By Glenn J. Downing, MBA, CFP®

Employer-sponsored retirement plans can be split into two groups:

• Defined Contribution Plans, or DC Plans
• Defined Benefit Plans, or DB Plans

As the name suggests, the salient feature of any defined contribution plan is the input – how money goes into the plan. Money goes in from employer contributions and matching, employee deferrals, and forfeitures from those not vested.

On the other hand, the DC plan is defined not by the inputs, but rather than by the output. The Florida Retirement System pension option is a defined benefit plan. I explain this a little more fully in my video.

The Investment Risk is With the State - Not You

With any defined benefit plan, all the investment risk is with the employer and not the participant. When I say the risk is with the employer, I mean the State of Florida. FRS invests the retirement plan assets in such a way that it is able to pay out what has been promised. The employer is guaranteeing the...

By Glenn J. Downing, MBA, CFP®

It used to be the case that you went to work for one employer and remained with that employer for the entirety of your working life.  You received a pension from that employer when you retired – in other words, you continued to get paid a lesser amount even though you’d stopped working. 

This arrangement is no longer the norm – people expect to change jobs several times during their working lives.  A 401K retirement plan suits this kind of work environment.  When you leave one employer, you can move your 401K funds into the 401K of your new employer, or over to a Traditional IRA.  In any event, the responsibility for providing a retirement income lies firmly with the worker!

How much can I contribute?

Contributions are limited by IRS regulation.  The maximum deferral that a plan participant can make in 2020 is 100% of salary up to $19,500.  If you are age 50 or older, you may be able to make an...

by Glenn J. Downing, MBA, CFP®

In Part I of this 3-part series I gave a brief history of the life insurance industry.  

Here in Part II I'll go over the main applications for life insurance policies.  Next, in Part III, I'll discuss some of the behavioral issues in obtaining coverage.  

 Uses of Life Insurance

So what are some of the uses of life insurance?  First and foremost, a death benefit to one’s survivors.  It is a risk transfer mechanism.  If you die before you've been able to financially provide for those financially dependent upon you, the life insurance policy will do so.  Other common applications:

To secure a loan

It is not uncommon for a commercial lender to require that a borrower take out a life insurance policy in the amount of the loan payable to the lender.  

For tax-free income

Many cash value policies can be structured to be over-funded in earlier years, and pay out a tax-free stream of income...

By Glenn J. Downing, MBA, CFP®

This retirement savings vehicle gets its name from Section 457 of the tax code. It is a type of non-qualified deferred compensation. The employee defers money into the 457 account on a pre-tax basis. Any growth in the account doesn’t get taxed until it is ultimately withdrawn years down the road, in retirement. Withdrawals are taxed then at ordinary income tax rates.

Where do you find a 457 deferred compensation plan? At government entities, and less commonly, non-church controlled tax-exempt organizations. Consequently, you won’t find a 457 plan at a for-profit corporation.

If your employer sponsors a 457 plan, how much can you put in? Same limits as with 401ks and 403bs: up to 100% of compensation, capped at $19,500 in 2020.

457 Deferred Compensation Plan Coordination & Catch-up

If you have two jobs, one with your city, and another with a private company, you can contribute to both retirement plans. You have two separate and...

by Glenn J. Downing, MBA, CFP®

I came to financial planning as a profession in my 40’s, having made a mid-life transition from retail management.  I worked in both department stores and specialty retail and generally enjoyed the work. I always enjoyed Christmas in the stores – the music, the new fragrances, the decorations, and generally upbeat anticipatory atmosphere.  

Working Christmas in Retail

Christmas time was grueling, however.  The amount of merchandise that comes into a store through its loading dock, and then out the doors in the customers’ shopping bags, is enormous.  It is very physical work, in that all that merchandise needs to be unpacked, displayed, and stocked around the store. The associates who wait on you generally have competing priorities imposed upon them:  great customer service, while getting the new merchandise out of the bins and on the racks, and looking out for thieves. 

You knew all year this was...