Countersignature Benefit Plan Made Easy

Countersignature benefit plan

okay as ago number one my name is derek ifasi I'm the owner of a fasiq Financial Group today's topic I want to discuss with you defined benefit plans fully explained I want to go over some of the the pros regarding a defined benefit plan some of the cons that individuals make some mistakes with when setting up their defined benefit plans and then essentially if you're not offered a defined benefit plan how you could have access into a personalized defined benefit plan more on the private market so there's a couple different ways to you know to kind of analyze defined benefit plans in the very beginning you know let's just start off with saying what exactly is a defined benefit plan now what happens is typically an individual's offered you know different slew of retirement accounts they either have a defined contribution plan or defined benefit plan when we break down these two words we have to really understand what is defined benefit well that means if you're working for a company so we have an individual that's working for a company and he's offered a defined benefit plan then this means that the employer so whatever the entity is that you're working with if it's you know for the state if it's for you know a federal entity a a private entity whatever that is if they offer you defined benefit plan then essentially what typical defined benefit plans do is this person's working for X amount of years and they have set up in their employee benefits package that after they're done sufficing X amount of years of service such as 25 years of service then they are deemed retired so now at that point in time once they are deemed retired depending upon what their age is at that time or a half - some some plans you have to wait until 1859 and a half other plans you could retire before age 59 and a half you know when it only goes off in years of service at that point in time now that employer is paying that individual a stream of income for either their lives or theirs and their spouses life you know for the rest of the life however long they live so defined benefit plans they used to be the norm back in the day and you know my I was explained the example of my grandfather my grandfather was an elevator mechanic for the city of New York so part of his job description or I guess part of his employee benefits was that if he works for the city of New York as an elevator mechanic in the Union for X amount of years after he was done with that last year they compute a certain calculation that says okay you know you started when you were 30 years old if you give us 25 years of service meaning when he's age 55 they're able to then calculate how much income he would receive for the rest of his life so individuals would find benefit plans also known as a pension plan are typically very happy because they understand that there's income that's going to be going to them for the rest of their life they don't have to play that big guessing game where when they turn 60 years old or 65 or 66 so just trying to decide how much money can I can I properly pull out of my retirement account to make sure that I'm not out living that money so the defined benefit plan date they do that option for you and all they're saying is listen focus on your job make sure that you're working hard every year that you're giving us and you could also include you know different things such as overtime that could be computed in that calculation we'll make sure to set you up and give you a correct retirement check so to speak every single month to the day that you pass away now one of the mistakes one of the very common mistakes that individuals make with defined benefit plans is they try to say okay well you know that sounds fantastic and I feel as if I'm gonna live a long life so therefore in my grandfather's case he was going to trigger his option a regarding his defined benefit plan as defined benefit pension plan when that said was he would receive X amount of thousands of dollars every single year of lifetime income but it would only go to his life so he was 55 years old my grandmother was 54 years old and he was in the process of walking out the door and she asked him we don't what was in your hand he's like oh I just checked out you know one of one of these things checked off one of the things for my company regarding how I want to take my my income option you know when I when I retire and you know at that point should they had a big fight she said how could you not put me on this all this so long story short she won the argument and you know they basically chose option B what option B did was they said okay well rather than just covering my grandfather's life they're gonna cover my grandfather and my grandmother's life with income for the rest of their lives so at age 55 let's say that you know he was going to receive $60,000 a year of lifetime income on himself or $50,000 a year for both him and his spouse my grandmother that's the option that they chose so someone watching this video might say okay well why is there such a difference why is there a difference of ten thousand dollars from option a to option B and this is the bedside to define benefit plans because with the typical pension plan or defined benefit plan let's save this interview if you know someone chose option A and they said okay it's for a single life only option and with my grandfather's case you know he's 55 years old let's say he chose option A and Olsen he gets paid sixty thousand dollars the first year sixty thousand dollars the second year and then all sudden passes away tragically or just you know just centrally just passes