that, once you start to withdraw money you will be taxed.
1. Describe the retirement plan.
A traditional 403b plan is mostly for employees who work in the educational fields or churches, non-profit organizations. This plan is also known as the TSA. This plan is similar to the 401K where, when you contribute money into it then your employer will also contribute money.
2. Is this retirement plan tax deferred?
Yes, this plan is tax deferred.
3. When are you allowed to take money out of this retirement plan?
You can start to withdraw money when you are 59 1/2 , if you start younger then you will be charged a to% penalty fee. There are exceptions to the rule, but these are very specific. For example, if yours disabled or dealing with a financial hardship.
4. Is there a maximum contribution per year? What is the maximum contribution if there is?
Under 50 years of age the max is $18,000, over the age of 50 than the max is $23,000 .
5. Do you get paid for this retirement plan for life?
By owning a 403b Traditional you will be covered for life.
6. Can you leave the money in this account after retirement? If not, when do you have to close the account?
You can leave money in the account until the age of 70 if you which to gain more money with interest, but after the age of 70 you have to start making withdraws.
7. Is there a monthly minimum amount you have to withdraw during retirement and how much is it?
With 403b's there are RMD's where a minimum amount needs to be withdrawn at anytime within a year. If you don't with draw this amount than there could be a really serious tax, it could be up to 50% of the amount of money you were supposed to withdraw.
8. What are the advantages and disadvantages of this retirement plan?
Advantages of the 403b is that your employer could match the money you contribute into the account, and that savings grow tax free. Disadvantages are that, there are penally fees and you must start to withdraw money at a certain age. The age restrictions as a whole is a disadvantage.
PICK TWO RETIREMENT PLANS FOR YOURSELF AND ANSWER QUESTIONS 1-6 FOR BOTH RETIREMENT PLANS.
1. Which two retirement plans did you pick? (one must be from your chosen career)
401K
Roth IRA
2. Look at your current budget. How much money do you have available to make investments? How much will you invest each month?
Assuming that iim around 35 years old, I will have $6,763.94.
Invest into 401K - $1,000
Invest into Roth IRA - $1,000
3. Calculate the amount of money you will have at retirement using an equation for both of your retirement accounts. Assume you are retiring at age 60 and have been making month contributions once age 35.
401K- 1000[(1+0.00167)^300-1/0.00167]= $987,234.32
Roth IRA- 1000[(1+0.00167)^300-1/0.00167]= $987,234.32
4. How much money will you have saved by the time you retire based on your online budget.
In entry 25 and 26
5. Payment is different for each retirement plan. How are the payments handles at retirement for your two investments? For example, do you have to pay a fee or are you only allowed to withdraw a certain amount each year?
There are no fees for either a 401K or a Roth IRA. As long as I don't withdraw money too early then I won't be charged with penalty fee's or anything like that.
6. Determine your monthly distribution from both accounts at retirement . Assume these investment choices were made at age 35.
Lets assume I want to distribute the money over 20 years. Thats 240 months and the money I have at the end of retirement is $987,234.32, for both regiment plans.
Answered in entry 26
8. Will you be able to live comfortably based on your lifestyle at retirement. Provide a clear explanation.
If you look at my entry number 26 then you will see that I will have $1,234.53 at the end of each month when I budget everything in. I feel that $1,234.53 is enough to live comfortably each month, for 20 years because , I've already paid everything I had to pay to $1,234.54 is just money that I can spend wherever I would like. I could supersize meals and buy expensive clothes. I would be able to surprise my significant other with treats and presents, and maybe buy a dog or a hedgehog or something that I have always wanted. That , to me, means comfortable living.
