Additional Voluntary Contribution - AVC

  

Paying Peter now so that Paul pays you more later. Additional voluntary contributions are additions you can make to your employer retirement fund. The wise owl will make, at minimum, contributions equal to the amount that will be matched by the employer, if a lucky wise owl has that option. Additional voluntary contributions can be made to the fund above and beyond the employer matching allowance. Doing so would make you a super wise owl, but only if the contributions are tax deferred and you are in a higher tax bracket than you will be during retirement. Otherwise, Paul wins.

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Finance: What is a Pension?31 Views

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finance a la shmoop. what is a pension? well it rhymes with tension, and likely

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for good reason. if you're a teachers pension or a fireman's pension or [person wearing dark glasses writes something down]

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another state employees pension that's backed up by a state that's going

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bankrupt. Hi, California, Hi Illinois. well we're looking at you. all right people

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well a pension is another term for a retirement fund. but what's special about

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a pension is that the employer essentially forces you to put away money

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for your retirement and then they invested for you.

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how nice. or at least be sure you invest it well on a salary of 75 grand a state [gambling table shown]

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employed ditch-digger might get a contribution of say 10 grand a year into

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her pension, and that's each year 10 grand of forced savings for as long as

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she you know digs ditches for the state. and in some states where the unions are

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strong in the governing financial knowledge is weak the government

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guarantees a minimum financial return on the pension investment made on behalf of

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the employees. that is in California for example the state guarantees a 10% per

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year return on their invested pension savings. if the invested return like [equation]

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investing it in Wall Street and stocks and bonds and private equity funds and

01:15

all that stuff well if that invested return is less than that number less

01:19

than that 10%, then the state rights to the pinch and a check to cover the

01:23

incremental difference. yeah it's a huge Delta and it's well pretty much why you

01:28

a Californian Illinois you're going bankrupt remember. Jesus Saves

01:31

but Moses invests. [ Moses, holding stone tablets glares and demands interest]

01:35

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