away well now all those now all the income is going to stop so that's kind of the risk first reward when you're setting up these types of income streams or you're setting up your type of think um payout is to say okay well when you pass away there's not going to be a death benefit made out to your beneficiaries now understand there's different options within the defined benefit plan but that's going to be the most basic type of option that does not provide some sort of death benefit there so that's why typically it's advantageous to say okay I want to make sure that me and my wife are both covered god forbid if I pass away then you know my wife would still be receiving income so in this case my grandfather passed away at a young age at age 69 and then my grandmother lived into her 80s into her late 80s before passing away so that the little fight that occurred while he was walking out the door was probably the best thing that could have ever happened to her you know because she was still able to receive a lifetime income benefit and then did not have to you know go back to work while she was in her sixties in her 70s just to you know just to make ends meet so it was a really good you know aspect and this was all set up through defined benefit plan so from 1974 you had a branch of the government that came out known as ERISA it's known as yeah it's ER is a employer retirement income Securities Act and what happened was individual individuals were now rather than saying okay if you work X amount of years for a company we're going to provide you a defined benefit that now went by the wayside because there's a lot of risk associated with that company when they're trying to set up those defined benefit plans with individuals that just keep living longer and longer and longer well then that company's going to have to be paying out more and more dollars and there's going to be more risk trying to make sure that they're leveraging the max amount of dollars possible to get the most amount of benefit to then be able to provide that benefit year by year by year so because of that risk that was getting thrown on the employer you had ERISA was the start of it they created different things different types of retirement accounts known as a defined contribution plan and became very attractive in the 1980s such as a 401k account or a 403b account or a 457 account different things that say okay rather than give you a defined benefit we're just going to define that you could contribute into a retirement plan so that's why you're seeing you know all these different these different retirement accounts that are invested within the stock market so in the 1980s through 2000s the markets were doing very well yet over a thousand percent growth in the market for 1980 to 2000 they're early 2000 and you know individuals were essentially placing dollars we're setting aside money from their salary placing dollars into a bucket you had companies that were also matching into that bucket and therefore this bucket the way that this bucket grew was the amount of contributions and matching into it and then essentially the percentage rate that was returned based upon you know mutual funds that 401k was tied to so with what happens the bad side to a defined contribution plan and I want to make my point with this because individuals to have a defined contribution plan understand that you could get set up in a private defined benefit plan by leveraging those old 401k monies or IRA monies or however you deem fit so with let's say in 2008 the average portfolio lost 37 percent so you had individuals that were getting ready to retire some accounts had as something as high as a million dollars into their account and these individuals took a 57 50 % hey let's say if this individual took a 50% hit just for easy math well that one year regardless of how much money or how much time they placed money into their bucket and how many thousands of dollars were were matched you know with with contributions this retirement bucket dropped down to five hundred thousand dollars worth of value in just one year's time frame so they saw their entire retirement their their livelihood as saying oh my gosh okay the markets are always going to go up to then saying wow this is this is very real the market is nothing more than that I gambled and going to Vegas and you know playing playing roulette so what happens with a defined contribution plan is individuals have this type of risk that's associated there they have the risk of 401k related fees they have the risk of mutual fund related fees that are already negatives entering that account and then most importantly they have the downward market loss risk as well so with the defined benefit plan the individuals just working for the company and saying okay well when I hit X amount of years of service I'm going to be receiving X amount of thousands of dollars every single year so rate when somebody either severs employment or they might hit 59 and a half or they change jobs or they have an IRA accounts there's ways on how you could take dollars from a defined contribution plan you could roll it over into a specifically designed IRA contract that mimics how a defined benefit plan works but has a little bit extra benefits to it as well what do I mean by that well what happens is with a typical defined benefit plan we understand that you're giving up your you know your access to that money you're giving up a death benefit because you're receiving an income stream for the rest of your life or yours in your spouse's life when one spouse passes away the other spouse will continue that income when that second spouse passes away then there's nothing