9. Provide a bibliography for all your research.
Social Security
1. Describe the retirement plan.
Social Security is when , normally, 6.2% of a workers earnings is taken out of their paycheck for Social Security and 1.45% of their earning is taken out for Hospital Insurance for Medicare. The employers of these workers pay an equal amount so all together is about 12.4% for Social Security and 2.95 for Medicare. Social Security contributions are pains on earning only up to a cap, Hospital Insurance is not. The self-employed pay the employee and employer part of the contributions and they get a deduction on their personal income taxes.
2. Is this retirement plan tax deferred?
Yes, rising income can subject 50% or even 85% of Social Security benefits to taxation until a cap is met. If your combined income is below $25,000 than you will not be taxed.
3. When are you allowed to take money out of this retirement plan?
You can start receiving your benefits as earl as age 62 but the amount of benefits received will be less than your full retirement benefit amount , up to 30% less. Full retirement age is 66 years of age.
4. Is there a maximum contribution per year? What is the maximum contribution if there is?
Social security functions as tax, so the contribution is dependent upon your income. This means there is not a max contribution.
5. Do you get paid for this retirement plan for life?
While you can get money from social security for the rest of your life, it is recognized that social security is not enough to live comfortably. Most of the time people have income coming from somewhere else as well as from social security.
6. Can you leave the money in this account after retirement? If not, when do you have to close the account?
The money is social security only becomes accessible when someone becomes disabled or retires, at regiment age. The government decides how much money someone will receive from social security. You don't ever have to close the account necessarily, because after someone dies their family or whomever is signed to receive the money will continue to get money, as long as they are eligible.
7. Is there a monthly minimum amount you have to withdraw during retirement and how much is it?
No, depending on the economy at that point in time the Social Security Administration will decide how much you will be given each month. It is not up to the person receiving insurance at all.
8. What are the advantages and disadvantages of this retirement plan?
Social Security is a safety net for all citizens, regardless of who you are. Every working citizen has to pay into social security and eventually they will reap the benefits of social security when they become of age. Spouses and ex-spouses (if the marriage lasted longer than 10 years) of retirees receive benefits, as well as children: under the age 18, disabled before the age 22, and 19 while still in high school. Children, young widower, old widower, disabled widower, and parent of a diseased worker can continue to receive benefits. Also, the spouse , children, or a worker themselves can continue to receive benefits if the worker becomes disabled. The financing of social security has proven to be more problematic as time goes on. The system as designed to pay for itself as the citizens in the workforce would pay for those retired but this equation is not unreliable because the number of retirees outnumbers the numbers of workers. Another disadvantage is that, the money citizens contribute to social security in their lifetime could potentially yield higher returns if they were invested else where, privately.
401K
1. Describe the retirement plan.
A 401K is a retirement plan that is, most of the time, sponsored from the employers to their employees. You yourself get to decide how much money you put into the account and your employer will match the amount exactly or almost exactly.
2. Is this retirement plan tax deferred?
Yes, you will not be taxed on your savings until you withdraw money.
3. When are you allowed to take money out of this retirement plan?
59 1/2 is the youngest you can start taking money out of the account, or if you leave your employer at 55 or older. If money is withdrawn before that then there will be a 10% charge alone with a regular tax charge.
4. Is there a maximum contribution per year? What is the maximum contribution if there is?
$17,500 is the max you're able to contribute if you're younger than 50 years old. $23,000 is the max contribution if you are older than 50 years old.
5. Do you get paid for this retirement plan for life?
No, you are not paid from this regiment plan for life.
6. Can you leave the money in this account after retirement? If not, when do you have to close the account?
When you turn 70 1/2 years old you have to stop putting money into the account and start withdrawing. When all the money is withdrawn from the account the account will be closed. You can move money into and IRA rollover account, move money into a new employers plan, or leave the money if the account has $5,000 or less.
7. Is there a monthly minimum amount you have to withdraw during retirement and how much is it?
The monthly minimum depends on your life expectancy most of the time. Once in a blue moon there will be an account that has a set number that has to be withdrawn every month.
