For over 70 years, the American Ins6tute for Economic Research has done a highly credible job tracking U.S. Business cycles.

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2 AIER Who are we American Ins3tute for Economic Research (AIER) conducts independent, scien3fic, economic research to educate individuals, thereby advancing their personal interests and those of the Na3on. For over 70 years, the American Ins6tute for Economic Research has done a highly credible job tracking U.S. Business cycles. Archie Richards, "Money Ma3ers columnist The primary mission of the American Ins3tute for Economic Research is to provide non- commercial, independent, objec3ve informa3on needed by consumers to make informed investment decisions.

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4 The sad truth Most Americans have to invest, but are unprepared to do so. While some Americans have defined- benefit contribu3on plans, most do not 78% A March 2009 survey by the Center for Re3rement Studies at Boston College shows the danger: Most Americans 79% are not eligible for a pension and must fend for themselves to finance their golden years. Most Americans will not have enough saved to maintain their standard of living in re3rement. 20% of eligible workers do not par3cipate in the company offered 401(k). 30% cash out of their 401(k) when they change jobs.

5 Why People Save Why people save and invest Preparing for a career, oxen by going to college Saving for a major purchase or expense Building up a rainy day fund Developing a personal financial/investment plan Star3ng a saving and inves3ng program Re3rement

6 1. Pay yourself first Key Concepts 2. Set goals that inspire success (short, medium and long term) 3. Don t take unnecessary risks 4. Put 3me to work for you 5. Diversify!

7 Taking 3me to manage your finances Between classes, studying, social commitments, athle3cs and more, learning how to manage money oxen isn t something college students consider to be a top priority. Unfortunately, more and more college graduates and young adults are entering the real world without sufficient prepara3on to successfully manage their own finances.

8 Change your life Saving money is a habit One calcula3on can make a big difference Treat every dollar you make as an investment Risk versus reward The wrappers K, IRA, Roth IRA Understanding the differences Inves3ng is not gambling Cost of Wai3ng Q&A

9 The Wrapper 401 K/ Roth/IRA? 401K What is it? - A qualified plan established by employers to which eligible employees may make salary deferral (salary reduc3on) contribu3ons on a post- tax and/or pretax basis. Employers offering a 401(k) plan may make matching or non- elec3ve contribu3ons to the plan on behalf of eligible employees and may also add a profit- sharing feature to the plan. Earnings accrue on a tax- deferred basis. Also 403 Plans. Limit $16,500 Tradi3onal IRA - An individual re3rement account (IRA) that allows individuals to direct pretax income, up to specific annual limits, toward investments that can grow tax- deferred (no capital gains or dividend income is taxed). Individual taxpayers are allowed to contribute 100% of compensa3on up to a specified maximum dollar amount to their Tradi3onal IRA. Contribu3ons to the Tradi3onal IRA may be tax- deduc3ble depending on the taxpayer's income, tax- filing status and other factors. Other variants of the IRA include the Roth IRA, SIMPLE IRA and SEP IRA. Limit $5,000. Roth IRA - An individual re3rement plan that bears many similari3es to the tradi3onal IRA, but contribu3ons are not tax deduc3ble and qualified distribu3ons are tax free. Similar to other re3rement plan accounts, non- qualified distribu3ons from a Roth IRA may be subject to a penalty upon withdrawal.

10 The Power of Compound Interest Interest paid on the principal and on the interest accumulated to date. Used in savings accounts, credit cards Compounded for daily, quarterly (4 3mes a year), semi- annually (twice a year), or annually Rule of 72 The rule says that to find the number of years required to double your money at a given interest rate, you just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at eight percent interest, divide 8 into 72 and get 9 years.

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12 Treasuries, Corporate Bonds, Stocks Loan Savings & Checking Cer3ficates of Deposit Treasury Bonds Corporate Bonds Own Large Cap Stock Mid Cap Stock Small Cap Stock Emerging Markets

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15 Geometric Mean Returns (1926 through 2008)

16 Can you place the following Can you place the following? Futures Real Estate High Quality Stocks Aggressive Growth Bonds High Quality Corporate Bonds Government Bonds

17 Pop Quiz the Answers Can you place the following? Futures Real Estate High Quality Stocks Aggressive Growth Bonds High Quality Corporate Bonds Government Bonds

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19 Saving Money (It is a habit) Saving Money is a habit It does not relate to how much your make Savings Account have 2-3 months emergency money If you have a 401 K Plan Contribute the max if not IRA or Roth IRA Index Funds Low Cost Inves3ng Save 10-15% of your Salary $500 a month at 6% over 40 years = $ 1,066,468

20 Reality Check

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22 Most people don t plan to fail they fail to plan Pensions are not an op3on A 65 year old would need 1.1 million to draw $50,000 Assuming 3% infla3on and 5% return 56% of current workers have less than $25,000 36% of workers say they will not be able to re3re Social Security will pay less than 36% of your expenses in re3rement Young people start now because roadblocks will come along Insurance can be a part of a diversified portolio

23 Cost of wai3ng 5 years 1,200,000 5% - $634,000 1,000, , ,000 6% - $820,238 7% - $1,038, , ,000 0 Age 25 Age 30 Age 35 Age 40 Cost of Wai3ng (Green Column) 5 Years = $ 298,433 $234,202 $166,983 Based on 7%, 6%, 5% hypothe3cal return. Rates are for investment purposes only. This chart does not represent any current available investment. Assumes investment of $5,000 per year to age 65. Expenses, fees, taxes would have a nega3ve impact of these results.

24 Contact Informa3on: AIER X 3153 Aier.org