1 The Financial Pathway To ARetirement Planning and Money Management The Financial Pathway To A Rewarding Retirement
2 A web-site dedicated to Stewardship can now be found at:Biblical Stewardship A web-site dedicated to Stewardship can now be found at: biblicalstewardship.com This is a web site that I have written and designed as a means of furthering His kingdom through stewardship education, counseling, advice and testimony.
3 How To Accumulate $1,000,000 by Age 65Change this to 85, if you’re already 65! At 75 you’ll still have 10 years At 65 you’ll still have 20 years
4 Power of Compounding Rate of Return Good Side of Compounding!!Interest Earned Stock Appreciation Good Side of Compounding!! Inflation Cost of Living Rising Expenses Bad Side of Compounding
5 How $100 a Month Will Grow $100. A month for 20 years! $100. A month for 20 years! $100. A month for 5 years! The difference, $58,902 - $24,000 is interest in the amount of $34,902!
6 How about your future retirement needs?Let's assume that we project we will need approximately $300,000 in invested funds so that we can "live off of our interest and dividends" when we retire. IF our savings will earn an average return of 6% for 30 years, then we can look at the chart and see that we will have about $100,452 for every $100 we could save a month. So if we save $300 a month we should have about $301,500. IF our investment returns can average 8%, we need only to save about $200 a month for the thirty years! Two Times the $149,036 is close to our goal of $300,000. We could also divide our goal, of $300,000 by the numbers in the column to see exactly how much we'd need to save to meet the goal. (Divide our goal of $300,000 by the column 8%, 30 years. The monthly savings needed is really $201.00)
7 How $100 a Month Will Grow We need $35,000.6%, 5 Years to save. Divide the $35,000 by the $6,977. Answer $501.00 We need $300,000.6%, 30 Years to save. For every $100, we’ll have $100,452 so save $300 a month We need $300,000.8%, 30 Years to save. For every $100. We’ll have $149,036 so save $200 a month We need $35,000.6%, 10 Years to save. Divide the $35,000 by the $16,388. Answer about $214 Page 7 WB
8 How about your future retirement needs?Using this method you can approximate your monthly required savings to meet any future retirement, college or other financial goal! Let's do one more example—let’s estimate, that in order to take care of a college education, you will need $35,000 five years from today. Now assume, you will earn 6% returns on your savings or investments--divide the $35,000 by the amount found in the 6% column--$6,997 and you’ll see you need to save about $ a month for the five years. At 10% returns, you need to save ($35,000/$7,744) $ This chart is extremely important as we’ll use it to calculate how much we’ll need to save for our future retirement “nest egg”. But first, let’s calculate how much we could save for the future!
9 EARNINGS & SAVINGS CHART25? You have 40 years to save! 40? $60,000 in salary 65? You have 5 years to save! Saves $6,000 a year for 25 years or $150,000 yet ends up with $588,000 Page 9 WB
10 Retirement Income NeedsAt age 65 when we retire our salary will be $104,00 Assume that our salary is $50,000 at age 50 At age 65 we’ll need about $78,000 in income to retain our current lifestyle
11 Retirement Income CalculationsPut your information here Retirement Income Needed Less: Social Security Pension Plan Benefits IRA/Keogh Benefits Life Ins. Annuities Other Income Items Rich Uncle’s Income Balance, the amount you will need to earn from savings or working This is the Income you’ll need Page 16 WB
12 Social Security EstimatePage 17 WB
13 Do Not Rely on Social Security!Only expected to be 25% of your needs! Age of eligibility is increasing faster than your age!