8. What are the advantages and disadvantages of this retirement plan?
The money is tax deferred , and your employer is putting in money as well. So you're not using only you're money the whole time. The only disadvantage I can think of is that, you have to wait till a certain age to start taking money out.
Roth IRA
1. Describe the retirement plan.
A Roth IRA is a retirement plan for people under the age of 70 1/2. Money is taken out of your paycheck every month and contributed to the Traditional IRA account. The account is tax deferred until you start to withdraw money from the account. A traditional IRA account belong to the retiree and the retiree only, it has nothing to do with the employer (like the 401K does)
2. Is this retirement plan tax deferred?
Yes, the Roth IRA is tax deferred.
3. When are you allowed to take money out of this retirement plan?
You can take out money from the account at any age really, but if its before 59 1/2 then you will be taxed 10%.
4. Is there a maximum contribution per year? What is the maximum
contribution if there is?
If you are younger than 50 years of age than the maximum is $5,500. When you reach over age 50 then you can start paying $1,000 more which would be a total of $6,500.
5. Do you get paid for this retirement plan for life?
This really depends on hoe much money you're putting in and saving while you're working. Once you start withdrawing money, if you can live comfortable with the amount of money you have in the account then by all means , live off it.
6. Can you leave the money in this account after retirement? If not, when do you have to close the account?
You can leave as much money in your account as you want until the age of 70 1/2, at that age you HAVE to start withdrawing money.
7. Is there a monthly minimum amount you have to withdraw during retirement and how much is it?
There isn't a monthly minimum amount of money that you have to withdraw monthly, a Roth IRA follows RMD. The RMD can be calculated by taking the total account balance and dividing it by your life expectancy.
8. What are the advantages and disadvantages of this retirement plan?
An advantage to this plan is that the money is tax deferred , also , the longer you let the money go untouched the more the money will grow because of interest. Another advantage is that you have a lot of choices of things to invest in. A disadvantage is that the max amount you're allowed to contribute into the account each year isn't very big. Another disadvantage is that, once you start to withdraw money you will be taxed.
403b Traditional
1. Describe the retirement plan.
A traditional 403b plan is mostly for employees who work in the educational fields or churches, non-profit organizations. This plan is also known as the TSA. This plan is similar to the 401K where, when you contribute money into it then your employer will also contribute money.
2. Is this retirement plan tax deferred?
Yes, this plan is tax deferred.
3. When are you allowed to take money out of this retirement plan?
You can start to withdraw money when you are 59 1/2 , if you start younger then you will be charged a to% penalty fee. There are exceptions to the rule, but these are very specific. For example, if yours disabled or dealing with a financial hardship.
4. Is there a maximum contribution per year? What is the maximum contribution if there is?
Under 50 years of age the max is $18,000, over the age of 50 than the max is $23,000 .
5. Do you get paid for this retirement plan for life?
By owning a 403b Traditional you will be covered for life.
6. Can you leave the money in this account after retirement? If not, when do you have to close the account?
You can leave money in the account until the age of 70 if you which to gain more money with interest, but after the age of 70 you have to start making withdraws.
7. Is there a monthly minimum amount you have to withdraw during retirement and how much is it?
With 403b's there are RMD's where a minimum amount needs to be withdrawn at anytime within a year. If you don't with draw this amount than there could be a really serious tax, it could be up to 50% of the amount of money you were supposed to withdraw.
8. What are the advantages and disadvantages of this retirement plan?
Advantages of the 403b is that your employer could match the money you contribute into the account, and that savings grow tax free. Disadvantages are that, there are penally fees and you must start to withdraw money at a certain age. The age restrictions as a whole is a disadvantage.
PICK TWO RETIREMENT PLANS FOR YOURSELF AND ANSWER QUESTIONS 1-6 FOR BOTH RETIREMENT PLANS.
1. Which two retirement plans did you pick? (one must be from your chosen career)
401K
Roth IRA
2. Look at your current budget. How much money do you have available to make investments? How much will you invest each month?
