PSYC 5571 Lecture Notes - Lecture 22: Market Risk, Pension, Defined Contribution Plan
Document Summary
**first draft of paper needs to be uploaded to canvas today. On average, social security replaces 40% of what you earned in your average working year each year: for higher earnings people, it replaces a smaller amount of what they earned. Other legs of the stool that aren"t traditional: earnings from jobs, welfare. Shares of income by source: for the average elderly person, 1/3rd of their income is ss, 1/3rd is earnings, 21% is pensions. Why do employers set up pensions: 1) to attract good workers, 2) tax delayed benefits. Whatever money you and your employer put into the pension and all of the earnings that it makes is not taxed until you withdraw it: 3) to retain workers, 4) induces employees to leave. For social security, your earnings are defined by your 35 best years but, Based on your last 5 years or your best 5 years (usually the same thing)
