Lesson Plan

Author

Matthew Gragg

 

Lesson Description

Through a combination of group work, discussion, individual work and lectures, students learn the factors that influence retirement planning and goals, including retirement income, lifestyle, expected age of retirement, and life expectancy. They also learn the risks associated with different types of investments. This is a two-day lesson.

 

Essential Question

When will you successfully be able to retire?

 

Grade Level

9-12

 

Concepts

Risk (Fraud Risk, Inflation Risk, Financial Risk, Market Risk)

Retirement Planning Options

Retirement Goals

 

Oklahoma PASS Content Standard

Standard 6: The standard will explain and evaluate the importance of planning for retirement.

Objective 6.1: Describe the necessity of accumulating financial resources needed for specific retirement goals, activities, and lifestyles, based on life expectancy.

Objective 6.2: Explain the roles of Social Security, employer retirement plans, and personal investments (e.g., annuities, IRA’s, real estate, stocks, and bonds) as sources of retirement income.

 

Jump$tart National Standards

Investing Standard 1: Explain how investing may build wealth and help meet financial goals.

12th Grade Benchmark a: Compare strategies for investing as part of a comprehensive financial plan.

12th Grade Benchmark b: Describe the importance of various sources of income in retirement, including Social Security, employer-sponsored retirement savings plans and personal investments.

12th Grade Benchmark c: Give examples of how employer matching contributions to employer-sponsored retirement savings plans and vesting schedules affect participating employees.

12th Grade Benchmark d: Illustrate the concept of the time value of money applies to retirement planning.

12th Grade Benchmark e: Compare the consequences of delaying investment for retirement and benefits of investing early.

 

Objectives

Students will be able to:

  • explain the importance of developing retirement goals.
  • describe the meaning of various types of retirement income options.
  • define and identify different types of risk.
  • evaluate retirement planning options.

 

Time Required

Two 45 Minute sessions.

Day 1 – Procedures 1-20

Day 2 – Procedures 21-31

 

Materials

  • PPT Slides 1-12
  • Activities 1-3, one copy per student
  • Activity 2 Answer Key, Activity 3 Answer Key, and Activity 7 Answer Key, one copy for the teacher.
  • Activity 4 cut apart, enough to provide for 5-10 groups of 3-4 students each.
  • Activity 5 Client Recommendation Form, one copy for each group.
  • Activity 6 Life Expectancy Chart, one copy for each student.
  • Activity 7, one copy for each student.
  • 6 Envelopes, one each labeled Current Age, Lifestyle, Projected Monthly Retirement Expenses, Current Income & Savings, and Retirement Portfolio
  • Envelope slips from Activity 4 placed in corresponding envelope.
  • Scotch Tape
  • Scissors, one pair.

Procedures

  1. Display Slide 1 (Title Slide)
  2. Display Slide 2 and read the following scenarios to the class.
    • John is 55 and married to his wife, Tabitha. He currently makes $65,000 and has $200,000 in savings. He is in good health and wants to spend his retirement traveling with his wife in their R.V. He has a retirement portfolio consisting of Social Security that will pay out $1,200 a month, 401K of $650 a month, and Annuity of $150 a month, a Roth IRA of $700 a month, and personal real estate investments worth $250,000. His projected monthly retirement expenses are $3,500.
    • Will is also 55 and has never married but currently lives with his long-time girlfriend, Stephanie. He makes $135,000 and he and Stephanie have a joint savings account valued at $50,000. Will is diabetic and wants to spend his retirement spoiling his grandkids. His retirement portfolio only consists of Social Security that will pay $1,500 a month. His projected monthly retirement expenses are $1,950.

 

