Retirement Planning – The starting point (investors 21-35 yrs)
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Transcript of Retirement Planning – The starting point (investors 21-35 yrs)
Retirement Planning: The Starting Point
For Investors 21-35 yrs old
The focus in this seminar is on Investing for Retirement
Personal Savings are split into:– Taxable Savings• Bank accounts, CD’s• Investments
– Non-taxable, retirement savings• 401(k)
– Traditional & Roth
• IRA
Our focus today
Create a Retirement Vision
• No one knows what the future holds
• Basics– Spend less than you make– Be a great saver – Eliminate debt
Create a Retirement Vision
Get Started Early• Compound growth
takes time to build• Largest effects felt
after years of saving and investing
• Cannot shortcut process
• Chart based on – 10% contribution rate– 5.14% annual rate of
return– 2% annual salary
increase– 3% annual inflation
25 30 35 40 45 50 55 60 67 -
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Example of Compound Growth
Get Started Early
25 year old 35 year old 45 year old -
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,167,972
747,464
438,264
401(k) Scenarios
• Beginning salary– 25 yr old: $50,000– 35 yr old: $61,000– 45 yr old: $75,000
• Contributes 10%• Includes Amway
match • Retires at 67 years
old
Focus on Being a Great Saver
• Your contributions today decide your quality of retirement
• Target 12% to 20%• Increase gradually
3% 6% 10% 15% -
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
404,298
808,595
1,167,972
1,617,192
Contribution Scenarios(25 yr old)
Manage Spending
• Work on your spending habits and your savings will take care of themselves
• Use a personal financial management tool– Mint.com– Quicken Books– Excel spreadsheet– Paper / Envelopes
401k Basics – Traditional 401k
• Pre-tax savings provide highly efficient savings tool for building your nest egg
• Taxed as income when you withdraw from account (available without penalty anytime after 59 ½ yrs old)
401k Basics – Roth 401k
• Post-tax savings provide highly efficient savings tool for creating tax-free income upon retirement
• Tax-free income when you withdraw from account (available without penalty anytime after 59 ½ yrs old)
401k BasicsTraditional 401(k)
• Contribution is taken out of paycheck before tax
• Investments grow tax-deferred• Taxed as ordinary income upon
retirement• Distributions without penalty
allowed after 59-½
Roth 401(k)
• Contribution is taken out of paycheck after tax
• Investments grow tax-free• Tax-free upon retirement• Distributions without penalty
allowed after 59-½
2%3%
4%5%
9%
1%
1%
2%
5%
6%
2%
2%
3%
3%
3%
PS
PS
PS
PS
PS
Traditional Contribution Roth ContributionAmway Match Amway Base & Profit Sharing
401k Basics – Amway Match
• Amway matches 50% of your contributions in any combination of traditional and Roth, up to your 6%.
• Amway match is always deposited into traditional account.
• Amway’s discretionary base contribution & profit sharing is deposited into traditional account
• 2012 IRS employee contribution limits is $17,000
How Your Amway 401k Works
Trad 401(k)
Roth 401(k)
Amway 401(k)• Investment options are
the same for Traditional & Roth
• Select contribution % for each – any combination is allowable
• Accounts shown in aggregate on Fidelity website
Common Amway Myths
• 15% Contribution Max– You can contribute up to
70% of your salary or the IRS limits, whichever is greater
• You have to roll your $ into an IRA upon retirement– Sales technique– You can leave your $ with
the Amway plan if you have more than $5k
Glossary of Important Investment Terms
• Stocks - Fractional ownership in company (Equity)• Bonds - Money lent to company (Debt)• Mutual Funds - An account consisting of a combination of multiple
companies’ stocks and/or bonds • Asset Allocation - The apportioning of investments to the different
asset classes: stocks, bonds & cash (main 3)• Diversification - The apportioning of investments to the different asset
class sub-classes– Stocks
• Large, mid & small cap• Value, growth & blend• International, specialty
– Bonds• Gov’t & Corporate• High yield, inflation protected, low duration, etc
– Cash
An Analogy for Understanding Asset Allocation
• Your Personal Investment Recipe
• Mutual funds = Ingredients
• Recipe = How you mix Ingredients
Determining Your Ingredients
• Make sure the ingredients are varied
• Consider risk• How expensive it is
Common Misbehaviors
Common Misbehaviors
Common Misbehaviors
Make a Plan and Stick to It
Thank YouSchedule your personal consultation now!
Visit http://amway.bemanaged.comContact us at (616) 871-0751 or (888) 738-8780