Financial Planning for Retirement

Why Retirement Plan? For Financial security when you do not work Saving is necessary to accumulate the capital needed to produce wealth. A retirement plan helps in creating wealth through Power of Compounding Start Early. Save today for better tomorrow! Tax Benefit

What Retirement Plan? Investment which gives financial security Moderate risk tolerance Long term view Systematic investment – Every month Gives Tax Benefit

What Should Eric Do? Spend Less, Save More Choose a suitable plan, Invest regularly for retirement Return on the investment should be more than inflation Differ World Travel now, Roam the World Later

Power of Compounding Start Early Compounding Lets you earn interest on interest Eg. Eric starts saving 10% of income at the age of 35.Employer matches 65 of income. He earns 8% return. By the time he turns 65, he will accumulate $1,636,622 !!!!!!! If Eric starts investing at the age of 40, he will accumulate only $1,221,317 i.e. $415,306 less. That is the power of compounding

How to Spend Less, Save More Pay yourself first Use Credit card as checking account- You are paying interest on credit card outstanding more than you earn elsewhere Differ unnecessary expenditure Buy used products (if possible) Avoid luxury up to some extent (specially if you have to pay interest)

Recommendation for Eric Save 15% of his income every month. Put 10% of the income in 401(K) Rest 5% of the income should be put in following funds (Suggestive portfolio, assuming Eric has moderate risk tolerance level) Vanguard Prime Money Market Fund Vanguard Balanced Index Mutual Fund Vanguard Total Stock Market Index Mutual Fund Vanguard Total International Stock Index Mutual Fund