 In this presentation, we will take a look at retirement plans. Retirement plans can be broken out into two broad categories. We've got defined benefit plans and we've got defined contribution plans. Defined benefit plan is one in which the employee will receive a certain amount each period after they retire. So in essence, we're going to say that after retirement, based on the conditions of the plan, there's going to be a certain amount that will be received in every period after that retirement date. The defined contribution plan usually has the employee contribute to the plan, usually by some type of percentage or fixed amount every pay period during the working time. And then the payouts are going to be varied depending on the type of plan. So in other words, you can think of the retirement plan as some type of benefit that you're going to receive after the point of retirement for work we did during the time period that we work. So what we're really doing is deferring some of the benefit we are receiving in terms of kind of wages from the point in time that we earned it to a future point in time as a benefit for our retirement years. There's a couple of different ways we can do that. The defined benefit plan in essence is saying that well, after the retirement period, based on the terms of the plan, we're just going to pay you a fixed amount after the point of retirement. And oftentimes that can give some more security because the fixed amount may be given depending on the plan until death after the retirement time point. And so since we don't know how long someone will be around, that could be a benefit or not a benefit. It could be a bit more security. It's also a little bit more difficult to calculate in that way because we would need actuarial tables and whatnot in order to calculate how much we think the defined benefit plan might be paying out. A defined contribution plan then is a little bit more easy to calculate for the company because it's typically based on how much is going to be contributed in to the defined contribution plan and then the rules on which it will be paid out for the defined contribution plan. When considering types of retirement plan, the most flexible plan, we won't go into all these in a lot of detail, but note that the retirement plans are really going to be something that's beneficial typically for the employer. They're one of the biggest benefits that can be given because of the tax implications that are usually involved, meaning they're a way that an employer can give a lot of compensation in the form of a retirement plan and have it not subject to tax or at least deferred tax a lot of times. And that can be a huge benefit to the employees. Now the most flexible plan typically is the 401K plan, it's probably the one most familiar to people and that works well typically for large companies because there is that flexibility. There are variations and usually the variations are going to be given for companies that are smaller. So if we have a simplified plan, that would allow us to implement a more simplified plan for a smaller company, a simple 401K. An IRA is a type of plan that if we don't have a 401K for an employer, then we can do a similar type of contribution through an individual retirement account, an IRA. There could be a simple IRA, which is something that could be set up from a business again, kind of like an alternative to less flexibility but easier to set up. A SEP account is again another type of retirement account. These are just, you see these types of terms, they're going to be similar in nature. So they're going to have different types of rules applied to them in terms of how they're going to be implemented and how much can be contributed to them and wage rules and a lot of different rules in terms of the different retirement accounts. But just note that when we talk about a retirement account, probably 401K is going to be the thing that comes to mind but there's other type of retirement accounts. So if we go through this again one more time, the 401K is going to be the one that's usually most used for large companies, what we typically would hear of. And the reason for that is that it's going to be the most flexible type of 401K retirement plan typically. And therefore it's the one that would be great for a large company that wants to customize their 401K plan to the needs of a particular company. But on the downside it does take, it takes the most paperwork and it takes the most reporting requirements and is the most costly. A simple 401K is going to have less flexibility and it's going to be limited. So you have to have less than a hundred employees and basically funds are specifically set aside for individual employees in a bank account, a mutual fund and that's going to be a form of retirement plan. Again less flexibility to it but a lot easier to set up for small companies typically these variations being for small companies. An IRA if we think an individual retirement account, this is an option that typically is there even if for an individual, even if the company is not providing the individual retirement account meaning we could set up an individual retirement account if we don't have a 401K plan by our employer. The 401K plan typically allows us more benefits because it allows us for one to put more money into it often times. But an individual retirement account is one in which we have our own type of account set up, our own bank account or some other type of asset type account that we put money into. Again the objective of this would be what you might think well why would we do that, why would we voluntarily take money out of our paycheck and put it into a retirement account by the way and the reason we're going to do that is to defer taxes in essence. It's not necessarily just there because we want to save for retirement. We wouldn't restrict our money in order just to save for retirement if we wanted to stay for retirement in other words we wouldn't necessarily put it into a 401K or an IRA account because that basically means that under those accounts we're restricted to take it out. If we take it out we get penalized by the bank so even if we had an emergency possibly we may not be able to take it out. We would rather put it into just a normal type of investment a bank account a savings account some type of account that we would just label as retirement and not have any added restrictions so that we can take it out if we want to based on our needs. Why do we put it into a retirement account because we get to defer the taxes it's a huge deferral and usually that's going to be a big benefit to employees because this is when we're earning revenue right now and the theory is that when we retire we have less needs in our lives probably don't you know may not have you may have a family in the middle of our lives at the end of life we may have less needs and therefore can live on less and and have a and not and therefore when we take the money out and pay taxes taxes on it at the point of taking it out at the end of retirement that the taxes will be lower at that point in time it's kind of a theory of it but in any case we just want to defer the taxes and so the IRA is an option that if a 401K isn't there some other retirement plan isn't there we can we can take our money and put it into an individual retirement account the idea there is that it's going to be deducted from the 1040 on the page one of the 1040 reducing our income now and then we'll have to pay that tax on it when we actually use it later when we pull the money out. An ESEP is another type of kind of simplified retirement account and this is going to be beneficial again it's not as flexible as the 401K plan but it can have tax benefits to the employer as well so it's going to be because it's going to be a benefit that possibly can be deducted from that the net income and resulted in less income taxes possibly by the employer so those are some benefits of between the different type of retirement also if you see a 403B type of account that's typically an account that will be there for employee of a government worker so same type of concept you're put you taking money out of the paycheck deferring the taxes put it into a retirement account 403B is going to be some government workers that same type of things like a 401K you think of it kind of like a 401K or a retirement account for a government worker a 403B so again these are huge benefits to the employee and the employer one and one reason is that the employer is able to give benefit to the employee in terms of compensation and in such a way that the taxes they they're not not taken or deferred until a substantial time in the future and as long as we can do that any time we can do that any time we can reduce the taxes give benefit or defer the taxes then the employers able to give more benefit give more you know value to the employee for the work being done