Planning for Retirement (even as a teenager)

The Truth Is… 1.Retirement WILL happen eventually. 2. Social Security and Medicare will NOT pay all your expenses. 3.You CANNOT save enough money if you start at age 50.

How Much Should I Save? The Social Security Administration and personal financial planning experts suggest that you’ll probably need 80% - 90% of your highest salary to retire comfortably. To make sure you don’t face a “retirement gap,” you’ll need your own supplemental retirement plan to make up the difference.

A Wise Savings Plan: save 7% of your income in your 20s; save 10% in your 30s; save 15% in your 40s; save 20% in your 50s and 60s.

Let Time and Your Money Do All the Work! In any retirement plan, the most important thing is to start your retirement savings plan right now! Through the power of compound interest, your investment will grow much larger than the sum of all your contributions.

Start Early! Look at a $200 monthly contribution started at different ages, and retiring at age 67. For illustrative purposes only. It assumes an 8% rate of return and reinvestment of earnings with no withdrawals. The illustration does not reflect any charges, expenses or fees that may be associated with your Plan. Age Out-of- Pocket $24,000$48,000$72,000$96,000$120,000 Account$36,589$117,804$298,072$698,202$1,586,345

Where Will I Get This Money? By cutting back just a little on some common monthly expenses, you can easily afford a modest contribution that will grow significantly over time. Just consider how much one person can save by cutting back on a few common items:

Expense Give Up How Often Monthly Savings Value if Invested for 25 Years DinnerOnce a week$100$94,745 Lunch outTwice a week$60$56,847 Coffee and bagel Twice a week$40$37,898 Vending machine soda Once a day$12$11,369 Movie ticketOnce a month$10$9,474

It Takes Willpower! Using an employer’s direct deposit system will help you to contribute regularly and painlessly. Money can be electronically transferred to your retirement account before you get your paycheck. Since you may never see it, you might never miss it!

The Power of Pre-Tax Saving Funding your retirement savings account with pre-tax dollars provides significant tax advantages. For example, a person who contributes to a plan with before-tax dollars, can actually increase the spendable income compared to putting aside money after taxes.

This chart shows how: Savings After Tax Savings Before Tax Gross Pay$2,000/mo. Minus Pre-Tax Contributions$0-$100 Taxable Pay$2,000$1,900 Minus Federal Tax Withholding-$380*-$361* Minus After-Tax Contributions-$100$0 Net Pay (Paycheck)$1,520$1,539 Difference$19

Don’t Touch It! Money withdrawn early from retirement accounts is heavily taxed! Do not withdraw retirement money unless it is an absolute emergency!

Retirement Planning Summary Start early. Contribute regularly. Leave it alone.