$2,000 You are age 16 (17, 18) and have EARNED $2,000 AT A SUMMER JOB. What will you spend It on? Now imagine working 7 more summers and earning $2,000 a summer. What will you spend that $$ on?

Why Plan for Retirement? Everyone grows old – It’s inevitable!

Motivation? What is your motivation, reason for planning? Why am I planning? There are many paths to the same goal. What is your motivation, reason for planning? What plans are out there? Which path is right for you?

Reasons, Motivations? why should I think about retirement now? I’m young and fit. I can think about it later. procrastination can be a costly and financially dangerous mistake. Everyone should be looking to the future and planning for the day that they will no longer want or be able to work.  Life expectancy for females is 83.3 years; for males, it's 79.5 years.  Most people will retire or want to retire well before that age.

Types of Retirement Plans Social security Annuities Mutual funds 401 (k) 403 (B) Defined benefit plan Employer sponsored plan TRADITIONAL ira AND ROTH IRA Stocks and bonds

Simple Recipe to Become a Millionaire Work 8 summers, starting at age 19 – plan on saving $2,000 a summer. Invest it in a simple, low-cost equity portfolio Simmer slowly for 47 years Serve ungarnished (and untaxed) at age 65!

If your $$ is invested in common stocks and you achieve the average compound annual rate on U.S. large-capitalization stocks, (Large capitalization stocks are the “big kahunas” of the financial world – Top 5 U.S. companies are: Wal-Mart, Exxon Mobil, ChevronTexaco, General Electric, and Bank of America. Assuming your money is invested in an account yielding 10-12% interest, your account will grow to $9,378 at the end of the fourth year. At the age of 20-22, investing in the same way, with no additional savings, the account will grow to: You started saving at age 16 (17 or 18) years old, in high school. You clear about $2,000 a summer. You invest in a Roth IRA. It will grow, tax free for as long as you have the account. All withdrawals from the account after age 59 ½ are tax- free. $43,452 by age 30 $134,646 by age 40 $418,191 by age 50 $1,298,837 by age 60 And. . . $2,288,996 by age 65

“Don't put all your eggs in one basket” Diversification means reducing risk by investing in a variety of assets. The simplest example of diversification is provided by the proverb above. Dropping the basket will break all the eggs. Placing each egg in a different basket is more diversified. There is more risk of losing one egg, but less risk of losing all of them. In the financial world, an example of an undiversified portfolio is to hold only one stock. That’s risky! Examples of diversification could be stocks, mutual funds, real estate, annuities, IRA’s.

Average Interest Rates Investment Interest Rate Regular Savings .05% (increases as balance increases) CD’s 2.7% (banks use your $$ to invest) Bonds 5-6% (loan $ - wait for maturity) Stocks 9.9% (own part of company) Mutual Funds 9.9% (combination of stocks & bonds) (your money is invested in a portfolio) Savings Investing SHORT-TERM LONG-TERM

THIS PLAN DOESN’T REQUIRE INVESTMENT BRILLIANCE EARLY START TENACITY & PATIENCE

RULE OF 72 To use the Rule of 72, divide the interest rate into 72. The answer is the number of years it will take for money to double in value. Example: If the stated interest rate is 6%, it will take 12 years for the money to double (72/6 = 12). You want to invest $8,000 in a mutual fund that is currently paying 9% interest. How long will it take for your money to double in value? 72/9 = 8 years

Why Plan for Retirement? A Millionaire’s Best Friend One awesome thing that you can take advantage of is compound interest. It may sound like an intimidating term, but it really isn’t once you know what it means. Here’s a little secret: compound interest is a millionaire’s best friend. It's really free money. Seriously. But don’t take our word for it. Just check out this story of Ben and Arthur to understand the power of compound interest. Ben and Arthur were friends who grew up together. They both knew that they needed to start thinking about the future. At age 19, Ben decided to invest $2,000 every year for eight years. He picked investment funds that averaged a 12% interest rate. Then, at age 26, Ben stopped putting money into his investments. So he put a total of $16,000 into his investment funds. Now Arthur didn’t start investing until age 27. Just like Ben, he put $2,000 into his investment funds every year until he turned 65. He got the same 12% interest rate as Ben, but he invested 23 more years than Ben did. So Arthur invested a total of $78,000 over 39 years. When both Ben and Arthur turned 65, they decided to compare their investment accounts. Who do you think had more? Ben, with his total of $16,000 invested over eight years, or Arthur, who invested $78,000 over 39 years?

Believe it or not, Ben came out ahead … $700,000 ahead Believe it or not, Ben came out ahead … $700,000 ahead! Arthur had a total of $1,532,166, while Ben had a total of $2,288,996. How did he do it? Starting early is the key. He put in less money but started eight years earlier. That’s compound interest for you! It turns $16,000 into almost $2.3 million! Since Ben invested earlier, the interest kicked in sooner.

Retirement Calculator Let’s check it out! Retirement Calculator