Budget at Retirement

link to the budget:

https://docs.google.com/spreadsheets/d/1_fpRSRQ_zs8E7QnsxG75zfG694iK9y5nUjyN7H4hJeQ/edit?usp=sharing

Budget (Including Life insurance and Retirement investment)

link to the budget:
https://docs.google.com/spreadsheets/d/1B_G4gmj4zT2lUETXjeDjmL84tf4ZE0oLfeXcOZN2b1M/edit?usp=sharing

Life insurance Questions

1. Explain how term life insurance works.

Term life insurance is life insurance that provides coverage at a fixed rate of payments for a limited period of time. After that period expires, coverage is  no longer guaranteed and the client must obtain further coverage with different payments or conditions. If the life insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time.

2. Explain how whole life insurance works.

Whole life insurance is a life insurance policy which is guaranteed to remain in force for the insured's entire lifetime, provided required premiums are paid, or to the maturity date. Premiums are pre-determined and do not increase with age.  Normally you pay premiums until death.

3. Explain how variable life insurance works.

A form of permanent life insurance, Variable life insurance provides permanent protection to the beneficiary upon the death of the policy holder. This type of insurance is generally the most expensive type because it allows you to allocate a portion of your premium dollars to a separate account comprised of various instruments and investment funds within the insurance company's

4. What are the advantages and disadvantages of variable life insurance?

Advantages are that your can contribute as much money that you want, and you can borrow and withdraw the money you contributed without fees or penalties. A disadvantage is that it is very expensive so you will have a hard time affording it.

5. Compare term life and whole life insurance. What are their advantages and

disadvantages?

Term Life advantages include that it is much cheaper than whole life and variable. All you have to do is pay your premiums. But a drawback is that it doesn't last for life. You will have to continuously have to renegotiate your contract and terms.

Whole life on the other hand, does last for life. You will never have renegotiate the terms as long as you pay your premium. The contract is also pre-determined so no matter how old and crippled your are, the price won't go up.

6. If you die, the insurance company has to pay your beneficiaries a lot of money.

How do life insurance companies make money?

Insurance companies have teams of accounts that calculate life expectancies, companie expenses, etc.They do this so that they calculate the amount of money to charge clients so that they make a profit.

7. Which life insurance is right for you and your family? Which one will you choose

and why? For the purpose of this class, use either term life or whole life.

I will chose whole life insurance simply because it’s cheaper. I feel like spending tons of money on certain life insurance plans if pretty much like throwing away money because I will never see it. Yah sure, my family will, but do they really need that money? why should they get paid for simply not having a father or a husband. They should make their own money and earn it.

8. Deduct the monthly expense from your budget.  Update your budget with the cost

of life insurance. Your teacher has the fees for you.

9. Calculate the amount of money you will spend after twenty years.

Amount of money per year: $250 x 12= $3000

Amount of money after 20 years: $3000 x 20= $60,000

Investment Questions

Roth IRA

1. Describe the retirement plan.  

Roth IRA is a retirement plan that allows you to grow your account without tax. The way this works is, your money is taxed before it is put into the account, instead of after.

2. Is this retirement plan tax deferred?

No, It is not tax deferred because your money is already taxed when you put in the account.

3. When are you allowed to take money out of this retirement plan?

One of the best parts of this retirement plan is that there is no limitation to when you can start taking out money. You can take it out whenever. This can be good and bad, because most people start taking out money before retirement at around the age of 59.

4. Is there a maximum contribution per year? What is the maximum contribution if any?

Yes, it’s $5,500 per year. But if you're older than 50 years old, than it’s $6,500 per year.

5. Do you get paid from this retirement plan for life?

No, when it runs out, then you're as good as dead.

6. Can you leave the money in this account after retirement?

yes, you can leave the money for your inheritors.

7. Is there a monthly minimum amount you have to withdrawal during retirement

   and how much is it?

No, there is no monthly minimum amount you have to withdraw.

8. What are the advantages and disadvantages of this retirement plan?

The main advantage is that your account won't be taxed after you withdraw your money because it taxes it before you put in the money. It’s also great for procrastinators, Roth IRA allows you to contribute to up until tax day of the following year. Some disadvantages include the fact that your retirement plan will not be tax deductible. Also, you can't put as much money in your account as you might want because there are yearly limitations.

401k

1. Describe the retirement plan.

401k is a retirement plan set up by your employer. A percentage of your paycheck will be put into your account for when you retire.

2. Is this retirement plan tax deferred?

Yes, the 401k retirement plan is tax deferred.

3. When are you allowed to take money out of this retirement plan?

You can take out money whenever but if you take out some before you are 59 ½ years old there will be a 10% penalty fee. Once your are 70 ½ you are forced to take out money,.

