8 || Financial Security

Jot your answers down:

1. How many years are you from retirement and what does your current retirement plan include?
2. How much of your current income is devoted to long-term investing?
3. Why is preparing for retirement important to you?

There was a time when retirement planning was not so critical. You worked for a company for 20 to 40 years and in return, you were given a gold watch and a secure pension retirement parachute. Retirement income consisted of a lucrative company pension and Social Security. Not anymore!

via GIPHY

For most people who are currently retired, Social Security and pensions are still the primary sources of retirement income. However, many seniors are now forced to rely on other sources of income to supplement their changing benefit plans. Additionally, younger workers who will not face retirement for 40 years, and those shortly facing retirement, consider the Social Security system inadequate to meet their retirement needs—a distant hope that may never be fulfilled. Times have changed.

Today, most of us have to create our own retirement solutions. To help you with this transition, we shall discuss some retirement planning and investment strategies to improve your chances for financial security during your retirement years.

Before you retire, you need to ask yourself the following questions:

How much money will I need when I retire?

What will be a comfortable monthly retirement income?

What lifestyle do I intend to have once I retire?

The answers to these questions will depend on a variety of factors. For example, do you plan on relaxing at home, working in your garden, and spending time with your grandchildren? Conversely, do you plan to travel, eat out frequently, and move to a new location where the cost of living is higher or lower? If you take the time to calculate HOW you will be spending during your retirement, you will begin to realize just how much you really will need.

via GIPHY

There is one more important question that you MUST ask yourself: Where is my retirement income going to come from? If you plan on working until you die, then there is no point in retiring. If you are counting on all of your income coming from Social Security, then you are in for a rude awakening—you could find yourself forced to live on very little. If you are wise, you will begin planning now for your retirement by creating new sources of retirement income. Below is a chart that illustrates various sources of income that you may want to consider. While examining this chart, ask yourself one more question: Do I really want to rely on Social Security to provide 40% of my retirement income (if it will even be there when I am ready to retire)?

Today, Social Security benefits account for about 40% of the average retiree’s income. In the future, that number will likely represent a smaller percentage of a retiree’s monthly income (if it still exists). About 50 years ago, there were 16 workers paying into a retirement system for every one retiree. In the next 25 years, there will only be two workers for every retiree. As the years go by, more and more baby boomers will be retiring. At one point in the near future, there will be more retirees than there are workers. Many experts believe that by the year 2041, the Social Security system (as it is now) will only be able to pay about 73% of benefits. Exactly what will happen to Social Security in the future is uncertain. However, what is certain is that you need to start planning now to finance a much greater portion of your retirement.

It is evident that many people today are not adequately preparing for retirement. The Employee Benefit Research Institute’s 2006 Retirement Confidence Survey reported that more than half of the people age 55 or older had less than $50,000 saved for retirement! With this in mind, consider the following two factors that should directly influence your plans for retirement.

Expenses

While it is true that you may not have other expenses, such as those associated with raising children and paying a mortgage, you will likely encounter other costs that you may have never anticipated (such as increased medical expenses). Most experts believe that retirees will typically need 75% to 85% of their pre-retirement annual income to cover their expenses during retirement.

Inflation

Although inflation has been low in recent years, the cumulative effect of even a low inflation rate over many years can devastate a retirement budget. Some expenses, like medical costs, have risen dramatically in recent years (versus costs for other expenses, such as clothing or food). On average, inflation has increased about 3% per year for the last several years.

To illustrate the effects of inflation, consider the chart on the next page. It indicates the annual retirement income needs for a 30-year-old person who makes $50,000 per year and plans to retire at age 65. The projections are based upon a life expectancy of 85 years, an average inflation rate of 3% per year, and he needs at least 75% of his pre-retirement annual income to cover his retirement expenses.

Annual Retirement Income Needs

If this person were to retire today, his annual retirement income would be $37,500 (75% of $50,000). However, when you factor in inflation, at retirement age his income would have to be $105,520 to maintain the same standard of living. At 85, he would need $190,581 per year! He would need approximately $1.7 million to retire at age 65 (assuming no benefits from Social Security).

Note: CNNMoney.com provides a retirement planner worksheet to help you calculate retirement savings. You can also download this spreadsheet found on this page.

