Technical Presentations #3 Non Technical Audience


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Technical Presentations #3 Non Technical Audience

  1. 1. The Nontechnical Audience Speech #3 Advanced Communications Manual – Technical Presentations Karen A. Threlkeld, PMP, CC, CL Toastmasters Power Speakers Club
  2. 2. The ABCs of 401(k)s
  3. 3. What is a 401(k)? <ul><li>A type of employer-sponsored retirement plan in the United States, named after a section of the U.S. Internal Revenue Code. </li></ul><ul><li>It allows a worker to save for retirement while deferring income taxes on the saved money and earnings until withdrawal . </li></ul>From A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2000 Edition
  4. 4. How does it work? <ul><li>The employee elects to have a portion of his or her wages paid directly, or &quot;deferred&quot;, into his or her 401(k) account. </li></ul><ul><li>This money is taken out “before-taxes” and thus reduces your taxable income. </li></ul><ul><li>Income taxes are not payable until the money is withdrawn. </li></ul><ul><ul><li>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. </li></ul></ul><ul><li>Many companies match all or some of the employee’s contributions. </li></ul>From A Guide to the Project Management Body of Knowledge (PMBOK ® Guide) – 2000 Edition
  5. 5. What happens to the money? <ul><li>The employee determines how the money is invested! </li></ul><ul><li>Several options are usually available: </li></ul><ul><ul><li>Money market </li></ul></ul><ul><ul><li>Stocks </li></ul></ul><ul><ul><li>Mutual funds </li></ul></ul><ul><li>The employer match is sometimes made in company stock. </li></ul>
  6. 6. What happens to the money? (2) <ul><li>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 </li></ul>
  7. 7. 401(k) Rules <ul><li>Money cannot be withdrawn without a penalty before age 59 1/2 </li></ul><ul><li>Money must be withdrawn beginning April 1st of the calendar year after the attainment of age 70½ or penalties will apply </li></ul>
  8. 8. What if I need the money NOW?! <ul><li>Hardship Withdrawal </li></ul><ul><li>Loan </li></ul>
  9. 9. Hardship Withdrawal <ul><li>Financial hardship withdrawal </li></ul><ul><ul><li>10% penalty applies if you withdraw before 59 ½ </li></ul></ul><ul><ul><li>The withdrawal is also taxed as income </li></ul></ul><ul><ul><li>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 </li></ul></ul><ul><li>Penalty-free withdrawal </li></ul><ul><ul><li>10% penalty is waived but you still pay taxes </li></ul></ul><ul><ul><li>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. </li></ul></ul>
  10. 10. Loan <ul><li>A loan from your 401(k) allows you to borrow against your savings. </li></ul><ul><li>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. </li></ul><ul><li>Can cause problems if you leave your job before the loan is paid back! </li></ul>
  11. 11. A Word of Advice <ul><li>Consult with a professional before withdrawing money from a 401(k) </li></ul><ul><li>There are serious penalties and tax implications to consider! </li></ul>
  12. 12. What if I change jobs? <ul><li>Generally, you can leave the money where it is and let it continue growing. </li></ul><ul><ul><li>You just wouldn’t be making the deferred contributions from your paycheck </li></ul></ul><ul><li>You can “roll it” into a self-directed IRA account. </li></ul>
  13. 13. What is a “Self-directed IRA”? <ul><li>IRA = Individual Retirement Account </li></ul><ul><li>A “self-directed IRA” is one where you, the investor, make all the decisions about the account </li></ul><ul><li>IRAs are a lot like 401(k)s except they are not coordinated through your employer </li></ul><ul><li>There are LOTS of 401(k) providers who can provide more information </li></ul><ul><ul><li>Fidelity </li></ul></ul><ul><ul><li>Charles Schwab </li></ul></ul><ul><ul><li>Merrill Lynch </li></ul></ul><ul><ul><li>TD Ameritrade </li></ul></ul><ul><ul><li>ScottTrade </li></ul></ul>
  14. 14. What does Southern Company offer? <ul><li>The Employee Savings Plan (ESP) is Southern Company's 401(k) plan. </li></ul><ul><li>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. </li></ul><ul><li>The company currently matches 85% of the first 6% of base salary that participating employees contribute. </li></ul><ul><li>All contributions, including company-matching contributions, are invested in the investment option(s) you select. </li></ul>
  15. 15. Scenario <ul><li>You make $1000 per pay period and contribute 5% to the ESP ($50) </li></ul><ul><ul><li>Your taxable income is only $950 </li></ul></ul><ul><ul><li>Southern Company adds another $42.50 to your contribution, for a total of $92.50 </li></ul></ul><ul><li>You make $2000 per pay period and contribute 10% to the ESP ($200) </li></ul><ul><ul><li>Your taxable income is only $1800 </li></ul></ul><ul><ul><li>Southern Company adds $102 (85% of $120 or 6%), for a total of $302. </li></ul></ul>
  16. 16. Benefits <ul><li>More secure retirement </li></ul><ul><li>Reduces your taxable income now </li></ul><ul><li>Taxes on withdrawals is based on your income at the time of the withdrawal </li></ul><ul><li>You determine how the money is invested </li></ul><ul><li>FREE MONEY, in the form of the employer match </li></ul>
  17. 17. Last Words <ul><li>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 </li></ul><ul><ul><li>So, at Southern Company, you should contribute at least 6% before-tax </li></ul></ul><ul><li>Google “401(k)” or go to the library to get more information </li></ul>