Planning For the Future Financial Literacy Copper Hills High School.
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Transcript of Planning For the Future Financial Literacy Copper Hills High School.
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Planning For the FutureFinancial Literacy
Copper Hills High School
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INSURANCE
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Health Insurance Provides protection against financial losses resulting
form injury, illness, and disability Provides coverage for
Medical expenses, emergency and routine Hospital expenditures Surgeries Dental Vision Prescriptions
Check you parent’s or guardian’s plan to see how long you can be covered
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HMO Health Managed Organization Limits the number of doctors, hospitals, and
clinics you can use Usually pays a larger portion of the bills
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Cobra Insurance Allows you to purchase insurance from your
former employer for a period of time. You must pay the entire premium amount
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Future of Health Insurance Congress is currently working on changing
health insurance. The new legislation :
Requires all employers to provide health insurance
Eliminates Pre-Existing Clauses by 2014 Allow individuals to stay on parents’ plan until
they turn 26 Requiring states to offer health insurance
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Life Insurance A contract specifying a sum to be paid to a
beneficiary upon the insured’s death Term Life Insurance
You are only insured for a period of time. Usually cheaper premiums that are only paid for
the period of insured time Whole Life Insurance
Pay premiums until death or age 100 Insured until you die
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Disability Insurance Replaces a portion of one’s income if they
become unable to work due to illness or injury
Must be purchased through your employer
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RETIREMENT
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Government Funded Options
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Social Security A government plan where approximately 42% of
your average earnings is paid to retired individuals, disabled individuals, or survivors
To become eligible, you must pay into the system Benefits are determined by
Number of years of service Your average level of earnings An adjustment for inflation
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Disability Benefits Disability benefits are given to those who
experience a physical or mental impairment that is expected to result in Death A job situation where they can not earn more than
$500 a month.
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Survivor Benefits Provided if the breadwinner of the family dies Includes a small lump-sum payment to help
with funeral costs. Can include monthly payment if:
Spouse is over 60 Spouse is caring for children under 16 Children are under 18 they can get a monthly
payment until they turn 18
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Private Retirement Funding OptionsSaving Enough to Live on In the Future
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Employer Funded Pensions Employees receive a promised payout at retirement Noncontributory Plan
Employees do no have to pay anything into the plan Contributory Plan
Employees help fund part of the plan Must work at a company for a specified number of
years to get the benefit Rare to find now
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Profit Sharing Plans A pension plan in which the company’s
contributions vary from year to year depending on the firm’s performance
The employee’s salary determines how much they will receive
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401(k) Plan A tax-deferred retirement plan where both the
employer and the employee put in a portion of their salary into an investment account
The money is invested in mutual funds Incur a penalty if you access the funds before
you retire Money is not taxed until you withdrawal it
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Keogh Plan Self-employment retirement plan Offered through financial institutions Can be contributory or non-contributory
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Individual Retirement Arrangements (IRAs) A retirement account to which an individual can
contribute up to $4000 in 2007, $5000 in 2008 and increased by $500 each year after
Usually invested in mutual funds You are penalized if you take money out before age
59 ½ You must start taking money by at 70 ½ Contributions are not taxed Withdrawals are taxed
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Roth IRA Similar to a traditional IRA Contributions are taxed Withdrawals are tax free as long as you have
had the Roth IRA for at least 5 years
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The Payout Options
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Single Life Annuity Receive a set monthly payment for your
entire life Payments stop when you die
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Annuity for Life or a “Certain Period of Time” Receive a set monthly payment for a fixed
amount of time Even if you die, the payments will still keep
coming for that amount of time
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Joint and Survivor Annuity Receive payment until either you or your
spouse dies The payment amount is reduced by as much
as 50%
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Lump Sum Payment Receive all retirement benefits in one single
payment If you are not careful, you could run out of
money before you die The rule of thumb is not to spend more than
4% of your nest egg per year for your savings to last through retirement.
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Estate PlanningWhat happens to your wealth after you die
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Steps to the Process Determine the value of your estate Choose your heirs and decide what they will
receive Determine the cash needs of the estate
Taxes, Funeral Expenses, Medical Expenses, etc. Create a plan
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Wills Legal documents describing
How you want your property to be transferred Your beneficiaries The executor Guardian for your children
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Joint Ownership When assets are owned jointly, they’re
transferred to the surviving owner(s) without going through probate Probate is the process of validating the will
through the court system
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Trusts A legal entity in which some of your property
is held for the benefit of another person Reduce the amount of estate taxes you will
owe Ensure that your wishes are granted