Retirement Savings

There are numerous ways to save for retirement, and taxes can have an enormous effect on the growth of your investments. Therefore, one of the best ways to save, once you are out of debt, is to invest your money in a tax-deferred or tax-free retirement account. Below is a summary of the most popular types of accounts.

Note: The following is general information and should be used for educational purposes only. The information should not be viewed as legal, investment, or tax advice. Contact an investment professional before establishing any retirement plan.

Individual Retirement Accounts (IRAs)

There are two types of IRAs available today. They are traditional IRAs and Roth IRAs. Both accounts earn interest on your money; however, there are marked differences between them. The traditional IRA uses pre-tax money and taxes are assessed when your money is withdrawn (as long as you meet certain requirements).

The Roth IRA uses post-tax money and no taxes are assessed when your money is withdrawn. Additionally, traditional IRAs help you to lower your taxable income while Roth IRAs do not lower your taxable income. There are advantages and disadvantages to each (as outlined below). You should investigate these accounts with a professional advisor and decide which would be best for you.

Eligibility

• Traditional IRA
  • Must be under age 70½ with compensation
  • No Income restrictions

• Roth IRA
  • No age restrictions, subject to income restrictions
  • The single filer must have income below $95,000 for a full contribution. (Partial contributions for single filers are available for an income between $95,000 to $110,000)
  • Joint filers must have an income below $150,000 for a full contribution. (Partial contributions are available for joint filers between $150,000 to $160,000)

The following limits are the same for both traditional IRAs and Roth IRAs:

• Tax Year
  • 2006: $4,000
  • 2007: $4,000
  • 2008: $5,000

• Over Age 50
  • 2006: $5,000
  • 2007: $5,000
  • 2008: $6,000

Deductibility of Contribution

• Traditional IRA: This IRA might be deductible (depends on your income, filing status, and whether you are covered by another retirement plan).
• Roth IRA: This IRA is not tax-deductible.

Distributions Before Age 59½

• Traditional IRA: The distributions are taxable, but may be withdrawn after age 59½ without penalty; otherwise, it is taxable and subject to a 10% early withdrawal penalty.
• Roth IRA: The actual contributions may be withdrawn at any time without penalty or tax if the Roth IRA is at least five years old; however, earnings are generally taxable and subject to a 10% early withdrawal penalty.

Accounts for the Self-Employed and Small Business Owner

If you are self-employed or own a small business, you should have a retirement plan integrated into your business. You may have a successful business that makes ample profit, but if it is not managed correctly, you may find yourself with no assets to retire with. Below are several retirement plans that were specifically developed for the self-employed and for small business owners.

via GIPHY

Simplified Employee Pension IRA (SEP-IRA)

This type of plan is one of the easiest to establish and administer. It is very similar to investing into a traditional IRA, except the limits to contributing are much higher. You may establish one for yourself and for any other eligible employees in your business.

SEP-IRAs are funded solely by employer contributions (employee contributions are not allowed). Contributions are limited to 25% of employee compensation or $44,000, whichever is less. If you have employees, you must contribute the same percentage of compensation for them as you do for yourself. However, because it is the percentage of total compensation that must be the same, if you have lower-paid employees, you can maximize contributions for yourself, and contributions for the employees may be significantly less.

If you are the owner of the business, one nice factor of a SEP-IRA is that employers are NOT required to contribute to the plan every year, which allows for flexibility when cash flow is tight. When contributions are made, they must be made to all of the participants’ accounts. If your business has only a few employees, and you are looking for a plan that is easy to maintain and inexpensive to set up, then you should consider a SEP-IRA.

Savings Incentive Match Plan for Employees (SIMPLE)

Any small business (100 employees or fewer) can establish a SIMPLE plan. Contributions are limited to 100% of compensation or $10,000 (employers are required to contribute a minimum of 2% to 3% of compensation to employee accounts). This makes the plan more attractive for lower-earning self-employed persons. For example, a business owner that makes $30,000 could contribute $10,000 into a SIMPLE account. With a SEP-IRA (or a Keogh plan), that same person could only contribute $7,500 annually.

via GIPHY

Keogh

A Keogh plan is a tax-deferred retirement plan for the self-employed. (It is also called the self-employed pension plan.) There are two distinct Keogh plans: Defined Contribution and Defined Benefit.

Defined Contribution

There are two versions that an employer may choose from a profit-sharing plan or a money purchase plan. In both plans, contributions are limited to 25% of compensation (up to $44,000).

