Planning for a Secure Retirement

Module 6e: Profit-sharing Plans

There are three basic approaches to funding profit-sharing plans. They are:

1. Current (cash): profits are paid directly to employees in cash, check, or stock as soon as profits are determined.
2. Deferred: profits are credited to employee accounts to be paid at retirement or upon other stated circumstances such as disability, death, severance, etc.
3. Combined: part of the profit is paid out currently in cash and part is deferred.

Employer contributions to profit sharing plans may be made on a discretionary basis (as determined annually by the board of directors) or in accordance with a definite predetermined formula.

Questions:

David's employer has a profit-sharing plan.

1. How will David know how much his plan will "grow" each year?
2. Will David have enough money for retirement?

Module 6 - Module 6a | Module 6b | Module 6c | Module 6d | Module 6e