Retirement Income and Estate Planning

Social Security

A public pension plan established by the US government in 1935 – defined benefit plan

RecipientsRetireesSurvivorsDisabled

Social Security

Benefits received are based on earnings

FactorsWhen you retireHow long you worked - number of quarters worked vs. year of birth (40 quarters for full benefits)

Earned income

Social SecurityStart of benefits – age 62 – 67

Yearly amount of benefit increases as delay start

Social Security Taxes (4.2% /6.2% of income)Called FICA taxes (Federal Insurance Contributions Act)

Taken out of paycheck along with other income taxes

Medicare taxes (1.45%) also taken out

Maximum Taxable Yearly Earnings (MTYE)Currently $113,700 (for 2013)No cap for Medicare

Estate Planning

EstateAll property and assets owned by an individual

Estate Planning Creating a detailed plan for managing your estate according to your wishes after your death

An essential part of financial and retirement planning

Estate Planning

WillLegal declaration of a person’s wishes regarding the distribution of his or her estate after death

Many different typesIf you die without one, you are “intestate”Key issues

ExecutorGuardianJoint ownershipTrustee

Estate Planning

Trust A legal arrangement in which a designated person (trustee) manages the assets of the estate for the benefit of someone else

ProbateLegal procedure of proving that a will is valid

Probate court validates the will and oversees the distribution of your assets

Key Terms – Estate Planning

Beneficiary WillDefined Benefit PlanProbateDefined Contribution Plan EstateTrust FICA Trustee IntestateVesting GuardianExecutor