Sample XYZ Company Employee 401k Retirement Plan

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Sample XYZ CompanyEmployee 401(k) Retirement
Plan

• Transamerica Insurance Investments

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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.

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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.

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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.

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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.

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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 Percentage
• Less 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

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Does 401(k) Cut my Pay?
Assuming you are saving now on an after tax
basis your net take home pay will
actually increase. Heres how

• 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

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The Benefit of Investing Early

• Annual of years Total Accumulative
• Age Contribution
  in plan Contribution value _at_ 65
• Participant A 20 2,000
  9 18,000 465,168
• Participant B 30 2,000 36 72,000
  404,141

Assumes an 8 Annual Rate of Return
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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 dont 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.

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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

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Types of Risk

• Market Risk -Short Term -Risk of losing money
  due to market fluctuations
• Inflation Risk -Long Term -Risk that your
  investments wont earn enough to maintain
  purchasing power

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Risk Classifications
Examples of Three Investment Strategies Conservat
ive 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?
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Your Investment Options
A broad range of investment funds!
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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 Conservat
ive 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

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Assess Your Financial Picture

• How Much Have I Saved?
• How Much Money Will I Need?
• Risk Tolerance Market Inflation Risk
• Time Horizon How many years until I retire?

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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

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Questions?

• Service Contact _at_ Penco
• Customer Service
• 800-999-9999
• cust.svc_at_penco401k.com
• Sample XYZ Company Contact
• Employer Contact
• Sample XYZ Company
• Transamerica Contact
• Mark L. Shaffer, Pension Specialist
• Executive Benefit Plans, Inc.
• 1-800-622-2411
• mshaffer_at_benefitplans.com

www.benefitplans.com/client
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