Retirement AccountsHow long will you live?

How to Become a Millionaire

Save $20,000 for 47 years with 8% interestWorth $744,640

10% interest, Worth $1,763,949

Every Million saved = $40,000 in retirementWith 4% annual interest rate (Do NOT touch

the principle)Calculate what you want to make in

retirementConsider Social Security payoutsConsider retirement account payouts

To Retire

Employee benefits package include non-wage itemsFree carFree phoneInsuranceRetirement savings: What company did we find

that offered really good retirement benefits?Personal accounts can be started on your own

IRARoth IRAMichigan Educational Savings Program

(MESP)529 accounts

Job and benefits

Retirement account = tax savingsAll names based on tax code

IRS (Internal Revenue Service) codesJust a name of account - have all types of

investments in the accountDressed up in a coat

Pre-Tax: invest before taxes, pay taxes laterAfter-Tax: invest after taxes, never pay taxes

againBoth grow tax FREE

NOTE: IRA is max of $5,500 per year

What you think and want to know

Roth = After-TaxPay taxes now & never againMoney grows tax free

Tax Deferred AccountsMake more in retirement, pay taxes

now!Pay taxes now = pay less in taxes

If take $ early = penalty

Roth

SEPSelf-employed person may deduct up to

15%How a pension work now days

Tax, employer and (minimum) employee funded

Get to retire without saving much / anyPoliticians, Police, Fire – Public Servants (new

teachers do NOT have a pension)

Employer Retirement Plans

Companies really do not have pensionsMost are now self-funded and matching plans401(k) = company 403(b) = non-profit

organization2010 median match = 3% of payMeaning, earn $40,000 you put at least 3%

or $1,200 in 401(k) and employer will put in 3% or

$1,200 free money into your accountLaw forces you to enroll or opt outCan usually put up to 15% into 401(k) up to

$18,000

401(k), 403(b)

Deferred compensationFor government employees (i.e., politicians) Do not use a Guaranteed Investment Contract

Difference between 457 & 401/403No 10% penalty for withdrawal before the

age of 59½Independent contractors can participate

457

You should be funding your plan whether your company matches or not.

You should always rollover retirement plans to an IRA when you leave the companyOr, if allowed roll to your new 401(k)Or, you will be charged more feesUse a direct transfer or may get charged taxes

and penalties

More on Retirement

Never borrow on your retirement plan (page 178) Will become a habit

1. Fund 401(k) or other plan up to the Match

2. Above the match, fund Roth IRAs3. Complete 15% of income by going back

to your 401(k) or other plans

Save for Wealth Building and to Retire!

Worksheet – What is Social Security?What is FICA?Who gets it

Note: NOT unemployed, NOT a form of welfare or entitlement

Where does the money come from?At what point do you stop paying into it?What are the problems and solutions?How do they figure out how much you will get?

Social Security

Estimate Life ExpectancyHow long you want to workHow much you make (figure out average)

Chart is for my retirement based on current earnings

Social Security Estimation

If you start your benefits:

And you earn an average of:

Your benefit will be about:

At full retirement (age 67)

$52,000 a year (from now until full retirement)

$1,859 a month

At age 70 $52,000 a year (from now until age 70)

$2,306 a month

At age 62 $52,000 a year (from now until age 62)

$1,302 a month