My Financial Philosophy By: Kyle Clemency

Clemen32@students.rowan.edu

Why Save?

With social security running out and the economy getting worse it is vital that anyone looking to retire start saving early.

Many jobs do not give pensions at retirement and social security as of now is much less than a person needs to live on.

Not Saving

• According to the Employee Benefits Research Institute, 50% of workers saving for retirement have less than $25,000 -- and 70% of those who aren't saving for retirement have less than $10,000 in savings.

• Studies show that humans are more likely to keep their behavior the same rather than change it. For example: in order to save $1,000 a year for retirement a family may have to make certain changes in it’s daily routine. This is hard for many families and is a big reason why the savings rate is so low.

Employee Benefit Research Institute

How much to Save

• According to the NJ Department of Health Services the average life expectancy for a male is 75.5 years. The average retirement age for a male is 64.6 years. That leaves at least ten years in which a male must have the money to take care of himself and maybe a spouse. If a worker enters the workforce directly from college he will be 22/23 years old. If he starts saving right away he will have around 45 years to build up a retirement nest egg.

• By saving sooner one can actually save money by putting away a small amount each year instead of lump sums near retirement.

Compound Interest• In order to find out how much interest you will earn on your investment or you want to know how much

you will have to pay extra for a loan or mortgage you must first understand compound interest.

• Formula for Compound Interest- A = (1+r)n • P = The Principal• r = The annual rate of interest• n = The amount of years the amount is deposited or borrowed for• A = The amount of money accumulated after “n” years, including interest.

How Does This Apply to Retirement:Compound Interest determines the rate of return for your retirement investment and can decide how much

money you will really have to retire on.

Link to Compound Interest Website

How much

• A 22 year old male with no spouse, making $45,000 a year, with 3% interest; will need to save 6.9% of his yearly income ($3,096). If he waits one year this number will move up to 7.5% a year ($3,368).

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How to Save

• According to CNN.com a 401 (k) is one of the best places to put your money for retirement. It gives you an immediate tax reduction, and tax deferred growth on your savings.

• Also there are many IRAs that are suitable for retirement saving such as a Roth IRA which allows for tax free growth; meaning that you pay no tax when you make a withdrawal.

• Stocks have the best chance of increasing your nest egg over a long period of time. They will increase your money and the purchasing power of your retirement fund.

• CNN

Resources to help you Save

• Bloomberg- http://www.bloomberg.com/?b=0&Intro=intro3

• Forbes- http://www.forbes.com/fdc/welcome_mjx.shtml

• Merrill Lynch- http://www.ml.com/index.asp?id=7695_15125

• TD Ameritrade http://www.tdameritrade.com/welcome1.html

• Business Week- http://www.businessweek.com/