Chapman reviews the Hunters’ expected spending needs in retirement and is concerned they will not have saved enough by retirement to support their lifestyle thereafter. Chapman recommends that the Hunters raise their DC plan contributions to 10% of their salaries. The Hunters are reluctant to do so, however, telling Chapman that they would rather save the additional funds to continue building up their bank account balance. The bank account savings are readily accessible compared with the contribution to the DC funds, which will be unavailable until they retire.
Discuss the advantages of the recommendation made by Chapman.
Chapman suggests that the Hunters increase their contributions to their DC pension plans. The Hunters are able to do so because they have considerable savings with their combined annual after- tax income of $126,000 being well above their current annual household living expenses of $90,000. The additional contributions total only $9,500 (5% of their combined pretax salaries of $190,000), and the after- tax effect would be only $6,650 (70% of $9,500). Even after increasing their DC contributions, the Hunters would still be able to save about $30,000 each year.
By increasing the contribution to the DC plans, the Hunters would gain the tax advantage of the DC plans because income and capital gain distributions within the plan are tax free. In addition, Susan Hunter could take advantage of the additional 5% contribution match offered as a benefit by her employer. The expected return on the DC plans would likely be significantly higher than in the highly liquid and low-interest bank account preferred by the Hunters. The increased contribution would build up their investment portfolio and boost retirement savings. Thus, the tax and return advantages of making additional contributions to the DC plans reduces the risk of a shortfall in projected retirement income while also leaving a significant amount of current income available for savings.
查普曼建议Hunters 增加他们对 DC 养老金计划的贡献。亨特夫妇之所以能够这样做，是因为他们有可观的储蓄，他们每年的税后总收入为 126,000 美元，远高于他们目前每年 90,000 美元的家庭生活开支。额外捐款总额仅为 9,500 美元（占其税前工资总额 190,000 美元的 5%），税后影响仅为 6,650 美元（9,500 美元的 70%）。即使在增加他们的 DC 贡献之后，Hunters 仍然可以每年节省大约 30,000 美元。
通过增加对 DC 计划的贡献，Hunters 将获得 DC 计划的税收优势，因为该计划内的收入和资本收益分配是免税的。此外，Susan Hunter 可以利用雇主提供的额外 5% 供款匹配作为福利。 DC 计划的预期回报可能远高于 Hunters 偏好的高流动性和低息银行账户。增加的捐款将建立他们的投资组合并增加退休储蓄。因此，向 DC 计划提供额外供款的税收和回报优势降低了预计退休收入不足的风险，同时还留下了大量当前收入可用于储蓄。