• Profit-Sharing: With this plan, contributions are dependent upon the profits of the business. With this type of plan, the law allows for skipping contributions during lean years.
• Money Purchase: This plan requires a set percentage contribution, regardless of profitability or affordability.

Defined Benefit

This plan provides a specific annual retirement benefit. An actuary is required to calculate each year’s contribution amount. The actuary takes into consideration the years remaining until you retire, assumed investment return, the targeted annual benefit in retirement, and your current Income. Annual actuarial fees can be very expensive. You must make a specific contribution every year, regardless of profitability. However, if you are over 50, and you are comfortable with making the required contribution each year, this type of plan could allow you to make much larger contributions than other programs allow.

Individual 401(k)

This plan works well for self-employed individuals or for business owners with no employees (other than a spouse). However, it may NOT be the plan for businesses that want to hire more employees in the future. It does have a potentially higher contribution limit than the SEP-IRA. The Individual 401(k) allows for a 25% of compensation contribution, PLUS another $15,500 in salary deferrals up to a maximum of $45,000. (The preceding figures are for 2007, which may be adjusted for inflation annually in $500 increments.)

Accounts for the Employed

Discussed below are accounts for persons who are employed by others. Small businesses and large corporations often offer such plans to their employees.

401(k)

Companies operating in the private sector (non-government) usually sponsor this type of retirement plan. An employee may make pre-tax contributions to his or her account, which is used for any number of investment options (usually mutual funds). In 2007, the annual maximum an employee can contribute to a 401(k) is $15,500. Employer contributions to the plan are optional; however, many employers will contribute (generally a percentage of the employees’ pay) as an incentive to retain their employees. When you retire and draw from this account, you will have to pay the previously deferred taxes on the amount you withdraw. (The annual compensation limit for 2007 was $225,000.)

Roth 401(k)

This is a relatively new retirement savings account and combines some of the best advantages of both the 401(k) and the Roth IRA. The Roth 401(k) allows employees to contribute funds on a post-tax basis. This retirement fund has the same maximum annual contribution limit as the 401(k). If the participant is over 50, he or she may contribute an additional $5,000. And as with a Roth IRA, the earnings on contributions will be tax-free (as long as the distribution is made at least 5 years after the first contribution and the contributor has reached the age of age 59½).

Employer contributions will accumulate in a separate account and will be taxed as ordinary income when withdrawn. If you take an early withdrawal (before age 59½), you will be penalized 10%. Since this particular savings account is relatively new, not many companies offer it. The Roth 401(k) is usually best for younger workers who are often in a lower tax bracket.

403(b)

403(b) plans are very similar to 401(k) plans, the main difference being that the 403(b) plan generally covers employees of non-profit organizations, churches, educational institutions, and public hospitals. 403(b) accounts also differ from 401(k) accounts in that they do not allow for any type of individual stock investments, although they do allow for annuities. Some 403(b) accounts are called a Tax Sheltered Annuity (TSA) or a Tax-Deferred Annuity (TDA). When 403(b) accounts were created during the 1950s, annuities were the sole investment. In the 1970s, the rules were extended to allow for investments in mutual funds. Nonetheless, annuities are still used today.

457

This plan is similar to the 401(k) plan. It is typically only available to government workers and some non-government employers. The main difference between the plans is that there is no 10% penalty for early withdrawal (before the age of 59½), although funds are subject to taxation.

Pensions

Pensions usually take the form of a guaranteed annuity for a retired person from a particular company or entity, which enables the retired person to receive a steady income throughout retirement (guaranteed for life). Some plans have a cashout option that grants the retiree the ability to withdraw all or part of the proceeds and invest as he or she sees fit.

By now, you should be well aware of the fact that you are responsible for your own retirement. Gone are the days of relying on Social Security and company pensions. You must act NOW to plan for your retirement. You must make changes in your life so that you will have ample savings that will sustain you for the rest of your life. Reduce your monthly expenses and work to pay off your debts. Pay off your debts now in order to maximize your contributions to tax-deferred and tax-free retirement savings plans (on an annual basis). In other words, begin planning for your retirement as soon as possible!