Assuming that iim around 35 years old, I will have $6,763.94.
Invest into 401K - $1,000
Invest into Roth IRA - $1,000
3. Calculate the amount of money you will have at retirement using an equation for both of your retirement accounts. Assume you are retiring at age 60 and have been making month contributions once age 35.
401K- 1000[(1+0.00167)^300-1/0.00167]= $987,234.32
Roth IRA- 1000[(1+0.00167)^300-1/0.00167]= $987,234.32
4. How much money will you have saved by the time you retire based on your online budget.
In entry 25 and 26
5. Payment is different for each retirement plan. How are the payments handles at retirement for your two investments? For example, do you have to pay a fee or are you only allowed to withdraw a certain amount each year?
There are no fees for either a 401K or a Roth IRA. As long as I don't withdraw money too early then I won't be charged with penalty fee's or anything like that.
6. Determine your monthly distribution from both accounts at retirement . Assume these investment choices were made at age 35.
Lets assume I want to distribute the money over 20 years. Thats 240 months and the money I have at the end of retirement is $987,234.32, for both regiment plans.
$987,234.32/240 = $4,113.48
7. Create a monthly budget for your retirement . Lets assume you are retiring at 60 years of age. Answered in entry 26
8. Will you be able to live comfortably based on your lifestyle at retirement. Provide a clear explanation.
If you look at my entry number 26 then you will see that I will have $1,234.53 at the end of each month when I budget everything in. I feel that $1,234.53 is enough to live comfortably each month, for 20 years because , I've already paid everything I had to pay to $1,234.54 is just money that I can spend wherever I would like. I could supersize meals and buy expensive clothes. I would be able to surprise my significant other with treats and presents, and maybe buy a dog or a hedgehog or something that I have always wanted. That , to me, means comfortable living.
9. Provide a bibliography for all your research.
Kitces, Michael E. "The Taxation Of Social Security Benefits As A Marginal Tax Rate Increase? | Kitces.com." Kitcescom. N.p., 27 Mar. 2013. Web. 02 Apr. 2015.
"Life Insurance." – Get a Quote Online. N.p., n.d. Web. 29 Mar. 2015.
Piper, Mike. "How Is Social Security Taxed?" Oblivious Investor. N.p., 13 July 2012. Web. 02 Apr. 2015.
"What Is a 401(k)?" Personal Finance RSS. The Wall Street Journal, n.d. Web. 31 Mar. 2015.
20 March 2015
#23: LS3 Reflections
1. For each of the three parts of Life Stage 3, detail at least one meaningful experience in which you gained a new understanding of, or a new perspective that you may not have had prior to the assignments.
-Part One: Learning about about my personality type in a relationship help me realize that there are a lot of things that I have to work on in myself before I can get into a committed relationship with someone. It also made me realize that I have no idea what kind of time and effort goes into planning a wedding and that I really need to appreciate the people that do it for a living because they are the real MVP'S.
-Part Two: In part two I learned that I don't know very much about my family , about who they are or where they came from. I also learned that, it depend on how you deal with situations that tells the kind of person you are. I don't know my family very well but I would like to think that I still know how to handle challenges that come my way.
-Part Three: I learned that buy or renting a house seems a lot easier than I had originally thought it. I learned that there are a lot of websites and services that are willing and ready to help you, that I don't have to absolutely freak out thinking about my future.
2. Please give me at least one recommendation and one commendation for each of the parts of Life Stage 3.
- Part One: Recommendation: Maybe if you could be more specific on what exactly you consider important and that you want budgeted when it comes to the wedding part.
Commendation: I really enjoyed the idea of looking into a honeymoon and seeing the activities and adventures that you could partake in while on said honeymoon.
-Part Two: Recommendation: I felt that the "Do You Know Quiz" really had no relevance.
Commendation: Having to speak to the oldest member of your family and interview them really gave me a good feeling aside from getting my assignment done. I enjoyed that connection time.
