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Retirement Planning – It’s not just for grandparents anymore!

2. Michelle and Michael make different savings decisions
Michelle and Michael make different savings decisions. Michelle is cautious, and she starts to save early. Her philosophy: "You never know what will happen in the future.“
Michael wants to enjoy life. His philosophy: "I earned it, I should enjoy it NOW." Assume their money is invested at 9% compounded interest.

3. See how their different decisions impact their lifetime savings
See how their different decisions impact their lifetime savings. In this example, Michelle starts to save early. She saves $1000 a year for only 10 years. Then she stops, and never adds another dime.
Michael on the other hand waited 10 years to start saving, and then saved $1000 a year every year for the next 33 years. Look at the difference starting to save early makes. Michelle ends up with a LOT more money. And imagine how much money she would have if she had continued to invest her whole life! (Close to $1,000,000!)
“Most people think that unless you can save thousands of dollars at a time, it isn't worth bothering. But it's not how much you save, it's how soon you start. With compounded interest, you earn interest on top of interest. That means that even putting away a couple of hundred dollars a year, just a few dollars per paycheck, can significantly add up over the years.”

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A 401(k) is a retirement savings plan for for-profit companies and a 403(b) plan for government agencies has more or less replaced the standard pension plan. Every 401(k) and 403(b) will have some unique features, but most of them have these characteristics in common:
Employees can decide how much of their paycheck they want to contribute to their plan. Some employers often require that their employees contribute at least a nominal amount to encourage savings. The more you contribute, and the earlier you start, the more money you'll have saved.
Plans offer a variety of ways to invest from almost risk-free money market accounts to ultra-risky stock funds. The riskier the fund, the greater opportunity for a higher return-and also a bigger chance of losing money.
Employers match some part of the employee's contribution. For example, if an employer has a 10% match, for every dollar that an employee puts into their account, the employer puts in 10 cents. That means, right off the top, your money is earning a 10% rate of return. You won't get that in a bank account!
Contributions are tax deferred. In your peak earning years, you will probably be in a higher tax bracket than when you retire. Putting money in your retirement plans means you can save on higher taxes now, and pay a lower tax rate on the withdrawals in the future.
Employees can borrow from their 401(k) or 403(b) to purchase a home, pay for education, or cover medical expenses. The money must be paid back into your account with interest, but you're paying YOURSELF the interest.

5. Different types of investments have different amounts of risk
Different types of investments have different amounts of risk. Riskier investments can earn you a lot of money, or they can cost you a lot of money. Never invest in a risky investment unless you can afford to lose your ENTIRE investment!
<The information in this chart is fine and arranged nicely. It just needs some eye candy. Maybe a little colorful respresentation of each kind.>

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