Investing

INVESTING 2006 I . Retirement Plans for Personal Situation

The case of IBM that freeze 48B pension plan in 2008 became a headline in the early 2006 when the company announced the changing pension program . In the case , the technology giant plan to use new benefits scheme through 401 (k ) plans in which IBM will double the percentage of their employees ' contributions into 6 percents of salary . Some of them will receive more than that (Bergstein , 2006

The situation raises a question which pension plan benefits employees and companies . From the company

point of view , the most attractive pension plan is one that the company contribute the least however , from for personal view , the most attractive one is that yield the most Currently , there are many choices for retirement plans from traditional IRA to 401k plan

A traditional IRA is basically an individual savings plan . In this plan a person contributes some amount that is tax deductible . The invested money is also subject to income taxes when withdrawal happens especially when the individual reach the age of 59 ? years if he does not want to pay any penalty (McKinney , 2006

Similarly , a Roth IRA is also an individual savings plan . However , in this improved plan , at a certain limit , the amount is non-deductible Interestingly , the invested money is not subject to income taxes when he withdraws when he is at the age of 59 ? years , provided that the funds have been in his account for 5 years at minimum (McKinney , 2006

Unlike IRA , 401k plan is a retirement plan that is sponsored by an employer when we work with . This is similar to the case of IBM as explained above . The company then set up how many percentages that an employee should contribute to the plan , which is taken from the employee 's monthly salary . In this plan , the person should decide which funds manager they choose . Beware of funds manager that offers high return since they are likely to invest in high risk investment like stock market . The peril of this situation is once we retire and the funds manager loose in stock market , we loose our years of savings as well

Based on the comparison , I think 401k plan is the best retirement plan since we can set how much we want to contribute to the funds monthly in to see how much we will get once we retire . However , we should be careful of selecting funds that we put our money in II . Stock Dividend , Regular Cash Dividend , and Periodic Share Repurchase

Dividend is a form of taxable payment that a company distribute to its shareholder related to its earnings , quarterly or annually . The dividend distribution comes in two forms : cash and stock dividend . In cash dividend , a shareholder will receive some amount of money , which is taxable while in the stock dividend , a shareholder will receive the dividend in the form of additional shares

Cash dividend is basically paid on a regular basis as a form of value-distribution as well as cash distribution . Concerning the comparison with periodic stock repurchase , I see that the later -stock repurchase- is more attractive since it is a one-time distribution and usually a company will promise that the shareholders will have an increased dividend in the future (Tajirian , 2006

III . Stock Splits

Consider a Microsoft stock , as of August 9 , 2006 , the company ' stock is traded at 24 .34 per stock . If the number is considered high for many investors that result in the low demand for the company 's stocks Microsoft can decide to stock split the par value in to be more purchasable for wide range of people . For example 1 :4 stock split means that Microsoft stock is now traded at 6 .85 . However , a person who used to have 100 shares of 24 .34 Microsoft stock , after stock split , he will have 400 shares

Therefore , a stock split is performed to trigger a market and is a kind of psychological initiatives since stock split is just a book entry that does not influence or change any benefit in terms of earnings per share . Bibliography

Bergstein , Brian (2006 . IBM to Freeze 48B Pension Plan in 2008 Retrieved August 9 , 2006 from HYPERLINK "http /abcnews .go .com /Business /wireStory ?id 1477533 business true http /abcnews .go .com /Business /wireStory ?id 1477533 business true

Equitymaster (2000 . Stock splits : Are they worth it ? Retrieved August 9 , 2006 from http /www .equitymaster .com /DETAIL .ASP ?story 11 date 10 /10 /2000

McKinney , Jenny and McKinney , Patrick (2006 . HYPERLINK "http /retireplan .about .com " Retirement Planning . Retrieved August 9 , 2006 from HYPERLINK "http /retireplan .about .com http /retireplan .about .com

Tajirian , Alex (2006 . Dividend : Cash Vs . Stock Repurchase . Retrieved August 9 , 2006 from HYPERLINK "http /morevalue .com /glossary /restrict /Dividend-PGE .html http /morevalue .com /glossary /restrict /Dividend-PGE .html

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