-Part Three: Recommendation: Shopping for credit is kind of frustrating snd confusing, so maybe if next time you can give a demonstration on how to do it and where to possibly go to find the information.
Commendation: I liked looking for houses, it was fun to look and dream and wonder.
-Part One: Learning about about my personality type in a relationship help me realize that there are a lot of things that I have to work on in myself before I can get into a committed relationship with someone. It also made me realize that I have no idea what kind of time and effort goes into planning a wedding and that I really need to appreciate the people that do it for a living because they are the real MVP'S.
-Part Two: In part two I learned that I don't know very much about my family , about who they are or where they came from. I also learned that, it depend on how you deal with situations that tells the kind of person you are. I don't know my family very well but I would like to think that I still know how to handle challenges that come my way.
-Part Three: I learned that buy or renting a house seems a lot easier than I had originally thought it. I learned that there are a lot of websites and services that are willing and ready to help you, that I don't have to absolutely freak out thinking about my future.
 |
| (just a house) |
2. Please give me at least one recommendation and one commendation for each of the parts of Life Stage 3.
- Part One: Recommendation: Maybe if you could be more specific on what exactly you consider important and that you want budgeted when it comes to the wedding part.
Commendation: I really enjoyed the idea of looking into a honeymoon and seeing the activities and adventures that you could partake in while on said honeymoon.
-Part Two: Recommendation: I felt that the "Do You Know Quiz" really had no relevance.
Commendation: Having to speak to the oldest member of your family and interview them really gave me a good feeling aside from getting my assignment done. I enjoyed that connection time.
-Part Three: Recommendation: Shopping for credit is kind of frustrating snd confusing, so maybe if next time you can give a demonstration on how to do it and where to possibly go to find the information.
Commendation: I liked looking for houses, it was fun to look and dream and wonder.
 |
| (just credit cards) |
17 March 2015
#22: Buying a Home
 |
| (Living room of house I would like to buy) |
Buying
1. Detail a location were you would like to reside for a majority of your career.
Sant Monica
2. Find one home that you feel you would actually be able to purchase and detail the following:a. How did you find this property? (URL)
$799,000
$79,900
d. Total estimated closing cost for your loan (assume 3%)
$23,970
e. Total monthly mortgage payment.
$2,908/month
i. Principle and Interest payment is $3,433 per month or ii. Property Taxes are $799 per month or $9,588 per year
iii. Homeowners Insurance is $67 per month
f. Estimate your total monthly utility expenses for:
-Electricity:
$85.00
-Water:
$75.00
-Garbage:
$60.00
-Natural Gas:
$45.00
 |
| (one of the bedrooms in the house I would like to buy) |
 |
| (living room of the house I would rent) |
Renting
3. find a similar home near the same locations that you would possibly like to rent and deal the following:
a. How did you find this property? (URL)
b. Monthly rent
$6,161/month
c. Security deposit
$9,900
d.Total monthly utility expenses:
-Electricity:
paid utilities
-Water:
paid utilities
-Garbage:
paid utilities
-Natural Gas:
paid utilities
e. Renters Insurance cost per year is $408.48 or $34.04 per month. Or is renters insurance even offered in your area?
f. Restrictions of the property
-2 car garage parking
-pet friendly
-laundry in unit
-central cooling
-gated entry
4. Discuss the advantages and disadvantages of renting vs. buying and how this might affect your renting or purchasing decisions.