4. Is there a maximum contribution per year? What is the maximum contribution if

   any?

Yes, it’s $18,000 a year. But, if you’re older than 50 than it rises to $53,000 a year.

5. Do you get paid from this retirement plan for life?

It depends on your employer, about 12% of employers who use 401k offer lifetime payment.

6. Can you leave the money in this account after retirement? If not, when do you

   have to close the account?

Yes, as long as your employer continues to sponsor the 401 k plan. But you can still just add all the fund to another retirement plan if they chose to no longer sponsor it.

7. Is there a monthly minimum amount you have to withdrawal during retirement

   and how much is it?

It depends on your life expectancy and the amount of money you have in the account.

8. What are the advantages and disadvantages of this retirement plan?

An advantage is that it is tax deferred so it will continue to grow. Another is that your employer will also put money into your account so it’s not all your own money that you’re saving for retirement. Some disadvantages include the fact that if you withdraw money before retirement, you get a huge fee.   

Deferred Annuities

1. Describe the retirement plan.  The content should have depth and demonstrates

   understanding.

Deferred Annuities is a retirement plan where you pay money for a specific amount of time.

  

2. Is this retirement plan tax deferred?

Yes, it is tax deferred.

3. When are you allowed to take money out of this retirement plan?

You can take out money when you reach the age you agreed upon.

4. Is there a maximum contribution per year? What is the maximum contribution if

any?

No, there is no maximum contribution per year.

5. Do you get paid from this retirement plan for life?

Yes, you get paid for life.

6. Can you leave the money in this account after retirement? If not, when do you

have to close the account?

Yes, you can put money in this account after retirement.

7. Is there a monthly minimum amount you have to withdrawal during retirement

and how much is it?

You agree on a fixed amount of money when you set up the account, so there is no monthly minimum.

8. What are the advantages and disadvantages of this retirement plan?

Advantages include the fact that when you setup your account all the amounts are predetermined so you wont have to worry about minimums or maximums every year. It’s also tax deferred so that’s also great. A disadvantage is that a fee is given to you if you take out money early.

Traditional IRA

1. Describe the retirement plan.  The content should have depth and demonstrates

   understanding.

Traditional IRA is a retirement plan that is tax deferred. Your money is taxed after you take the money out of your account. This means the money will grow faster and bigger in your account.

2. Is this retirement plan tax deferred?

Yes, traditional IRA is tax-deferred.

3. When are you allowed to take money out of this retirement plan?

You can take the money out whenever but you will be charged tax when you do your withdrawals. And if you take money out before your 59 ½ the tax is 10% more.

4. Is there a maximum contribution per year? What is the maximum contribution if

   any?

If your are under the age of 50 then the maximum contribution is $5,500, but if you're over the age of 50 then it increases to $6,500.

5. Do you get paid from this retirement plan for life?

No, you do not get paid for life.

6. Can you leave the money in this account after retirement? If not, when do you

   have to close the account?

Yes, you can leave money in the account after retirement. But once you reach 70 1/2 , minimum amount of withdrawals are required.

7. Is there a monthly minimum amount you have to withdrawal during retirement

   and how much is it?

Yes, the minimum amount you have to withdraw depends on your age and life expectancy.

8. What are the advantages and disadvantages of this retirement plan?

The main advantage is that it is tax-deferred so your money can grow faster and bigger in your account. Plus, you can always change to a Roth IRA. Some disadvantages include the fact that you have to meet the requirements for tax benefits, and the taxes that you have to pay when you withdraw your money. Plus, your tax percentage is higher if you withdraw early.

1. Which two retirement plans did you pick? One of which must be from your chosen career.
I picked 401k and Roth IRA.
2. Look at your current budget. How much money do you have available to make investments? How much will you invest each month?

I will be a psychologist. they make around $5,829 a month. With all my expenses paid I will have $3,742 to play with every month. So, I will invest 600 a month into my accounts.

401k: I will invest $200 every month because my employer will match that and I will be adding $400 to my account every month.

Roth IRA: I will invest $400 into this account
3. Calculate the amount of money you will have at retirement using an equation for both of your retirement accounts. Assume you are retiring at age 60 and have been making monthly contributions starting at age 35.
Future Value = P [ (1 + r)ⁿ  - 1 / r ]

401k:  200 [ (1 + 0.00167)³⁰⁰  - 1 / 0.00167 ]
           $97,806

ROth IRA: 400 [ (1 + 0.00167)³⁰⁰  - 1 / 0.00167 ]
                      $155,612
           
4. How much money will you have saved by the time you retire based on your online budget?
By the time I retire I will have saved $253,418.
5. Payment is different for each retirement plan. How are the payments handled at retirement for your two investments? For example, do you have to pay a fee or are you only allowed to withdraw a certain amount each year?

