Economics > STUDY GUIDE > ECON MISC Module 10 Topic 4 Application-Economics and Personal Finance (All)

ECON MISC Module 10 Topic 4 Application-Economics and Personal Finance

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Economics and Personal Finance Pick the Retirement Plan NAME: To complete this assignment, read each of the scenarios and decide on your retirement strategy. Address each of the issues below to support why you selected that strategy. Submit this document to the dropbox when you are finished. 1. Give the reasoning for why you picked one plan over another with regards to how it fits into your retirement planning. Include the following factors if possible: a. How your age determined your strategy b. How your risk tolerance affected your decision c. How your employment plans affected your decision. For example, do you plan on working for the company a long/short time? Is this important? 2. Are you going to fund any other plans in addition to the main plan (IRA, Roth IRA, annuities, etc.)? If so, which one(s). If not, why not? Scenario 1 - Your First Real Job You're fresh out of college and you land you first real job at a large technology company. As part of your orientation, you sit down with the human resources manager to pick out a retirement plan. They have a couple of options. Option 1 - Pension Plan The company has a pension plan that will pay a comfortable retirement benefit based on current projections. It won't make your rich, but you'll be comfortable. The plan will pay out from when you retire at 65, the earliest age, until you die. You have to work for the company for at least ten years before you are eligible to take part in the plan. If you leave before then, you won't get any retirement benefit. Option 2 - 401K Plan The company also sponsors a 401K plan. They will match 50% of your contributions up to 5% of your salary. The plan has a couple of funds that you can invest in that have done reasonably well over the years. I would choose the 401K plan because I am just out of college and want to learn more and experience new jobs. I believe that the best way to do this is to switch to new companies every few years to learn new things and gain experience in different areas. I wouldn’t want to stay in one company for 10 years because then I miss out on the learning portion of my career. I am young, therefore I need to gather experience rather than stay put for 10 years. I can take the risks because I don’t have much to lose. It is only my first job and if I can take the risk losing it. I am not going to add any additional plan to the main plan because you usually can’t withdraw money from the accounts and at this age I need to withdraw a certain amount of money to meet my payments

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