I feel that the disadvantages and the advantages of owning vs. renting a house vary depending on the situation that you're currently living in. For example, if I'm a college student living in another state but I'm not doing dorming at the college, then I would prefer to rent because its not as a big a commitment as buying and its a lot easier to move out of a house that you're renting. It would also cost less and thats important because a college students isn't making very much money because of schooling. If I've recently married though, and me and my significant other are looking for somewhere to movie into and start a family then I would most likely buy a house. Its stable and I hopefully have a job so i could afford a house and I'm in control of the house that I'm purchasing. What I mean by in control is that, when you rent a house you might not have freedom to paint walls or remodel the kitchen or even have pets. When you purchase your own home though, you can do whatever you want, wether you want to build and attach another room or move out old furniture and bring in new furniture. I just think that, renting or buying depends on your life at certain points. Theres no "right" choice when it comes to renting vs. buying.
 |
| (restroom of the house I would rent) |
#21: Shopping For Credit
- Credit card name (Visa, MasterCard, Discover, Kohl’s, etc.) Chase
- Type of Account Credit
- Company name, address, phone (of company the card is issued by) Chase Bank925 S Hacienda BlvdLa Puente, CA(626) 336-4557
- Website
- Locations where card is accepted (everywhere, or very specific) Anywhere that accepts visa
- Annual fee $0
- Payment grace period 25 Days
- Annual Percentage Rate (APR) 0% First 15 months and a variable APR of 13.99%, 18.99% or 22.99%
- Finance charge calculation method (this is the calculation of how your balance will be charged interest) Not Available
- Credit limit $5,000
- Minimum payment $25
- Other fees None
- Other features 5% cash back on $15,000 purchases
- Credit card name Discover Card
- Type of Account Credit Card
- Company name, address, phone P.o Box 30943 Salt Lake City, UT 84130-0943 1-800-DISCOVER
- Website Discover Website
- Locations where card is accepted North America, South America, Europe, Scandinavia, and Russia
- Annual fee None
- Payment grace period 23 Days
- Annual Percentage Rate (APR) 0% for 14 months, then 10.99%-22.99% after the 14 months
- Finance charge calculation method (this is the calculation of how your balance will be charged interest) Average Daily Balance
- Credit limit Starts at $500 (depends on credit scores)
- Minimum payment 2% of current balance
- Other fees: Transfer fee of 3%, Cash Advanced fee or $10 or 5%, $35 late payment fee
- Other features: 1% (or more) cash back on most credit card purchases, cash back never expires, no foreign transaction fee
Credit card name My Best Buy Card- Type of Account Charge Card
- Company name, address, phone 1800 Plaza Dr.West Covina, CA 91790Phone: 626-480-5399
- Website http://stores.bestbuy.com/102/
- Locations where card is accepted All Best Buy stores
- Annual fee None
- Payment grace period 25 Days
- Annual Percentage Rate (APR) 0-12% for 6-48 months, then 25-28% ongoing
- Finance charge calculation method Daily Balance
- Credit limit Review of Credit Score
- Minimum payment Depends on balance of card
- Other fees: $35 late payment charge, transaction fees
- Other features: Discount for card holder for in-store or online purchases
Credit Card Analysis
- Which credit card has the highest annual percentage rate and how much is it? Best Buy: 0-12% for 6-48 months, then 25-28% ongoing
- What method is used to calculate the monthly finance charge for the first major credit card? It was not made clear to me
- When does the finance charge begin to accrue on the credit card from the local department store? The first day there is a charge added to the daily balance
- Do any of the cards have annual fees?None of the cards have annual fees
- Is there a transaction fee on any card?Chase: balance transfer - $5, cash advance - $10Best Buy: cash advance - $10, balance transfer - $15
- Is there a minimum finance charge on either of the major credit cards? Discover Card: $0.50 Chase: $1.50
- Does the first major credit card charge a fee for late payments? Chase: $35
- What is the grace period on the credit card from the local department store? 25 Days
- Rafael wants to buy a new CD player that costs $450. According to his budget, he can afford payments up to $62.00 per month. Which of the three credit cards you’ve found would you recommend that Rafael use to purchase the CD player?I recommend that Rafael use Chase. Chase has a 25 day grace period, with a $0 annual fee and 0% APR for 14 months. Its the most casual and 'go your own pace' card.
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