Saving for Retirement Congratulations Graduates! My gift to you: the secret to wealth!

Rule of 72 Formula to estimate how long it will take your investment dollars to double. 72 ÷ Interest Rate = Time

Example Rule of 72 Invest $1,000 at 10% 72 ÷ 10 = 7.2 years Your $1,000 will be $2,000 in 7.2 years.

Start Early SAMPLE 1 Save $2,000 per year for 8 years at 12%. Start saving at 19 and stop at 26.

Money at Retirement ($2,000 for 8 years at 12%) At 26 = $27,551 At 32 = $54,381 At 38 = $107,339 At 44 = $211,869 At 50 = $418,191 At 56 = $825,435 At 62 = $1,629,261 At 65 = $2,288,996

SAMPLE 2 Save $2,000 EVERY year and NEVER stop starting at 26. At 32 = $18,178 At 38 = $54,058 At 44 = $124,879 At 50 = $264,665 At 56 = $540,579 At 62 = $1,085,185 At 65 = $1,532,166

SAMPLE 3 Save $3,000 for 15 years from 19 to 34. At 34 = $126,394 At 40 = $252,788 At 46 = $505,576 At 52 = $1,011,152 (You’re a millionaire!) At 58 = $2,022,304 At 64 = $4,044,608

Investment Vehicle Type of account in which you park your investments.   IRA   401(k)   Money Market Account

Investment Products Type of investment that you purchase and place in your investment vehicle.   Stocks   Bonds   Mutual funds

Investment Products Stocks   Shares in a for-profit corporation.   Purchase a “share” of the company, which generates growth. SAMPLE Buy 100 shares of Wal-Mart stock at $50/share, that’s $5, year later, Wal-Mart stock sells for $60/share, that’s $6,000. You’ve made a cool grand. $6,000 - $5,000 = $1,000

Investment Products Mutual Funds  Collection of thousands of shares of different stocks.  One share of ABC Mutual Fund may own fractions of shares in hundreds of corporations.  Fund managers.  Able to diversify.

Retirement Accounts IRA  Individual Retirement Account  Save with pre-tax dollars, pay taxes upon withdrawal at future tax rates. SAMPLE Invest $1,000 this year, pay no income tax on that $1,000 this year, but you DO pay income tax on the $118,647 that the original investment will be worth in 40 years.

Retirement Accounts Roth IRA Pay taxes today on this year’s investment of $1,000 this year, but pay NO taxes on the $118,647 in 40 years!

401(k) or 403(b) (non-profit employer)  Save with pre-tax dollars.  Often, employers will match contributions up to a certain amount.  Choose your employer wisely!  MAX out this contribution – it is free, instant money.

Recommendations  Mr. Hughes is not an expert investor!!!  Kiplinger’s Personal Finance.  Your best bet is a Roth IRA with good, growth-stock mutual funds.

Recommendations   Stay away from credit cards!!!!  If you don’t have the cold, hard cash in your hand, you CAN’T AFFORD IT!!!!