Financial Planning 101 Todd Jorns

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

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

Facts & Stats 2005 Retirement Confidence Survey Retirement SavingsAll Less than $25,000 52%70%50%41%39% $25,000 - $ %12%15%14%12% $50,000 - $99,000 11%9%14%13%7% $100,000 - $249,000 12%5%10%17%23% $250,000 or more 11%4%10%16%19%

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. Transform and Challenge attendees to share this knowledge with their children, family and friends.

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.

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 F 3 (future financial freedom).

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

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

Interest Rates and Their Effect on Your Investments 5-yrs10-yrs20-yrs30-yrs40-yrs 0%$10,000 1%$10,512$11,051$12,213$13,497$14,916 2%$11,051$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 $10,000 Lump Sum

Interest Rates and Their Effect on Your Investments $100 Per Month 5-yrs10-yrs20-yrs30-yrs40-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

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!).

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

The Magic of Compound Interest JimmieJoelJake AgePaymentAccumulationPaymentAccumulationPaymentAccumulation 22 $2,000$2,240$0 $2,000$2, $2,000$4,749$0 $2,000$4, $2,000$7,559$0 $2,000$7, $2,000$10,706$0 $2,000$10, $2,000$14,230$0 $2,000$14, $2,000$18,178$0 $2,000$18, $0$20,359$2,000$ 2,240$2,000$ 22, $0↕ $2,000↕ $2,000↕ 65$0 $1,348,440 $0 $1,363,780 $0 $2,712,220

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.

Rule of 72 Interest Rate (Lump Sum Investment) Year2%4%6%8%10%12% 72÷2=3672÷4=1872÷6=1272÷8=972÷10=7.272÷12=6 0$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

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

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

Retirement Contributions Vehicle MaxMonthlyMaxMonthlyMaxMonthly *IRAs$4,000$333$4,000$333$5,000$416 *403(b)$14,000$1,166$15,000$1,250$15,000$1,250 *457(b)$14,000$1,166$15,000$1,250$15,000$1,250 Totals$32,000$2,665$34,000$2,833$35,000$2,916 *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.

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

12 Financial Principles 1.Map your financial future 2.Pay yourself first 3.Start saving young 4.High returns equal high risks 5.Money doubles by the "Rule of 72" 6.Budget your money

12 Financial Principles 7.Know your take-home pay 8.Don't expect something for nothing 9.Your credit past is your credit future 10.Compare interest rates 11.Don't borrow what you can't repay 12.Stay insured

10 Ways to Mismanage a 401(k) 1.Failure to participate at all. 2.Failure to contribute enough to receive the maximum employer match. 3.Using 401(k) plan as a piggy bank. 4.Trying to time the market. 5.Being too conservative. Motley Fool Commentary, February 8, 2005

10 Ways to Mismanage a 401(k) 6.Being too aggressive. 7.Holding too much company stock. 8.Failure to allocate or rebalance. 9.Keeping a default election. 10.Keeping the money during a job change. Motley Fool Commentary, February 8, 2005

Financial Web Resources

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.

Words to “Live” By Pay yourself first. Start saving/investing now. 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.

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