People that have financial sense know that the stock market is unpredictable. They also know that there is no true means of determining what future rates of return will be on any given investment. So why are billions of dollars changing hands every day on Wall Street? The answer can be found in two simple words: inflation and taxes.

via GIPHY

Most banks offer an extremely small rate of return on savings accounts. If your savings do not grow faster than inflation and the cost of living, your purchasing power (and eventual ability to make ends meet) will decline. If you do not effectively make your money work for you, you will end up working for your money for the rest of your life. Not only that but you are taxed on any interest you do earn, which further reduces the true amount of anything you gain. To illustrate the difference between a savings account and the stock market, consider the following scenario:

Say your father took $90 and stashed it away in a lockbox 60 years ago. If that $90 had been invested in a savings account (that kept even with inflation), it would have grown to a little more than a few thousand dollars today. However, if that $90 had been invested in the stock market, it would likely have grown to more than $116,000 today. Investing wisely can mean the difference between a comfortable retirement or working for the rest of your life.

When you plan for your retirement, you are investing in your future. You are creating a cash flow strategy that will create a monthly income that you can live on for the rest of your life. Saving money is simply creating a cash reserve, and it is extremely important in building a financial foundation. However, saving money is really putting money away for safekeeping. On the other hand, investing is USING your money to produce more money. Investing is a tricky business, but it need not be as risky as one might think. In order for you to understand investing better, you need to know some basic concepts about investing. They are listed below, and we will discuss them further on the pages that follow.

• The Rule of 72
• The Power of Time
• Stocks, Bonds, and Mutual Funds
• Modern Portfolio Theory
• Dollar-Cost Averaging
• Load Funds and No-Load Funds
• Index Funds

The Rule of 72 is used to determine how long it will take you to double your investment. In other words, if you invest $500, how long will it take to double it to $1,000? The rule is very simple: it is based on the number “72” and the interest rate your money earns.

via GIPHY

To estimate the number of periods (in years) required to double an original investment, divide the rule-quantity (72) by the expected growth rate (interest rate). For example, if you were to invest $100 at 9% per annum, the Rule of 72 states that it will take eight years to double your money (72/9 = 8). The following table illustrates the Rule of 72 (assuming the money is compounded annually):

To further illustrate the Rule of 72, if you invest $10,000 in a certificate of deposit that earns 4% interest, it will take 18 years before it doubles to $20,000 (72/4 = 18). Compare this to an investor who invests the same amount in equity that earns 10%. It will take just over seven years for it to double to $20,000 (72/10 = 7.2). Therefore, the higher the interest rate, the less time it will take to double one’s investment.

The power of time is a concept that advocates investing today rather than waiting until sometime in the future. We often hear that we should start investing early because time is on our side. Consider the following as an example of how the power of time works.

Say you have the opportunity to participate in a game show called Let’s Make a Financial Deal. During the game, you have to choose between two deals. In the first deal, you are offered one million dollars. It sounds like a great deal. In the second deal, you are offered one penny the first day, and the value of your deal is doubled each day for the next 30 days. That is, on day one you receive one penny; on day two you receive two pennies; on day three you receive four pennies; and so on and so forth. Which deal would you choose?

One deal grants you one million dollars and the other deal is yet to be determined. So let’s figure it out (we shall skip a few days and round to the nearest whole dollar). On day one, you receive one penny; on day ten, you receive $5.00; on day fifteen, you receive $164; on day twenty, you receive $5,243; on day twenty-five, you receive $167,772; and on day thirty, you receive $5,268,709! Therefore, when you total each day’s winnings, you will have received $10,737,418!

via GIPHY

Need we say more about the power of time? Yes! There is one more concept that needs to be addressed. In the above example, when did the most growth take place? IT WAS DURING THE LAST THREE DAYS! On those last days, you received over one million dollars, over two million dollars, and over five million dollars, respectively. If you had waited three days before you started the deal, and only had twenty-seven days of growth, you would have lost $9,395,241 ($10,737,418 – $1,342,177). Have we made the case for the power of time and investing early?

DCA is a technique designed to reduce market risk through the systematic purchase of securities at predetermined intervals and with set amounts of money. Instead of purchasing a set amount of securities with a lump-sum dollar amount, the investor purchases groups of securities over a period of time with the same amount of money with each purchase. This spreads the cost over several years and helps to insulate one’s investments against changes in market price. (It is also a way to force savings.)

For example, say you invested $1,200 in a Vanguard fund on January 1, 2007. You had two options: you could have invested the money as a lump sum, walked away, and forgot about it; or you could have set up a dollar-cost averaging fund and eased your way into the fund. After some research, you opted for the latter and began investing $100 each month for one year. The tables below illustrate the difference between lump-sum investing and using the dollar cost averaging technique.

