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Securing Your Financial Future

Securing Your Financial Future. Amount American Workers Have Saved for Retirement (65% are confident they will have enough money for retirement). Christian Perspective. Ecclesiastes 5:10

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Securing Your Financial Future

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  1. SecuringYour FinancialFuture

  2. Amount American Workers Have Saved for Retirement(65% are confident they will have enough money for retirement) SOURCE: Employee Benefit Research Institute

  3. Christian Perspective • Ecclesiastes 5:10 Whoever lovesmoney never has money enough; whoever loveswealth is never satisfied with his income. This too is meaningless. • Hebrews 13:5 Keep your lives free from the loveofmoney and be content with what you have… • I Timothy 6:10 For the loveofmoney is a root of all kinds of evil.

  4. Christian Perspective • I Corinthians 16:2 (Paul speaking) On the first day of each week, each one of you should setaside a sum of money in keeping with his income, savingitup, … • Proverbs 13:11 Dishonest money dwindles away, but he who gathersmoneylittlebylittle makes it grow. • Proverbs 13:22 A good man leavesaninheritance for his children's children, …

  5. 401K, 403B, 457, SEP Retirement Plans • Companysponsoredretirementsavingsplans (supported by multiple types of mutual funds) • 401K offered by “for profit” companies • 403B offered by “non profit” companies • 457 offered by governmentagencies • SEP available for self-employedindividuals • In many cases, these retirement savings plans are replacing company sponsored pensionplans

  6. 401K, 403B, 457, SEP Retirement Plans (cont’d) • Maximum contribution is 15% of earned income • Tax favored (tax advantaged) • Additions are made with “before- tax” dollars • All interest/dividends are taxdeferred • Most companies will match the first 1-5% of each employee’s contribution • All balances must be rolled over to an IRA when you leave a job (to avoid taxes and 10% tax penalties)

  7. Individual Retirement Accounts • Traditional IRA(very similar to a 401K or 403B plans) • All contributions are made with “before-tax” dollars • All mutual fund gains are taxdiffered • All future withdrawals are fullytaxable • You must begin withdrawing money at age 70 ½ • Main use: Store (roll over) 401K/403B funds from previous jobs (and thus defer taxes) • Roth IRA(introduced in 1997) • All contributions are made with “after-tax” dollars • All mutual fund gains are taxfree • All withdrawals are taxfree (after age 59 ½ ) • You do not have to begin withdrawing money at 70 ½

  8. Retirement Strategy • Begin investing 10%yourfirstdayatwork • You will never miss what you never had • You will not have to make tough decisions later • Recommended Investment Strategy • First, invest in a 401K up to the matching percent • Second, invest in a RothIRA up to the maximum amount allowed per year ($4,000 in 2005). • Third, go back and invest in your 401K up to the maximum allowed per year ($14,000 in 2005)

  9. Retirement Savings Example • Your first job pays $30,000 per year and you get a raise of $3,000 per year thereafter. • You contribute 10% each month (payroll deduction) • Your employer matches the first 3% contribution • You contribute 10% for 45 years (ages 22–67) • Your final retirement “nest egg” will be: 401K + Roth IRA = Total $ 700,000 + $ 800,000 = $1,500,000( 5% - pessimistic) $ 900,000 + $1,100,000 = $2,000,000( 6%- conservative) $1,500,000 + $1,800,000 = $3,300,000( 8%- avg. last 30 yrs) $2,600,000 + $3,100,000 = $5,700,000(10% - optimistic)

  10. Summary • Every person is eligible to invest in their future • You will secure your financial future if you follow one simple rule…. Invest 10%beginning dayone of your career • Don’t borrow from your 401K or 403B plan! • College is still the best option if you want: • More initial career options • Higher starting salary • More career advancement opportunities

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