Retirement Changed dramatically in the United States over the past 30 years Individuals are living longer and are healthier More individuals are retiring earlier, working part time or changing careers

Retirement The never ending question is: HOW MUCH DO I NEED TO SAVE??!! Variables at work: –What do you want to do –What are your responsibilities—children at later ages, invalid parents –Inflation, investments and longevity

Retirement Standard answers are: –70-80% of pre-retirement salary Probably high for physicians because they consistently have higher incomes, with more discretionary income Yearly withdrawals of 4, 5 or 6% of total invested assets –Assumes inflation numbers are stable –Assumes investment returns are stable

Retirement Other driving forces are: –Expensive desires (travel, property, boats, grandchildren, etc.) –Age of collection of social security –Health care and cost—may have to wait until Medicare and pharmacy benefit becomes available to retire

How to Estimate Time value of money concepts –What can you expect investments to return (usually range is 5-9% –Inflation—. Usual range is 3-4.5%

Pension A pension is a fund into which a sum of money is added during an employee's employment years, and from which payments are drawn to support the person's retirement from work in the form of periodic paymentsretirement

401K Retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes aren't paid until the money is withdrawn from the account.

When did 401K start? 1978: Congress passes the Revenue Act of 1978, which includes a provision that allows employees to avoid being taxed on a portion of income that they decide to receive as deferred compensation, rather than direct pay

IRA An IRA is an account set up at a financial institution that allows an individual to save for retirement with tax-free growth or on a tax-deferred basis. There are three main types of IRAs—Traditional, Roth, and Rollover— each with different advantages.

ROTH IRA A Roth IRA is a retirement savings account that allows your money to grow tax-free. You fund a Roth with after-tax dollars, meaning you've already paid taxes on the money you put into it.

Compound Interest Interest added to the principal of a deposit or loan so that the added interest also earns interest from then on.

RATE OF RETURN Profit on an investment over a period of time, expressed as a proportion of the original investment. The time period is typically a year, in which case the rate of return is referred to as annual return.

RETURN ON INVESTMENTS Return on investment, or ROI, is the most common profitability ratio. There are several ways to determine ROI, but the most frequently used method is to divide net profit by total assets. So if your net profit is $100,000 and your total assets are $300,000, your ROI would be.33 or 33 percent.