left as a death benefit now when you have a defined contribution plan you can get set up making sure that you're eliminating the mutual fund related fees the 401k related fees and most importantly the downward market losses to your portfolio when you roll it over to a properly designed I are a contract and then on top of it you could attach something known as an income rider to those IRA contracts that will provide you lifetime income in two years and 30 days and 10 years whatever that case may be and there's a specific guarantees that are set up through these companies that say okay if you go and you trigger your lifetime income at age 65 you're guaranteed X amount of thousands of dollars you know every single year for the rest of your life now rather than having that income stopped or let's say the same case with my grandfather let's say he was 60 years old and he's getting paid $60,000 $60,000 from one of these specifically designed IRA contracts if he was to pass away after a couple of years whatever was remaining in his account value that he did not pull from that would go to his beneficiaries now if he kept living living living living living and let's say he exhausted his IRA bucket well now the company is still on the hook to pay him $60,000 for the rest of his life so even if he lives there's hundreds you know for the rest of his life so there's certain things that you could do and you know there's been so many innovations regarding these types of financial plans in these types of financial products especially after 2008 that you should always be mindful of what those plans are and how to best execute them or whether or not you know they may suit your specific needs so you know a couple things we learned with this video is with the defined benefit plan typically individuals that have them are very happy because they understand that there's going to be income coming to them for the rest of their life they could live their retirement years with confidence because they know that that retirement check is going to keep coming to them month by month by month but there are some risks involved with the defined benefit plan those risks that are involved are the death benefit essentially you're not leaving a legacy to your loved ones or you can't leave an accumulated account to your loved ones depending upon which option you chose off a defined benefit plan a really quick example or a really quick solution off of this you know when I was giving the example with my with my grandfather single life only option or the joint life only option regarding the pension plan is there's a ten thousand dollar difference right there what could have happened was they could have said okay I will go 100% into the single life only option for $60,000 and then we take a life insurance policy out on my grandfather to make sure that at $60,000 is coming to him $60,000 is coming to them maybe the life insurance policy cost $5,000 and that's now going to provide 300 grand worth of tax-free death benefit to my grandmother to say okay let's say if he keeps living living living living living they're netting that $10,000 worth today we're sorry $5,000 worth of difference and then God forbid whenever he passes away now my grandmother has access to $300,000 of a lump sum benefit that she could now place into one of these private defined benefit pension plans you know so there's a couple of different ways to to set that up properly but understand dependent upon you know what your situation is going to be entirely different than the next guy so you have to make sure that you're setting it up properly being educated on what are the best options out there for your specific state for the dollar amount that you're using for the lifetime income that you want to see happen so you're just maximizing your benefit as much as possible so you know in closing I hope that a lot of this made sense I hope that you learn some things you know we're going to find benefit plans and and if you're currently in defined contribution plan that's not necessarily a problem because you could actually leverage those accounts better and have that safety aspect and have that lifetime income stream that individuals that have defined benefit plans that so you know once again my name is derek ifasi we are I'm the owner of a phosphate Financial Group we are a plus right on the Better Business Bureau and what we do is we have specialists standing by that try to help educate you first and foremost of saying okay listen you know I have a defined contribution plan I'm looking to potentially rollover that money to have that defined benefit plan aspect or even defined benefit plan I'm coming very close to deciding how to take out this income I need some you know advice on you know how to how to do this properly and that's we're here for we offer 24/7 customer service all right one 800 number is stand the national volume that we get and you know we've had all very good reviews we've never had any complaints because it's methodical process making sure that education is first and foremost and you have to be educated before you can make a decision on you know what would be which plan would suit your needs you know the best possible way and when you when individuals unfortunately make that mistake of going the wrong route it cost them thousands and thousands of dollars in retirement you know by just debt that that's more than lack of education on what were some of the best options out there for their for their specific benefit so I want to thank you very much for watching this video feel free to subscribe to our youtube channel retire sharp so you have access to the most up-to-date videos thanks guys