1. Todd Jorns www.flip4u.org
Financial Planning 101
Todd Jorns

3. Facts & Stats A woman age 65 has a 19% chance of living to age 95.
A man age 65 has a 11% chance of living to age 95.
Only 60% of workers are currently saving for retirement.
Over 50% felt they were behind in saving for retirement.
32% rated themselves as “a lot behind.”
2005 Retirement Confidence Survey

4. Facts & Stats
25% of all workers rely solely on Social Security when they retire.
66% rely primarily on Social Security.
The average Social Security benefit is $959 a month ($11,508 a year).
31% of Americans would rather scrub a bathroom than plan for retirement!
2005 Retirement Confidence Survey

5. Facts & Stats Retirement Savings All 25-34 35-44 45-54 55+
Less than $10,000
35%
50%
36%
24%
26%
$10,000 – $24,000
13%
19%
16%
10% 5%
$25,000 – $49,999 9%
11%
$50,000 – $99,000
14%
15% 11
$100,000 – $149,000 8% 7%
$150,000 – $249,999 1%
$250,000 – $499,999 4%
12%
$250,000 or more
17%
2005 Retirement Confidence Survey

6. Objectives
Improve Awareness and Understanding of the term “saving versus investing.”
Familiarize and Educate attendees on the various retirement options available to them.
Inspire and Motivate attendees to be in charge of their retirement.
Challenge attendees to share this knowledge with their children, family and friends.

7. Do’s & Don’ts Don’t get mad at me. Don’t get mad at yourself.
Don’t blame anyone (but yourself).
Do use the information positively.
Do create a plan for yourself.
Do stick to your plan.
Do enjoy retirement.

8. Waiver I am not a certified financial planner or accountant.
All information I share with you are things I have read about or seen on TV.
I have a passion to share my financial knowledge with anyone who will listen.
My goal is to help others find the path towards F3 (future financial freedom).

9. Investing versus Saving
How to Have a Net Worth of $1 Million at Age 55
Interest Rates and Their Effect on Your Investments
The Magic of Compound Interest
Rule of 72 – Lump Sum Investment

10. How to Have a Net Worth of $1 Million at Age 55
Monthly Savings Age
Return of 10%
Return of 8%
Return of 4%
Return of 2% 20
$264
$435
$1,094
$1,646 25
$442
$670
$1,440
$2,030 30
$754
$1,051
$1,945
$2,572 35
$1,317
$1,697
$2,726
$3,392 40
$2,413
$2,889
$4,063
$4,768 45
$4,882
$5,466
$6,791
$7,535 50
$12,914
$13,609
$15,083
$15,861
Bloomberg Personal, September 1994

11. Interest Rates and Their Effect on Your Investments
$10,000 Lump Sum
5-yrs
10-yrs
20-yrs
30-yrs
40-yrs 0%
$10,000 1%
$10,512
$11,051
$12,213
$13,497
$14,916 2%
$12,212
$14,913
$18,212
$22,241 4%
$12,210
$14,908
$22,226
$33,135
$49,399 6%
$13,489
$18,194
$33102
$60,226
$109,575 8%
$14,898
$22,196
$49,268
$109,357
$242,734
10%
$16,453
$27,070
$73,281
$198,374
$537,007
12%
$18,167
$33,004
$108,926
$359,496
$1,186,477

12. Interest Rates and Their Effect on Your Investments
$100 Per Month
5-yrs
10-yrs
20-yrs
30-yrs
40-yrs 0%
$6,000
$12,000
$24,000
$36,000
$48,000 1%
$6,155
$12,625
$26,578
$41,998
$59,038 2%
$6,315
$13,294
$29,529
$49,355
$73,566 4%
$6,652
$14,774
$36,800
$69,636
$118,590 6%
$7,012
$16,470
$46,435
$100,954
$200,145 8%
$7,397
$18,417
$59,295
$150,030
$351,428
10%
$7,808
$20,655
$76,570
$227,933
$637,678
12%
$8,249
$23,234
$99,915
$352,991
$1,188,242

13. The Magic of Compound Interest
Jimmie
Opens IRA at 12% interest at age 22.
Invests $2,000/year for 6 years = $12,000.
After 43 years IRA is worth $1,348,440.
Joel
Spends $2,000/yr on himself for six years.
Opens IRA at 12% at age 28.
Invests $2,000/yr for 37 years = $74,000.
After 43 years, IRA is worth $1,363,780.
Difference of $15,340 (start early!).

14. The Magic of Compound Interest
Jimmie
Joel
Age
Payment
Accumulation 22
$2,000
$2,240 $0 23
$4,749 24
$7,559 25
$10,706 26
$14,230 27
$18,178 28
$20,359
$ 2,240
29-64
↕ ↕ 65
$1,348,440
$1,363,780

15. The Magic of Compound Interest
Jimmie
Joel
Jake
Age
Payment
Accumulation 22
$2,000
$2,240 $0 23
$4,749 24
$7,559 25
$10,706 26
$14,230 27
$18,178 28
$20,359
$ 2,240
$ 22,599
29-64
↕ ↕ 65
$1,348,440
$1,363,780
$2,712,220

16. Rule of 72
The rule of 72 says if you take the interest rate you are receiving and divide it into 72, it will give you the number of years it will take for your investment to double.
Example, 72 divided by 4 (interest rate at a bank) = 18 years for your money to double.
Another example, 72 ÷ 2 = 36 years.