Roth IRA: I can take out money from this account before the age of 59 as long as there is a valid reason. Bu once I'm 50 I can start taking out money without any restrictions. And the money is already taxed so I wont have to pay that.

401k: At the age of 59 I can withdraw the money from the account, but it will be taxed. I could take out the money before but I would be a fee. 6. Determine your monthly distribution from both accounts at retirement. Assume these investment choices were made at age 35.

Monthly Distribution= Future Value/ 300 months

Roth IRA= $155,612/ 300
= $518

401k = $97,806/ 300
= $326

Total= $844 a month
7. Create a monthly budget for your retirement. Lets assume you are retiring at 60 years of age.

Go to "Budget at Retirement" blog post

8. Will you be able to live comfortably based on your life style at retirement? Provide a clear explanation.

No, I will no be able to live comfortably during retirement. I will only be getting $844 a month and my expenses are approximately $1500.

9. Provide a bibliography for all your research.

    “What is a 401(k) plan?” PracticalMoneySkills.com. Practical Money Skills, 
               n.d. Web. 26 Mar. 2015.

    “How does a 401(k) plan work?” Money.CNN.com. MoneyCNN, n.d. Web. 24 
               Mar. 2015.

Malone, Matthew. “What is a Roth IRA?” rothira.com Retirement Online LLC. n.d. Web. 24 March 2015.

    “IRA FAQs – Contributions.” IRS.gov. IRS, 17 Dec. 2014. Web. 26 Mar. 2015.

"Lifetime Income Options: Pension Power for the 401(k)." CFO. N.p., 05 Dec. 2014. Web. 27 Mar. 2015.Website

Life Stage 3 Reflection

Marriage

I always heard that wedding are expensive but, holy moly guacamole, I didn't know they were this expensive. I'll probably just end up going to the courthouse with a few witnesses from the local drugstore and get married right there. If she really loves me I won't have to spend tens of thousands just to please her, right?

Family

This is something that I have never really wanted, the thought of having to change diapers and host disney princess birthday parties always made me queasy. Nut after looking at houses I started to imagine me and my son casually watching a movie on a friday night and suddenly I was happy with the idea.

Credit & Debt

Most of this I already knew because my mom shows me her bills whenever I ask her why I cant buy the latest blu-ray release. But I did learn a little bit about how different credit card companies try and scam you into using there card to get into debt.

Recommendation and Commendation

I think that these blog assignments were fine for the kind of people in the Junior class who want a family and who want to get married and who want to acquire tons of debt. But for those of us who would rather not be the stereotypical suburban family from a disney channel movie, its a bit unnecessary. I learned a lot about honeymooning in Hawaii, but lets face it, Im never going to honeymoon in Hawaii so all the hours I spent trying to perfect that blog assignment were just thrown away. I was excited to start to learn about actual life skills instead of useless history lessons, which I love, but you know what I mean. The things we are learning feel way too over-saturated with unnecessary lessons. I don't know, at this point i'm just ranting about iPoly in general because I'm tired, and I'm stressed and I have to drive 2 hours round trip to pick up my grandma after I finish this sentence! Please just lighten the work-load, Im 16, im supposed to be having fun and going on dates, but instead I'm worrying about things 10 years in the future.

Renting Vs. Owning

(Michael Scott, alongside his Assistant to the Regional Manager, buying his first condo.)

1.

         Claremont, CA

2. Buy a house

a. How did you find this property? (URL, webpage, listing – show details)

    

http://www.zillow.com/homedetails/128-E-Green-St-Claremont-CA-91711/21502148_zpid/

b. What is your purchase price?

$498,000

c. Down payment (assume 10% - a one time cost)

$49,800

d. Total estimated closing costs for your loan (assume 3% - one time cost)

$14,940

e. Total monthly mortgage payment: $2,602

      Principal and Interest payment is $1,985 per month 

      Property Taxes are $2,892 per year, or $241 per month.

      Homeowners Insurance is $972 per year, or $81 per month.

f. Estimate you total monthly utility expenses 

$291

3. Rent a house or apartment

a. How did you find this property? (URL, webpage, listing – show details)

http://www.trulia.com/rental/3191473857-2041-New-Haven-Ave-Claremont-CA-91711#affordability

b. Monthly rent

$2,395

c. Security deposit (one time fee)

$500

d. Total monthly utility expenses: electricity, water, garbage, and natural gas

$500

e. Renters insurance cost per year is ________ or _______ monthly. Or is renters 

N/A

f. Restrictions of the property (pet owners, smokers, etc.)

insurance even offered in your area?

No pets :( 

No smoking :)

3. 

