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
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