Wall Street Journal: Assignment: Defined Contribution Plans
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:
b. Defined contributions plans:
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 from each paycheck. c. How are the contributions treated for tax purposes today (do you pay tax on this …show more content…
When do you pay taxes on the returns you earn?
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. Why would it be a bad idea to take your 401(k) account balance in cash and go on vacation between jobs?
4. For individuals who do not have access to an employer-provided retirement plan, Individual Retirement Accounts are available. Suppose you open a tax-deductible IRA. e. How much can you deposit in the IRA account for 2015 ?
f. How are the contributions treated for tax purposes?
g. When you make withdrawals in retirement, how are the contributions and returns on those contributions taxed?
5. A second type of IRA is the “Roth IRA.” Suppose you open a Roth IRA account. h. How much can you deposit into the account for 2015?
i. How are the contributions treated for tax purposes?
j. When you make withdrawals in retirement, how are the contributions and returns on those contributions taxed?
6. In President Obama’s State of the Union speech in January, he stated that the IRS would be creating a new retirement account called the MyRA. This retirement account is available Jan. 1,