1. Retirement Options

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Retirement
Pension plans
Company plans that provide retirement income for their workers.
401k
PERS
5/12/2019
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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
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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
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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
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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
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7. Building wealth over the long term.

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

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

10. Three Rules for Building Wealth
Diversify
Spread out your investments

11. Making money with your money
Simple interest vs. compound interest

12. 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?

14. Daily Decisions can make a HUGE impact!
Expenses
Cost per day
Cost per month
If 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

15. 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.

16. 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

17. 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.

18. 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

19. 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.

20. 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.

21. 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.

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

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