17. Interest Rate (Lump Sum Investment)
Rule of 72
Interest Rate (Lump Sum Investment)
Year 2% 4% 6% 8%
10%
12%
72÷2=36
72÷4=18
72÷6=12
72÷8=9
72÷10=7.2
72÷12=6
$1,000 6
$1,130
$1,268
$1,432
$1,617
$1,813
$2,047 12
$1,277
$1,607
$2,051
$2,616
$3,288
$4,191 18
$1,443
$2,037
$2,937
$4,231
$5,962
$8,579 24
$1,631
$2,583
$4,206
$6,843
$10,811
$17,561 30
$1,843
$3,274
$6,023
$11,067
$19,603
$35,950 36
$2,083
$4,151
$8,625
$17,899
$35,545
$73,592

19. Guidelines & Resources
Retirement Options/Contributions
Net Worth Projection – Calculator
12 Financial Principles
10 Ways to Mismanage a 401(k)
Credit Card Debt
Financial Web Resources

20. Retirement Options/Vehicles
401(k) (corporations)
403(b) (not-for-profits-education/hospitals)
457(b) (government)
Roth IRA
IRA
Annuities
U.S. Savings Bonds
CDs
Savings Accounts
Others

21. Retirement Contributions
Vehicle
2005
2008
Max
Monthly
*IRAs
$4,000
$333
$5,000
$416
*403(b)
$14,000
$1,166
$15,500
$1,291
*457(b)
Totals
$32,000
$2,665
$35,000
$2,915
$36,000
$2,998
*Catch-up contributions: Workers age 50 and above are permitted to contribute an additional $1,000 to their IRAs and $5,000 to their 403b and 457b plans.

22. Net Worth Projection – Calculator
Will help you plan for retirement.
Allows you to make projections into the future.
Adjustments made to the Interest Rate shows the impact on investments.
You can download this calculator at

23. 12 Financial Principles Map your financial future Pay yourself first
Start saving young
High returns equal high risks
Money doubles by the "Rule of 72"
Budget your money

24. 12 Financial Principles Know your take-home pay
Don't expect something for nothing
Your credit past is your credit future
Compare interest rates
Don't borrow what you can't repay
Stay insured

25. 10 Ways to Mismanage a 401(k) Failure to participate at all
Failure to contribute enough to receive the maximum employer match
Using 401(k) plan as a piggy bank
Trying to time the market
Being too conservative
Motley Fool Commentary, February 8, 2005

26. 10 Ways to Mismanage a 401(k) Being too aggressive.
Holding too much company stock.
Failure to allocate or rebalance.
Keeping a default election.
Keeping the money during a job change.
Motley Fool Commentary, February 8, 2005

27. Debt: the Good, Bad & Ugly
House Loan (Mortgage)
Auto Loan (Car or Truck)
Personal Loan
Credit Card

29. House Loan (Mortgage)
Mortgages are usually good debt because equity in the house is built up over time.
Only borrow what you can reasonably afford to pay back each month.
The shorter the term (15yr vs. 30yr) the less interest you pay over time.
Shop around for lowest interest rate.

30. Auto Loan
Auto loans are considered not so good debt because the value of the car goes down over time.
The shorter the term (36 mo vs. 60 mo) the less interest you pay over time.
Shop around for lowest interest rate.
Better to buy a used car or save up and pay cash for your vehicles.

31. Personal Loan
Personal loans are considered bad debt because you pay interest with no return.
Only borrow if it is a true emergency.
Shop around for lowest interest rate.
Pay back the loan ASAP.
Better to create your own “emergency” fund and borrow from and repay yourself.

32. Credit Card Debt
Credit Card debt is ugly debt because you pay enormously high interest rates.
Interest rates can range from 0% - 30%
Credit card debt is one of the leading causes of personal bankruptcy.
Don’t carry balance over each month.
Better to only charge what you can easily pay back each month.

33. Credit Card Debt How long to pay off credit card?
$5,000 balance
10% interest rate
$100 monthly payment
Almost 5.5 years to pay off the debt.
$1,495 of interest
$5,000 principle
$6,495 total money paid – Ugly!

34. Credit Card Debt How long to pay off credit card?
$5,000 balance
20% interest rate
$100 monthly payment
Over 9 years to pay off the debt.
$5,840 of interest
$5,000 principle
$10,840 total money paid – Uglier!

35. Financial Web Resources

36. Financial Priorities Pay down (eliminate) credit card debt ASAP
Create an emergency fund - enough to cover 3 – 6 months of monthly expenses
Make sure you have adequate life insurance (term is the cheapest)
Maximize all your tax-deferred opportunities first (401k, 403b, 457b)
Open Roth IRAs
Save for children’s college education

37. Words to “Live” By Start saving/investing now Pay yourself first
Rule of 72
Compounding interest ($ work hard for you)
Stick with your financial plan
Invest 50% of your annual raise in you
Work smart, Invest hard, Retire peacefully

39. Questions