Renting Vs. Owning 

Renting an apartment or house should only be done for a few year after college. Once you get a stable job I would recommend to start saving for a house. Renting just feels like your throwing you money away into a place that you will never fully own. If you have a house you can fully pay it off in 30 years. Plus you can build whatever you want on it because its your property.

Shopping for Credit

(I know this is like the 4th batman reference on this blog but who cares, he's a very quotable character)

1. Credit card name

1. Chase Freedom
2. Capital One Quiksilver 
3. Target Red Card

2. Type of Account

1. Credit 
2. Credit 
3. Charge 

3. Company name, address, phone (of company the card is issued by)

Chase                                                                                                                  270 Park Ave,
New York, NY 10017

(212) 270-6000

Capital One 

1680 Capital One Drive 
McLean, VA 22102-3491

(703) 720-2500

Target 

• 1000 Nicollet Mall
• Minneapolis, Minnesota 55402

(800) 440-0680

4.Website

1. https://www.chase.com/
2. https://www.capitalone.com/
3. http://www.target.com/

5. Locations where card is accepted (everywhere, or very specific)

1. Anywhere that accepts Visa 
2. Anywhere that accepts Mastercard 
3. Anywhere that accepts Visa 

6. Annual fee (if any)

1. none 
2. none 
3. none 

7. Payment grace period

1. 21 days 
2. 25 days 
3. 25 days

8. Annual Percentage Rate (APR)

1. 0% Intro APR for 15 months on purchases and balance transfers. After the intro period, a variable APR of 13.99-22.99%
2. 0% intro APR on purchases until December 2015; 12.9%-22.9% variable APR after that
3. 22.9%

9. Finance charge calculation method (this is the calculation of how your balance will be charged interest)

1. N/A 
2. Balance Method 
3. Balance Method 

10. Credit limit (is there one? Is it based on credit and income? How do they decide?)

1. Depends on your credit 
2. Limit start low then gradually increases after several on-time payments.
3. Depends on your credit.

11. Minimum payment (that is due each month. How do they calculate?)

1. $35 
2. $35 
3. $25

12. Other fees: (late payment or others that you find)

1. Max late fee: $35                                                                                                                         
2. Max late fee: $35                                                                                                                         
3. Max late fee: $35

13. Other features: (??? – you tell me)

1. Chase Freedom

• Earn a $100 Bonus after you spend $500 on purchases in your first 3 months from account opening
• Earn a $25 Bonus after you add your first authorized user and make a purchase within this same 3-month period
• 5% Cash Back on up to $1,500 in combined purchases between 1/1/15–3/31/15 at grocery stores (not including Walmart® and Target® purchases), movie theaters, and Starbucks® stores
• You'll enjoy new 5% categories every 3 months like restaurants, gas stations, and Amazon.com. It’s free and easy to activate your bonus each quarter!
• Unlimited 1% Cash Back on all other purchases

2. Capital One Quicksilver

• One-time $100 bonus after you spend $500 on purchases within the first 3 months.
• Earn unlimited 1.5% cash back on every purchase, every day.
• No rotating categories and no sign ups needed to earn cash rewards.
• Cash back doesn't expire and there’s no limit to how much you can earn

3. Target Red

• Save 5% at Target and Target.com.
• REDcard gives you 30 extra days for returns.
• Stack your everyday 5% REDcard discount with your 5% Target Pharmacy® Rewards certificate for ultimate savings on a day of Target Shopping.
• Free Shipping at Target.com       

Credit Card Analysis

 1. Which credit card has the highest annual percentage rate and how much is it?

Target- 22.9%

2. What method is used to calculate the monthly finance charge for the first major credit card?

The balance method is used for Capital One. I couldn't find this information for Chase.

3. When does the finance charge begin to accrue on the credit card from the local department store?

With your first payment

4. Do any of the cards have annual fees? If so, which one(s) and how much is the fee?

no

5. Is there a transaction fee on any card? If so, how much is it?

Chase has an international transaction fee of 3%

6. Is there a minimum finance charge on either of the major credit cards? If so, how much is it?

no

7. Does the first major credit card charge a fee for late payments? If so, how much is it?

Maximum of $35

8. What is the grace period on the credit card from the local department store?

25 days

9. Rafael wants to buy a new CD player that costs $450. According to his budget, he can afford

payments up to $62.00 per month. Which of the three credit cards you've found would you

recommend that Rafael use to purchase the CD player? Explain why.

I would use the Target RED card because it has a 5% discount at Target and free shipping on Target.com. He can pay it off in about 7 months.

10. In general, reflect on how making responsible financial decisions regarding borrowing and credit (debt) can lead to financial well-being over a lifetime.

Being cautios when deciding whether you should swipe that card or not can help you have less debt over time. Creating a budget for impulse buying can help you make responsible decisions.