Make 2008 the year to take the mystery out of your EMPLOYER-SPONSORED RETIREMENT plan Your employer-provided retirement plan is one of the most important pieces of your financial plan — yet it is misunderstood and under-utilized. Make it one of your top goals this year to fully understand and take full advantage of your plan. What are Employer-Sponsored Retirement Plans? An employer-sponsored retirement plan (ESRP) is any type of retirement plan sponsored by your employer to accumulate money to help sustain you for your retirement years. Some of the basics of ESRPs: ► Employer Sponsored: Your employer spends time and money (accounting, payroll and administrative costs) to provide this benefit for you and often contributes money into it on your behalf. ► Qualified Plans: ESRPs are also referred to as Qualified Plans, since they are usually Tax qualified, meaning they have tax advantages (usually tax deductible contributions and tax deferred accumulations). ► Two Types — Defined Contribution and Defined Benefit: There are many types of retirement plans, but essentially they fall into these two categories: - Defined Contribution plans: Your employer and you decide how much to contribute (within IRS guidelines). The most common types are 401(k) and profit sharing, as well as 403(b) and 457(b) plans. - Defined Benefit plans: These plans provide employees with a percentage of their income upon retirement. Defined Benefit plans are provided by less than 10% of for-profit companies today. However if you work for a not-for-profit institution or belong to a Union, you may have one. ► ESRP’s provide over 50% of retirement income. The balance will come from government benefits and personal savings and investments. ► Contributions: The amount that you and your employer can contribute to ESRPs is limited by government regulations. However, the amount that can be contributed to them is much higher than employees could contribute to other plans, such as IRAs, on their own. 12 Steps to Mastering your Defined Contribution Plan Research indicates that people are NOT contributing enough and making correct investment decisions. The checklist below will help you master your Defined Contribution Plan. 1. Obtain information: Round up all available information and put it into a file folder. Obtain the Intra- or Internet Web site address and login instructions. Print out or obtain from your employer the following information and review the contents so that you are more familiar with it. - Current account statement - Investment account information describing what you have chosen and options that are available to you - Contribution information that describes how much money your employer will contribute (match) and how much you can contribute - Beneficiary information 2. Know your employer contribution amount. Some employers contribute a set dollar amount on your behalf to your retirement plan; they may also contribute based on a matching formula. For example, they may match 50% of your contribution up to 5% of your income. Some employers may do both. 3. Sign Up Now. Participation rates are only about 70% — down about 5% from a few years ago. If you have passed the waiting period and are eligible to sign up, do so today. 4. Contribute enough to receive the full match. Only ¼ of employees take advantage of their employers’ matches. Doing so leaves money on the table. Your employer has a several thousand dollar raise waiting for you, so take advantage of it. At the very least, contribute the minimum amount so as to fully exhaust your employer’s match. Using the example in #2 above, contribute 5% of your income to receive the employer’s full match. 5. Contribute more than the match minimum. 30% of employees only contribute enough to receive the full match. If less than 10% of your income is contributed to retirement, chances are your retirement will be under funded. Workers who have not contributed enough in preceding years may need to contribute more than 10% of their income. The only way to know for sure is to have a financial plan. 6. Understand the tax savings. Since virtually all contributions to retirement plans are tax deductible, the tax savings will help offset the hit to your income. For example, a contribution of $100 from your paycheck may reduce your take-home pay only by $75, depending on your tax bracket. You may even be able to lower your tax withholding from your paycheck; consult your tax advisor. 7. Don’t borrow or withdraw. Many defined contribution plans have loan privileges; however, borrowing from your plan is highly discouraged because many people never pay it back. If you leave your employer and want to roll over the net unloaned amount to an IRA, you will pay tax on the entire outstanding loan balance, plus a 10% penalty. Also avoid withdrawing your vested amount from your plan because withdrawals are fully taxable, and you will incur the same tax penalty unless you qualify under special hardship rules. 8. Start early. The average 401(k) participant with 11 years of tenure and 20 years until retirement (65) has accumulated only about $60,000, and the median total average plan balance is only about $27,000. Many workers in their 20’s do not take advantage of employer-sponsored retirement plans, thinking that retirement is too far off to think about. However the earlier you start, the longer you have to take advantage of the magic of compound interest. 9. Obtain a financial plan. The best way to make financial decisions is in the context of a financial plan, which will help guide you simultaneously through all the moving parts of your finances. That way you will make more informed decisions about when you can retire and how much you should contribute, while still making good decisions about all of the other areas of your plan. A plan helps you avoid neglecting one area because you focused too much on another area. If you have purchased eFinPLAN, keep your information up-to-date so that you can easily track your progress. A financial plan will also help you spot trouble areas, such as too much debt, and will provide suggestions to improve your overall situation. If you don’t have a plan, consider starting your plan today by purchasing eFinPLAN. 10. Make wise investment decisions. You may have done all of these things, but don’t neglect this vital issue. Many people invest all or a large percentage into a fixed or money market account, either out of fear of risk, lack of investment knowledge or procrastination. Review the investment information provided by your ESRP. If you have an eFinPLAN, check the investment section for the asset allocation model that fits your level of risk. Also discuss this with your investment advisor or Plan Representative regarding account selection. 11. Correct Beneficiary Arrangements. As with life insurance, annuities and IRAs, ESRPs have beneficiaries — someone you designate to receive your money when you die. Many people do not have correct arrangements. Sometimes they have married or divorced or had children. Be sure that your arrangements reflect your wishes. Also, if you get a financial plan, a will, or a trust, be sure all your beneficiary arrangements are updated and consistent with your plans. Beneficiary designations supersede other documents. No matter what your estate plan documents say, when it comes time to pay beneficiaries, the beneficiary form you signed and filed is usually the final say. Make sure that you receive expert advice from your legal advisors to help avoid problems. Many people also want some money to go to a specific charity; your beneficiary arrangements can reflect this too. The beneficiary form usually has a place for Primary and Contingent/Secondary beneficiaries. The Primary beneficiaries inherit your money unless they predecease you, in which case the contingent beneficiaries inherit. 12. Don’t give up. You may feel that even after doing all of these things your plans for retirement are still off track. Don’t worry. Feel good that you have completed as many of these steps as you could. Stay focused on your overall financial plan; by making improvements each year, you will accelerate your progress. | 