If you had invested $1,200 in January of 2007, you would have purchased 120 shares at $10 each. When the fund closed in December of 2007, at $10 each, your holdings would still be $1,200! However, since your dollar cost averaged into the fund over the past year, you now own 122 shares with a market value of $1,220 (122 shares x $10 per share). Although this amount seems rather small, the power of this type of investing in the increase of your portfolio without any additional investment of your money.

What you will find is that even if the costs of funds were to go up over the year, eventually the average cost per share of the security will become smaller. Dollar-cost averaging lessens the risk of investing a large amount into a single investment at the wrong time.

All mutual funds carry fees that pay for the privilege of investing in the funds. These fees usually cover the expenses for an actively traded mutual fund. No one likes to pay fees when they invest, but it is necessary to keep the mutual funds in operation. Additionally, there are load funds that carry more charges than other funds (no-load funds). There is a big difference between load funds and no-load funds. (Sometimes the difference between them is whether the investors or the salespersons make the money.) The following defines load and no-load funds more simply:

• Load funds are mutual funds with sales charges, 12b-1 fees, and expense ratios (charges to receive advice on HOW to invest). In other words, these are mutual funds with tacked-on commissions and charges, which can amount to an additional upfront cost of 4% to 8½% of the amount you invest!
• No-load funds are mutual funds that are sold without a sales charge and with lower 12b-1 fees (around 0.25% or less). These funds are sold directly to investors, rather than through an intermediary. No advice is provided for these funds.

Note: Brokers sing the praises of loaded funds because they are often the ones taking your additional money. History shows that loaded funds do not outperform no-load funds, regardless of what paid financial planners say (to the contrary).

Index Funds

Index funds are mutual funds that attempt to copy the performance of a market index (a listing of stocks and statistics reflecting the composite value of its components). For example, a fund manager may try to track the S&P 500 (Standard and Poor’s 500) by purchasing all 500 stocks (as is the case with the Vanguard 500 Index). Other indices that mutual fund managers try to mimic are the Wilshire 5000 (an index of the whole stock market) and the NASDAQ 100 (a composite of the largest companies listed on the NASDAQ stock market). (NASDAQ is an acronym for National Association of Securities Dealers Automated Quotations system.)

In comparison to actively managed mutual funds, a much smaller staff manages index funds. Computers do most of the work, so there is no need to hire expensive staff or research analysts, making index funds much less expensive to operate.

Index funds can have expense ratios as low as 0.18%, while actively managed funds can have higher expense ratios. For example, if two mutual funds produce a 7% return before expenses, you could receive a return of 6.8% with the index fund versus 5.64% with the no-load (actively managed) mutual fund.

Additionally, another challenge with mutual funds is the potential that a fund manager could often turn over the account (meaning, they frequently buy and sell the securities, which often results in capital gains each year). Funds that trade more often do not have the tax advantage that index funds have. Index funds delay capital gains taxes because the fund holds onto the stock much longer, causing the money that would have been paid out in taxes to keep producing investment returns.

To be fair, one disadvantage of index funds is their inability to achieve higher market returns. There is no chance of out-performing the market because index funds trade at the market and should remain constant with the index that they are modeled after. Index funds can also play an important part in diversification (if selecting asset classes that conveniently reflect whole markets) and can make up an important part of a balanced portfolio.

For years, the general population has tried every conceivable technique to improve their portfolio’s performance by guessing which investments will do well. Some of the most commonly used techniques include the following:

• Asking for advice from neighbors, family members, or a peers
• Watching financial television programs or reading financial magazines, brochures, or other literature
• Gleaning messages from economists, CPAs, attorneys, financial advisors, or other financial professionals
• Personal preferences derived from experiences, hobbies, and familiarity

Each of these approaches may seem reasonable in their own right; however, they ignore one key factor that is common to all portfolio performance: the future is unpredictable.

via GIPHY

Those who say they know what the market is going to do in the future are fooling themselves and others. The act of estimating performance is called speculation. No one can truly predict how future markets will perform. As a result, investors often try to time the market by selecting high-performing funds, or they make an educated guess in order to maximize their portfolio’s performance. Modern portfolio theory is similar to riding the kiddy coaster at the amusement park. Whereas, speculation can be compared to riding a colossal coaster that rises and falls without warning.