14 $1,000 a month for this many yearsSPENDING $1,000 PER MONTH! $1,000 a month. 10 Years at 8% $1,000 a month for this many years This chart shows the approximate amount of money or investments, that you will need invested, to allow you to withdraw $1,000 a month for the periods shown in Col. # 1 For example, assume that your future savings will earn 8% interest (Col. # 4). Then assume that, after you retire, you will need $1,000 a month for 10 years (Col. # 1). In looking at the chart, you will need, at the start of the ten years, approximately $82,000. If you have this amount, you will be able to withdraw the $1,000 a month for the full 10 years, at which time your savings would be close to zero Page 11 WB
15 Remember That Bumper Sticker!WE ARE SPENDING OUR KID’S INHERITANCE!
16 How Much to Save? Let’s estimate how much we’ll need. Say $3,000. (top of page 12) At 8%, with 15 more years of life we’ll need $105,000 for each $1,000. Or 3 time $105,000--$315,000 How can we estimate how much to save? Go Back to our Chart “How $100 a Month Will Grow” on page 7 Look at 6%, assume 15 years of saving. Divide the $315,000 by the $29,082 to see that you need to save $1,083 a month
17 How $100 A Month Will Grow At 6% and 15 years to save for every $100 we’d have $29,082 But we need $315,000 or about 10 times the $29,082! 315,000/29,082 = $1,083 Same 6%, but use 30 Years! 315,000/100,452 or $313.58 Page 7 WB
18 Let’s Increase Your Income!I have about $155,000 in the Ocean Bank I spend the $9,000 but I need $12,000! Hi I’m Millie. I’m 75 Years Old and Still Swimmin It earns about $9,000 A year in interest
19 SPENDING $1,000 PER MONTH! Years 6% 5 $52,000 10 $90,000 15 $118,00020 $140,000 25 $155,000 30 $167,000 Col #1 If Millie lives to be 100 years of age, she’ll basically have $5,000 left in the bank! Meanwhile, her lifestyle would have improved tremendously! Page 11 WB
20 And What will it be worth in the Future?What’s in Your Bank? And What will it be worth in the Future? Our Next Chart Will Estimate What Our Future Values Will Be For All of The Things We Own Today.
21 GROWTH RATE MEASUREMENTS $1,240 today, 4%, 5 years--$1,240 * 1.22 or $1,512.80 We want to do this for every asset we own. See page 15 Page 14 WB
22 What You Will Own! Multiply Column 2 by column 3 and put answers in Col. 4 Estimate of today’s value or balance in Col 2 Estimate growth rate of assets and number of years you want to project. See table on page 14 Page 15 WB
23 The Bad Side of CompoundingHow can you be prepared for inflation? 1. Live for it! Don't spend more than you are receiving. Sounds simple but it's a reminder that a budget is necessary even after you retire! Page 18 in booklet. 2. Invest for it! Don't be so conservative so that all your investments are "INCOME" oriented and "PRINCIPAL" secured. Leave room in your investment portfolio for some growth type stocks and/or mutual funds. 3. Spend for it! Buy, those long term assets that you know you will need in the next few years. Don't use this as an excuse to purchase new items that you don't really need. But buy or set aside the money for a new roof or new car. Let’s take a look at an inflation chart to just “see” what inflation can do to our lifestyle! Page 18 WB
24 INFLATION RATE MEASUREMENTSSee the DOUBLE FACTOR? See the DOUBLE FACTOR? Hot Water Heater $300 today, 6% inflation. Buy a new one in 5 years. $402. See the DOUBLE FACTOR? Page 18 WB
25 Future Costs List your expenses at today’s cost, use Column 2Estimate the Rate of Inflation and put this in column 1 Look at the chart on page 18 use the 20 year column for the inflation factors Page 20 WB
26 Inflation Fighters!! Keeping Up With Inflation requires investments in GROWING ASSETS! STOCKS REAL ESTATE MUTUAL FUNDS COMMODITIES
27 Top 5 Investments 1. Pay off all credit card debts—AS QUICKLY AS POSSIBLE!! 2. Pay off all consumer debts. Car loans, second mortgages etc. 3. Buy Mutual Funds, direct from the mutual fund companies.. 4. Purchase high grade income instruments. CD’s, Treasuries and/or High Grade Corporate Bonds. 5. Purchase individual high quality stocks using a dividend reinvestment plan. Limited to 10 to 20% of investable assets. Page 21 WB
