most likely own bonds in “mutual funds” * Bonds – a key part of the economy Part B: Your Retirement Your Retirement: How to pay? Social Security & Defined Benefit Plans Social Security will be there for you but benefits are modest. "Pay as you go" system. That is, people currently working are supporting current Social Security recipients with what is called a "payroll tax" (and thus it is a transfer). Baby Boomers will not use it up. average benefit Young workers rarely get traditional “defined benefit pension plans” monthly payments in retirement typically calculated by years of work and final salary (thus defined benefit ) managed by employer Your Retirement: What should you do? “Save early and often” * Stocks too risky? Not over past decades. Your Retirement: How to Save? Most employers offer “defined contribution” plans amount going in is set ex : PSU employees: 14.3% of pay types: 401(k), 403(b), & 457 (IRS code) various tax benefits you select how much goes in you select the assets ex : best: stock & bond mutual funds ex : bank deposits pay too little ex : mostly stocks when young ex : more in bonds as you age Low fees essential Diversify: many assets (mutual funds) Easiest: “life cycle fund” Your Retirement: Investments Very few students today will be covered by defined benefit pension plans (they're the old style pension plans that your grandparents might have where the employer pays you from retirement until death). Social Security will be there but the benefits are modest . Bank deposits earn much less than stocks and bonds (often held by individuals in mutual funds).
A life-cycle mutual fundsselects an appropriate mix of stock and bondsbased upon one's age.Your Retirement: Alternative to Saving?Living with your children and helping raise the grandkids.Your Retirement: Why Care? Why should a college student care about this?Must start saving early.Why will you likely own more than $1,000,000 of worth of stocks & bonds?
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- Fall '10