In the 1950s, Harry Markowitz conducted a study to determine how investors could improve a portfolio’s performance. This study earned Mr. Markowitz a Nobel Prize in Economics. What he found are three main factors that contribute to the success of a portfolio’s performance:

• Asset Class
• Portfolio Management
• Timing

What Markowitz found was that over 91% of the performance of one’s portfolio is based upon how one allocates asset classes. The remaining 9% is the result of the other two factors (management and timing). Unfortunately, most investors use the last two factors to make investment decisions. This is why so many investors are frustrated.

Asset Class

First, we need to understand the definition of an asset class. For our purposes, an asset is an individually-owned physical property, a commonly-valued capital, or an investment. For example, the value of your house varies from that of another person’s house, but houses in the same geographical area generally increase and decrease in value at the same rate (based upon market conditions). This makes real estate in that area an asset class. Other asset classes include companies organized by size. Large companies (with large-cap equities) are companies that you could probably identify by name, such as Microsoft, Disney, IBM, General Electric, etc. Small companies (with small-cap equities) include assets held by such securities as bonds, cash, money-market accounts, stocks, natural resources, precious metals, etc. Markowitz identified over 21 different types of asset classes.

He also found that there is a relationship between specific asset classes. By selecting, allocating, and combining specific percentages of asset classes into a portfolio, you are able to REDUCE the risk associated with the overall portfolio and IMPROVE the return you would normally experience with a traditional stock-picking strategy. In other words, you are able to minimize the highs and lows of each asset class and earn a higher return because you are eliminating emotion from the equation. It also improves your portfolio’s performance because you are less likely to sell or buy your investments at the wrong time.

via GIPHY

Markowitz also developed models that correlate to a person’s risk tolerance and assets. INVESTOPEDIA (an online investment encyclopedia) defines risk tolerance as “the degree of uncertainty that an investor can handle in regards to a negative change in the value of their portfolio.” In other words, how skittish are you when the stock market rises and falls with your invested assets and how much risk are you willing to take? Risk tolerance allows an investor to establish a correct asset allocation for their portfolio. Once you determine your level of risk tolerance, you can better choose your asset class allocation and feel more comfortable with it. For example, many young investors will allocate 50% of their portfolios to a high-risk investment with large growth potential. The other 50% may be spread among more solvent entities (such as large company equities, proven mutual funds, and moderate stock and bond investments).

Portfolio Management and Timing

The next step to improve portfolio performance is proper portfolio management and timing (looking for the best-performing funds using different asset classes and monitoring the funds regularly). You should look for mutual funds, stocks, bonds, real estate, or other investment options that are asset class-specific. For example, say that after evaluating several mutual funds, you find desirable large-cap, bond, international equity, and small-cap funds that fit your level of risk tolerance. The next step is to monitor the performance of the funds regularly. Some may perform better than others within a specific period. Not all investments will experience a growth at the same rate. It is important to look at long-term growth potential by evaluating past performance (though performance history is only an indicator, not a guarantee of a fund’s future growth).

Diversifying your investment is probably the single best way to reduce the risks of investing. It is simply a way to distribute your money among several investments; hence, reducing your chances of losing all of your money at once. When it comes to investing, there is great wisdom in the old maxim, “Don’t put all your eggs in one basket.” Diversification is the main reason why mutual funds are so popular!

“Plans fail for lack of counsel, but with many advisers they succeed.”
– Proverbs 15:22

A successful retirement takes planning. The earlier you begin, the better off you should be; and the younger you are, the more aggressive you can be with your investments. To ensure that funds remain available as long as they are needed, learning and implementing proper money management is key BEFORE reaching retirement age. Adding a diversified stock portfolio may be one of the crucial elements to a well-planned retirement.

With the education you gain from this course you should be able to better plan for a successful retirement. Remember, investing in something just because a friend or neighbor gives you a hot tip may not be the best approach. No one should care more about your money more than you do! Make sure you are in the driver’s seat when it comes to making financial decisions. Begin your planning with the end result in mind. And when all is said and done, it is never too late to begin investing in the future. Any planning is better than no planning, and the more you do, the better.

1. What two factors discussed in this course affect the amount of money you will need to retire?
2. What retirement savings accounts are available for the owners of small businesses?
3. What is the Rule of 72?
4. What is the Power of Time?