Technical Presentations   #3 Non Technical Audience
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Technical Presentations   #3 Non Technical Audience Technical Presentations #3 Non Technical Audience Presentation Transcript

  • The Nontechnical Audience Speech #3 Advanced Communications Manual – Technical Presentations Karen A. Threlkeld, PMP, CC, CL Toastmasters Power Speakers Club
  • The ABCs of 401(k)s
  • What is a 401(k)?
    • A type of employer-sponsored retirement plan in the United States, named after a section of the U.S. Internal Revenue Code.
    • It allows a worker to save for retirement while deferring income taxes on the saved money and earnings until withdrawal .
    From A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2000 Edition
  • How does it work?
    • The employee elects to have a portion of his or her wages paid directly, or "deferred", into his or her 401(k) account.
    • This money is taken out “before-taxes” and thus reduces your taxable income.
    • Income taxes are not payable until the money is withdrawn.
      • For example, if you earn $1,000 each paycheck, and you contribute, say 5% ($50), you are only taxed on $950. You don't owe income taxes on the money until you withdraw it from the plan, when you could be in a lower tax bracket.
    • Many companies match all or some of the employee’s contributions.
    From A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2000 Edition
  • What happens to the money?
    • The employee determines how the money is invested!
    • Several options are usually available:
      • Money market
      • Stocks
      • Mutual funds
    • The employer match is sometimes made in company stock.
  • What happens to the money? (2)
    • The account grows as the investments grow in value and pay dividends AND as you continue to defer a percentage of your wages from each paycheck
  • 401(k) Rules
    • Money cannot be withdrawn without a penalty before age 59 1/2
    • Money must be withdrawn beginning April 1st of the calendar year after the attainment of age 70½ or penalties will apply
  • What if I need the money NOW?!
    • Hardship Withdrawal
    • Loan
  • Hardship Withdrawal
    • Financial hardship withdrawal
      • 10% penalty applies if you withdraw before 59 ½
      • The withdrawal is also taxed as income
      • Examples: To buy a primary residence or to prevent foreclosure or eviction from your home; to pay college tuition for yourself or a dependent; to pay unreimbursed medical expenses for you or your dependents
    • Penalty-free withdrawal
      • 10% penalty is waived but you still pay taxes
      • Examples: You become totally disabled; you are in debt for medical expenses that exceed 7.5 percent of your adjusted gross income; you are required by court order to give the money to your divorced spouse, a child, or a dependent.
  • Loan
    • A loan from your 401(k) allows you to borrow against your savings.
    • The loan must be paid back, usually within five years, and payments are withdrawn from your paycheck in addition to your “regular” 401(k) contributions.
    • Can cause problems if you leave your job before the loan is paid back!
  • A Word of Advice
    • Consult with a professional before withdrawing money from a 401(k)
    • There are serious penalties and tax implications to consider!
  • What if I change jobs?
    • Generally, you can leave the money where it is and let it continue growing.
      • You just wouldn’t be making the deferred contributions from your paycheck
    • You can “roll it” into a self-directed IRA account.
  • What is a “Self-directed IRA”?
    • IRA = Individual Retirement Account
    • A “self-directed IRA” is one where you, the investor, make all the decisions about the account
    • IRAs are a lot like 401(k)s except they are not coordinated through your employer
    • There are LOTS of 401(k) providers who can provide more information
      • Fidelity
      • Charles Schwab
      • Merrill Lynch
      • TD Ameritrade
      • ScottTrade
  • What does Southern Company offer?
    • The Employee Savings Plan (ESP) is Southern Company's 401(k) plan.
    • Eligible employees can contribute from 1% to 25% of base pay on a before-tax or after-tax basis or a combination of both, up to certain annual federal limits.
    • The company currently matches 85% of the first 6% of base salary that participating employees contribute.
    • All contributions, including company-matching contributions, are invested in the investment option(s) you select.
  • Scenario
    • You make $1000 per pay period and contribute 5% to the ESP ($50)
      • Your taxable income is only $950
      • Southern Company adds another $42.50 to your contribution, for a total of $92.50
    • You make $2000 per pay period and contribute 10% to the ESP ($200)
      • Your taxable income is only $1800
      • Southern Company adds $102 (85% of $120 or 6%), for a total of $302.
  • Benefits
    • More secure retirement
    • Reduces your taxable income now
    • Taxes on withdrawals is based on your income at the time of the withdrawal
    • You determine how the money is invested
    • FREE MONEY, in the form of the employer match
  • Last Words
    • If your employer offers a 401(k) plan with an employer match, you are CRAZY if you don’t contribute at least the amount required to get the maximum employer match
      • So, at Southern Company, you should contribute at least 6% before-tax
    • Google “401(k)” or go to the library to get more information