Retirement Options

Template copyright 2005 www.brainybetty.com Retirement Pension plans Company plans that provide retirement income for their workers. 401k PERS 5/12/2019 Template copyright 2005 www.brainybetty.com

Template copyright 2005 www.brainybetty.com Retirement Keogh Plan Retirement plan that allows self-employed individuals save a maximum of 15% of their income up to a specified amount each year, and to deduct that amount from their yearly taxable income. 5/12/2019 Template copyright 2005 www.brainybetty.com

Template copyright 2005 www.brainybetty.com Retirement Individual Retirement Account (IRA) Private retirement plan that allows individuals or married couples to save a certain amount of untaxed earnings per year with the interest being tax-deferred. 5/12/2019 Template copyright 2005 www.brainybetty.com

Template copyright 2005 www.brainybetty.com Retirement Roth IRA Private retirement plan that taxes income before it is saved, but which does not tax interest on that income when funds are used upon retirement. 5/12/2019 Template copyright 2005 www.brainybetty.com

Template copyright 2005 www.brainybetty.com Retirement “Don’t put all your eggs in one basket.” Diversification Spreading of investments among several different types of accounts to lower overall risk. 5/12/2019 Template copyright 2005 www.brainybetty.com

Building wealth over the long term.

Three Rules for Building Wealth Start Early Give money time to grow.

Three Rules for Building Wealth Buy and Hold Keep your money invested

Three Rules for Building Wealth Diversify Spread out your investments

Making money with your money Simple interest vs. compound interest

Ben and Arthur Both save $2,000 per year at 12% Ben starts at age 19 and stops at age 26 Arthur starts at age 27 and stops at age 65 Who do you think has the most money?

Daily Decisions can make a HUGE impact! Expenses Cost per day Cost per month If invested @ 12% from age 16-76 Cigarettes $3 $90 $11,662,000 Gourmet Coffee $5 $150 $19,371,943 Lunch (5 days/week) $8 $160 $20,663,319

Types of interest Simple interest the bank will pay you a certain amount for every year your money is in the bank. Simple interest applies only to the cash deposits you make.

Here is what it looks like in a formula Types of interest Here is what it looks like in a formula Simple interest Cash deposit + (cash deposit x annual interest rate x number of years) = Final Balance

Types of interest Compound Interest the bank will pay you a certain amount for every year your money is in the bank. Compound interest looks at your cash deposits plus the interest from the previous year or years.

Here is what it looks like in a formula Types of interest Here is what it looks like in a formula Compound interest Current balance + (current balance x interest rate ) = New balance

Types of interest Key things to remember… When compounding interest, ALWAYS take your final balance from the previous year to figure the next years interest. Always round off to the nearest cent.

Types of interest Confused???? Examples… You open a savings account that pays 4% interest. You deposited $500 into the account. Figure out what the simple interest is for one year and the compound interest for one year.

Types of interest You should have the same answer for both. You will have $520 in your savings account at the end of the first year. Now figure out what your balance will be at the end of 3 years.

Types of interest Answers Simple interest final balance will be $560 Compound interest final balance is $562.43

Types of interest Answers worked out. Simple: 500 + (500 x .04 x 3) = 560 Compound: 1st year: 500 + (500 x .04) = 520 2nd year: 520 + (520 x .04) = 540.80 3rd year: 540.80 + (540.80 x .04) = 562.43