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Long Term Savings

savings, budgeting, longterm savings, retirement, college education

finlitgal
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Long Term Savings

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  1. Long TermSavings www.lifethenfinance.com

  2. The longer you have for saving up, the less money you need to allocate each month toward your goal. www.lifethenfinance.com

  3. The Power of Compound Interest • if you begin saving $100 a month at age 21 and earned 8 percent interest, by 65 your account would be worth about $447,000. www.lifethenfinance.com

  4. The Power of Compound Interest: Cont....  • Increasing the monthly contribution to $200 would double that to about $893,000 www.lifethenfinance.com

  5. Because of the power of compound interest, it’s to your advantage to start your long term savings as early as possible! www.lifethenfinance.com

  6. Saving for College – Strategies • Start early – Begin an account for your child in their first year. • Assemble a team – Try to get relatives involved. They can give college money as gifts for Christmas or birthdays. Tip: Let your child pitch in as well. www.lifethenfinance.com

  7. Saving for College - Strategies • Seek security plus a higher interest rate. • Online banks tend to have higher interest rates. • Look into using mutual funds and other investments. Warning: As the interest rate rises, so does the risk! www.lifethenfinance.com

  8. Scholarships • Offered on an academic or athletic basis • Some cover the entire tuition but most only cover a portion of the bill. • You don’t have to pay them back! Tip: Take advantage of your college’s financial aid office! www.lifethenfinance.com

  9. Saving for Retirement Consider investment options that provide a better rate of return on your funds than your checking or savings account at your bank. www.lifethenfinance.com

  10. IRA’s • Retirement accounts you can open at your bank • They allow you to create a portfolio of stocks, bonds, and mutual funds • Two types: Traditional and Roth IRA’s www.lifethenfinance.com

  11. Traditional IRA’s • You can fund your IRA with cash or cash equivalents. • You pay no income tax on the money you deposit into your IRA. Warning: Taking money out of an IRA before you hit age 70 will incur penalties. www.lifethenfinance.com

  12. Roth IRA’s • Not tax deductible • Fewer penalties for taking money out • Deposit limit: $5,000 per year($6,000 if you’re over age 50) www.lifethenfinance.com

  13. Roth IRA’s • If you have a Roth and Traditional IRA, the deposit limit applies to both accounts combined. • The limit is still $5000 or $6,000. It doesn’t double just because you have two accounts. www.lifethenfinance.com

  14. 401(K) • Processed through your employer • Annual deposit limit: $16,500 • Any contributions will not be taxed until you withdraw the money www.lifethenfinance.com

  15. 401(K) • Earnings made from the 401(k) are tax deferred until the money is withdrawn. • Withdrawing money before you reach the minimum age (60) will result in penalties. • Some employers match a percentage of your contribution www.lifethenfinance.com

  16. Retirement Funding in Canada • Tax Free Savings Account • You can withdraw money at any time without tax penalties. Tip: While the deposits aren’t tax deductible, money made from that account isn’t taxed. www.lifethenfinance.com

  17. Retirement Funding in Canada • Registered Retirement Savings Plan • Much closer to USA’s Traditional IRA • The deposit limit is much higher than IRA’s in the USA www.lifethenfinance.com

  18. Retirement Funding in Canada Your Registered Retirement Savings Plan doubles as a 401(k), as employers can put money from your paycheck straight into the account. www.lifethenfinance.com

  19. IRA’s in the United Kingdom • Individual Savings Account (ISA) • Divided into two components – Cash and Stock shares. • It's possible to transfer funds from the cash to the stocks component, but not the other way around. www.lifethenfinance.com

  20. Other Countries • The term 401(K) does not mean much in other countries, since it refers to a US law. • However, other countries have similarly functioning accounts. • The term has become common enough that these accounts are sometimes referred to as 401(k)’s. www.lifethenfinance.com

  21. Self-Reflection Questions: • What financial goal is needed to retire comfortably? • Does my employer match 401(k) contributions? • What type of retirement savings account best suits my needs? www.lifethenfinance.com

  22. Action Tips: • Start saving now to allow earnings to compound and accumulate to a greater extent. • If your employer matches 401(k) contributions, add the maximum percentage that your employer will match to ensure you get as much of a return as possible. • If you put money into an IRA or 401(k), leave it there; taking it out results in penalties and fees. www.lifethenfinance.com

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