1. Investment Your money making money

2. Social Security Def. Comprehensive federal program providing workers and their dependents with retirement, disability income, etc.

3. What will I get? If I stop work at: –Age 62: $944 a month –Age 67: $ 1,349 a month –Age 70: $ 1,672 a month

4. Pension Employers put money in special funds that a person collects when they retire This is usually a percentage of your final salary

5. Teacher Pension After 30 years of service Age 55 60% of Final Average Salary So, if I am making $100,000 my final year of teaching, 60% would be $60,000 every year, or $5000/month retirement

6. Wilson’s Retirement $ 944 Social Security +$5,000 Teacher Pension $5,944 Monthly Payments Sounds great, huh? But I can’t get Social Security until I’m 62. That’ll be in 2036. Inflation will raise prices to a point where goods and services are twice as expensive. I’ll need more than that to get by!!!

7. Check it out! If you invest $2000 a year from the time you are 20-28, then stopped, You will have invested $16,000 By the time you are 55, it will be worth $169,252

8. And… If you wait until you are 30 and invest $2000 a year for 20 years You will have invested $40,000 By the time you are 55 it will be worth $126,003 Why? Time! Over time, interest earns interest. Your greatest asset is your youth!

9. Where to invest Banks, S&Ls and Credit Unions: pay interest to accounts for use of money as loans. (Banking notes) Finance Companies: Like banks make loans to businesses, but on a larger scale Mutual Funds: Many individuals pool savings to invest in stocks and bonds Life Insurance Companies: Provide financial protection to family of the insured Pension Funds: Set up by employers to collect deposits and distribute payments to retirees.

10. Financial Intermediaries Def. Businesses that invest your money for you. Services they provide: –Liquidity: allow investments to be easily converted to cash –Diversification: spread investments to reduce risk –Information: Have info. that ordinary investors would not have or would have to look up.

11. Certificate of Deposit Def. Account that pays a higher rate of interest than a savings account. Fixed interest rate Cannot access money for a specified period of time

12. Bonds Def. When you buy a bond, you are lending money to the corporation or government entity that issues the bond. Bonds pay out interest to the holder of the bond for use of their money.

13. Types of Government Bonds Savings Bonds: Low cost bonds issued by the U.S. government ($50-$10,000). A safe investment. Treasury Bonds: Larger bonds issued by U.S. Treasury Department Municipal Bonds: Issued by state or local governments to pay for local projects (building schools, libraries, roads, etc.)

14. Corporate Bonds Corporate Bonds: Issued by a corporation to raise money and expand its business. Riskier than government bonds, but pay more in interest. Junk Bonds: Low rated bonds issued by risky businesses. Risky investments because the business may not be able to pay the bond, But interest is higher due to the risk!

15. Series EE Patriot Bonds Issued after the September 11 th, 2001 terrorist attacks. All proceeds from sale of these bonds contribute to the recovery and war efforts.

16. Mutual Funds How they work: –Large number of people buy shares in the mutual fund. –Their pooled money has more buying power. –Fund managers invest in a variety of stocks, bonds and securities –Provide a good rate of return without great risk: By dividing investments, if a few lose value, the others provide security (diversification)

17. Retirement Plans Less and less industries are offering Retirement Pension plans. More are providing 401(k) plans as an alternative 401(k): Employees of a corporation invest pre-tax dollars in the company until they retire or leave the company. 403(b): lets employees of tax-exempt organizations or public schools to invest pre-tax until they retire or leave their employment.

18. Ex. Of Pre-tax dollars $75,000 income $6,000invested in 401(k) pre- tax $69,000 taxed by govt $14,495 paid in taxes. $75,000 income $0 invested pre-tax $75,000 taxed by govt $16,355 paid in taxes!

19. So? 401(k) investments are pre-tax: the money invested is not counted towards federal or state income taxes. This way the company gets money invested to expand, etc. The employee gets an investment which earns interest in their company as well as lower taxable income (they pay less in taxes)