  1. Ask the class whether John or Will is closer to a successful retirement.
  2. Ask the students what is a successful retirement?
    • Possible responses might include: Lots of money, traveling, big house, spending time with family.
  3. Display Slide 3 and tell the students that some things to consider when planning retirement include the following:
    • Retirement Goals (Retire by certain age, healthy and active with plenty of money to travel and do what we want.)
    • Activities and Lifestyles (Gardening, traveling, sports and leisure, time with family and grandkids.)
    • Retirement planning options (Social Security, 401K, Pensions, IRA’s, Personal Investments, and Annuities)
    • Retirement Expenses (Rent/Mortgage, Medicare/Medicare Supplements, Utilities, Groceries, Medicine, Car Expenses, Travel)
  4. Place the students into groups of 3-4 students.
  5. Tell the groups to develop group retirement goals in each of the categories (lifestyle/activities, life expectancy, and retirement incomes). At least 5 specific goals.
  6. Have each group share their goals with the class.
  7. Have students return to their own seat
  8. Display Slide 4 (Why Is It Important to Retire)
    • Talk about the importance of planning for your retirement.
    • Emphasize to students the importance of planning early just like we talked about saving early in Standard 5
  9. Display Slide 5 (What Do You Need To Know About Retirement). Point out that these are some of the questions they need to answer when planning for retirement.
  10. Display Slide 6 and point out that the median age of retirement is currently 62 (http://www.gallup.com/poll/168707/average-retirement-age-rises.aspx)
  • Median – The middle number in a sequence of numbers.
  1. Display Slide 7. Distribute a copy of Activity 6 – Life Expectancy Chart to each student. Point out the gap in years between retirement age and life expectancy.
  • People are living longer passed the age of retirement than ever before. Their income options greatly change yet they still have expenses due to lifestyle, health care costs, basic needs, etc. The earlier a person starts to plan for this the better.
  1. Distribute Activity 1 – Defining Terms to each student.
  2. Display Slides 8-9 Read the term and the definition, allowing time for the students to write down each definition.
  • Social Security – A federal system of old age, survivor’s disability, and Medicare, which requires employers to withhold wages from employees paychecks and deposit that money in designated accounts.
  • Employers also makes a contribution to their Social Security account. Currently the contribution is 7.65% of the pay for both employee and employer.
  • Pension/401K – An account in which in an individual may set aside earned income in a tax deferred savings plan for his or her retirement.
  • A pension will have a guaranteed payout rate and majority of the risk is with the company, however their can be a risk to the employee if the Pension is underfunded.
  • A 401K may have a potential higher payout, but there is no minimum guarantee of payout amount, and all of the risk is on the employee.
  • Explain how Pensions are being replaced by 401K’s.
  • IRA’s – A retirement plan that allows employees in private companies to make contributions of pre-tax dollars to a company pool that is then invested in stocks, bonds, or money markets.
  • Annuities – A contract between an individual and an insurance company where the individual makes a series of payments that are invested by the company and repaid to the individuals at a later date, generally during retirement.
  • Personal Investments – An individual investment in stocks bonds, real estate or money markets.
    1. When discussing Pensions and 401K’s make sure to discuss the differences.
  1. Display Slide 10. Read the term and the definition, allowing time for the students to write down each definition.
    • Financial Risk – The chance that an individual, business or government will not be able to return money invested.
    • Market Risk – The chance that the value of an investment will go down because of a change in supply and demand.
    • Fraud Risk – The chance that an investment has been misrepresented.
    • Inflation Risk – The chance that the rate of inflation will exceed the rate of return on an investment.
  2. Display Slide 11 and re-read the beginning scenarios to the class.
    • John is 55 and married to his wife, Tabitha. He currently makes $65,000 and has $200,000 in savings. He is in good health and wants to spend his retirement traveling with his wife in their R.V. He has a retirement portfolio consisting of Social Security that will pay out $1,200 a month, 401K of $650 a month, and Annuity of $150 a month, a Roth IRA of $700 a month, and personal real estate investments worth $250,000. His projected monthly retirement expenses are $3,500.
    • Will is also 55 and has never married but currently lives with his long-time girlfriend, Stephanie. He makes $135,000 and he and Stephanie have a joint savings account valued at $50,000. Will is diabetic and wants to spend his retirement spoiling his grandkids. His retirement portfolio only consists of Social Security that will pay $1,500 a month. His projected monthly retirement expenses are $1,950.
  3. Ask the class if their opinion has changed on whether John or Will is closer to a successful retirement.
  4. Distribute a copy of Activity 3 to each student. Instruct students to complete the activity. Review their answers using Activity 3 Answer Key.
  5. End of Day 1
  6. Start of Day 2
  7. Begin the day by distributing Activity 2 or playing the associated Kahoot.
  8. Tape the 6 envelopes Current Age, Lifestyle, Projected Monthly Retirement Expenses, Current Income & Savings, and Retirement Portfolio around the room.
    • Take the 6 envelopes and label each envelope as one of the following categories: Current Age, Health, Marital Status, Lifestyle, Current Income & Savings, and Retirement Portfolio.
    • Cut the Category Options out and place into corresponding envelopes.
    • Place the envelopes around the room on the wall.
  9. Separate the class into 5-10 groups depending on class size, ideally with groups of 3-4 students.
  10. Instruct each group to get one slip from each envelope. This will create their client.
  11. Tell the groups to fill out the chart for their client.
  12. Instruct the students to evaluate their client’s readiness for retirement and what changes they may need to make to be ready for retirement and have them write their answer in the space provided.
  13. Have each group present their client and recommendation.
  14. Debrief with discussion questions.
  • What were the common attributes for those clients that are ready for retirement? (Answers will vary, but may include: started early and has enough money.)
  • What were the common attributes for those clients that are not ready for retirement? (Answers will vary, but may include: did not star early, has no money and poor health.)
  • Which of the different factors had the biggest impact? (Retirement Portfolio, Projected Monthly Retirement Expenses, Lifestyle and Health)
  • Which of the different factors can you control? (Retirement Portfolio, Projected Monthly Retirement Expenses, and Lifestyle)
  • How can you control these factors? (Answers will vary, but may include start early, have a diverse portfolio, plan well for your lifestyle, and save money)
  1. Distribute a copy of Activity 7 to each student. Instruct students to complete the activity. Review their answers using Activity 7 Answer Key.

 

Closure

  1. Review the key points of the lesson by discussing the following:
  • What are the different types of risk? (Fraud Risk, Market Risk, Financial Risk, Inflation Risk)
  • What are the different Retirement Income Options? (Social Security, 401K, Pension, Personal Investments, Annuities, IRA’s)
  • Why is it important to have retirement goals? (Answers will vary, but may include to have something to work for, to be able to plan better)
  • How will you know when you are ready to successfully retire? (Answers will vary, but may include when we can afford our expenses, health issues, and lifestyle.)

 

Assessment

At the end of day 1 assess students using Activity 3, as per Procedure 19

At the end of day 2 assess the students using Activity 7 as per Procedure 30.

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