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Sample XYZ Company
Employee 401(k) Retirement Plan
Transamerica Insurance & Investments
Your Social Security Benefit
The Social Security Administration will give you a benefit estimate at your request. Call (800) 772-1213 and ask for a “Request for Earnings & Benefit Estimate Statement”. Fill out the form and mail it back. The Social Security Administration will send you a report (in three to four weeks) that shows your employment history and an estimate of your benefits.
WHAT IS IT?
• IRS regulations allowing for employee income deferral before taxes.
• An employee benefit.
• A vehicle available to employees which provides for long-term growth of retirement income.
WHAT DOES ITMEAN TO ME?
• Accumulative savings for retirement.
• Current year income tax reduction.
• No tax on earnings as they grow.
• Future tax advantages when you receive your income.
• Competitive investment yields with Transamerica.
HOW DOES IT WORK?
• You elect a deferral of your income in the form of a percentage of pay (1%-15%).
• Your company may match a percentage of the salary you defer on a discretionary basis.
• Your annual taxable income reported to the IRS is reduced by your elected deferral.
• Your deferred income is owned by you and will accrue at a competitive current rate of interest, tax-deferred, with Transamerica.
Sample XYZ Company 401(k) Plan Highlights
1) Plan Effective Date: April 1, 1997
2) Maximum Deferral: 15% of Salary
3) Company Contribution: Discretionary
4) Eligibility Requirements: Age 21 and 12 Months of Service
5) Monthly Entry Dates: January 1st, & July 1st
6) Change in Investment Mix: Daily
7) Normal Retirement Date: Age 65
8) Early Retirement Date: Age 55 and 10 Years of Service
9) Vesting of-Elective Contributions: 100% Immediate-Employer Contributions: Begins from Date of Hire
Years of Service Vested PercentageLess than 3 0%3 but less than 4 20%4 but less than 5 40%5 but less than 6 60%6 but less than 7 80%7 or more 100%
10) Death/Total Disability: 100% Vesting
11) Hardship Withdrawals: of Your Elective Deferrals Permitted
12) Loans: Permitted with a Minimum of $1,000
13) 24-Hour Fund Performance Hotline-- Call (800) 382-8661
14) Transamerica’s Website Address: www.ta-retirement.com
Does 401(k) Cut my Pay?
Assumes a $20,000 Annual Salary
Without 401(k) With 401(k)
Current Pay $20,000 $20,000
401(k) Deferral (6%) ______ 1,200
Taxable Income $20,000 $18,800
Tax (20%) 4,000 3,760
Net Pay $16,000 $15,040
Personal Savings 960 _______
Net Take Home Pay $15,040 $15,040
Tax Savings $ -0- $ 240
Plus your 401(k) Savings -0- 1,200
Plus Employer Match -0- 0
TOTAL SAVINGS $ 960 $ 1,440
Assuming you are saving nowon an after tax basis; your nettake home pay will actuallyincrease. Here’s how:
The Benefit of Investing Early
Annual # of years TotalAccumulative
Age Contribution in plan Contribution value @ 65
Participant A 20 $2,000 9 $18,000 $465,168
Participant B 30 $2,000 36 $72,000 $404,141
$0 $100,000 $200,000 $300,000 $400,000 $500,000
Part. B
Part. A
Acc. Value
Ttl. Contribution
Assumes an 8% Annual Rate of Return
How Should I Invest My Plan Contributions?
Good question. Especially when you consider the difference just a few percentage points of additional investment return can make on your accumulated balance, as this chart shows:
Investment of $100 per Month
Assumed Investment Return
Years 6% 8% 10% 12%
10 $16,470 18,417 20,655 23,234
20 46,435 59,295 76,570 99,915
30 100,954 150,030 227,933 352,991
40 200,145 351,428 637,428 1,188,242
The right answer for you depends on a number of factors in your own personal situation. These include: How many years until you need to liquidate your account? What other investments do you have? What is your investment goal? What level of risk are you willing to take?
Before you try to analyze your answers to these questions, remember a basic theory of investing: over time, you should be rewarded for taking greater risk. For example, despite its ups and downs, over any ten year period in the last 70 years- the stock market has outperformed any other investment category.
This is not to say that everyone should invest in the stock market. Every individual is different and has different risk tolerance levels. One way to lower your risk but still participate in the market is to diversify your investments... the old “don’t put your eggs in one basket” theory. With this strategy, even if one type of investment does poorly, the other types are likely to do better.
Asset Classifications
•CASH Investing money in very short term securities such as T-Bills
•BONDS Lending Money to Governments or Corporations
•STOCKSOwning a piece of a company
• Market Risk-Short Term-Risk of losing money due
to market fluctuations
• Inflation Risk-Long Term-Risk that your investments
won’t earn enough to maintain purchasing power
Types of Risk
Risk Classifications
Examples of Three Investment Strategies
Conservative
5% Cash
55% Bonds
40% Stocks
Moderate
5% Cash
30% Bonds
65% Stocks
Aggressive
15% Bonds
85% Stocks
Whatever strategy is right for you, remember, you have the flexibility to change it if your situation or goals change. The keys to successful investing are knowing your risk tolerance, planning a long-term strategy and diversification.
Where Do You Fit In?
Your Investment Options
A broad range of investment funds!
Your Investment Options
Sample XYZ Company Selected Funds
TA PBHG Emerging Growth
TA Janus Worldwide Fund
Transamerica Equity Fund
TA Brandywine
Transamerica Equity Index
TA Fidelity Equity Income II
TA Putnam Asset Allocation: Growth
TA Putnam Asset Allocation: Balanced
Transamerica Bond
Transamerica Cash Management
Examples of Three Investment Strategies
Conservative
5% Cash
55% Bonds
40% Stocks
Moderate
5% Cash
30% Bonds
65% Stocks
Aggressive
15% Bonds
85% Stocks
Whatever strategy is right for you, remember, you have the flexibility to change it if your situation or goals change. The keys to successful investing are knowing your risk tolerance, planning a long-term strategy and diversification.
Aggressive
Moderate
Conservative
Assess Your Financial Picture
• How Much Have I Saved?
• How Much Money Will I Need?
• Risk ToleranceMarket & Inflation Risk
• Time HorizonHow many years until I retire?
Your Game Plan
• Assess your Financial Picture• Save Early on a Pre-tax Basis• Save Regularly - Dollar Cost
Averaging• Understand Basic Investment
Concepts• Expect Years With Losses!• Develop a Long Term Game Plan• Review that Plan Periodically
Questions?Service Contact @ Penco:
Customer Service
800-999-9999
Sample XYZ Company Contact:
Employer Contact
Sample XYZ Company
Transamerica Contact:
Mark L. Shaffer, Pension Specialist
Executive Benefit Plans, Inc.
1-800-622-2411
www.benefitplans.com/client
www.benefitplans.com/client