28 Investing for Your FutureMutual Fund Investing Stay away from 1 or 2 year HOT funds Look at 5 years Don’t buy what’s being talked about Compare 3, 5 and 10 year returns Buy only NO-LOAD Look at the expenses Buy the smallest in your researched list of funds
29 Mutual Fund Criteria Buy funds that match your investment style and risk tolerance level Buy, hold and use Dollar Cost Averaging Check the magazines. RESEARCH Call and ask for Schwab’s Select List The Internet Resource listings are invaluable Pick from 2 to 4 funds, in different classifications Invest, say 1/3 of what you’d like to invest in each fund
30 Mutual Fund Criteria Set up each fund for automatic monthly investmentUse another1/3 to 2/3 over the next year for the automatic investments After 12 months, analyze each fund, then invest the last 1/3. If you didn’t do it monthly, Or invest the last 1/3 if the market drops during the year Pick a risk indicator and follow it! Morningstar’s 5 star rating is a good one
31 U.S. Treasury Investing Stick with the Noncompetitive BidsDon’t invest in any long term issues Take the tutorial on the web site Buy Direct—Save the Commissions Minimum purchases are $1,000 Treasuries are guaranteed beyond the bank amounts Principal is guaranteed as long as you hold to maturity Page 23 WB
32 Financial Goals Must Have Some Written GoalsWatch the Changing of the Goal as Age Changes See My Chart on Page 25 Set the Goals with God’s Help and With all Family Members Being Involved Re-Write on a Yearly Basis Split the Investment Dollars into Goal Pools Page 25 WB
33 Long Term Care InsuranceWatch for Rate Increases Unaffordable? Watch our Inflation Warnings Children—Help Fund? Cost is rising fast
34 Life Insurances How Much Reduce as Age Increases?Use for Estate Liquidity NO special use type of insurances Watch Annuity types
35 Medicaid State vs Federal Guidelines Get an Elder Care AttorneyCheck with each State for each category Today’s eligibility does not affect tomorrow’s
36 Medicaid As assets deplete know what is exemptWatch that State doesn’t use the estate Kiplinger’s Personal Finance March 2000 Ask at local nursing and care homes
37 Mortgages Question #1 No, don’t pay it off automatically! Analyze itReturn vs Cost? After Tax Cost Can you get another? Increase prior to retirement if rates are low?
38 Reverse Mortgages May just be the ticket Lots of analysisIncreasing Risks See articles on the internet Send me your research
39 Family Preparations Husband—Get with it Other than FuneralInstruction Booklet Appliances Christmas Lights Assets Owned Names on sentimental assets Page 27 WB
40 Estate Planning Trusts Bypass Trusts Living Trusts Q Tip FantasticTransfer all Assets Avoids Probate Pick the State Still Need a Will
41 Estate Planning Will is Necessary Don’t scrimp here!Gift tax laws can help Up to $1,000,000 by 2006 Watch Joint Assets Watch signers on bank accounts
42 Estate Planning Page 29 WB
43 Frauds, Con Artists and Rip-offsNo Phone No Unusual Investments No Home Repairs No Mail Replies No Contests Guard that SS # If You Don’t Know, Don’t!!
44 Frauds, Con Artists and Rip-offsNever Heard of it—Don’t Watch “new” and “hot” investments Callable CD’s? Risky—not for You! Call Me!!
45 Your Personal CPA CFP I’m sorry, I can’t make a decision without my CPA’s and Certified Financial Planner’s approval. If you’d like to hasten the approval process, mail Mr. Kornmeier, the relevant materials. His address is: *************** Lane—Coconut Creek, FL—33066
46 Tips, Tricks and SourcesFantastic Stuff for you to research Seniorresource.com—one of the best Consumer booklets—www.fdic.gov American Savings—asec.org—Great ballpark retirement estimator Financialengines.com—Analyzes your portfolio Morningstar.com—the place for you research
47 Develop an Investment Group? Take Some Courses Look to the Internet Where to From Here? Start Get More Education Develop an Investment Group? Take Some Courses Look to the Internet Research Commit it all to HIM Page 35 WB