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Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
Achieving Financial Security In New Normal
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Achieving Financial Security In New Normal

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Retirement Planning at U.S. Department of Veterans Affairs, July 2011, Albuquerque

Retirement Planning at U.S. Department of Veterans Affairs, July 2011, Albuquerque

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  • Psychology
  • The marshmallow experiment is a famous test of this concept conducted by Walter Mischel at Stanford University and discussed by Daniel Goleman in his popular work. In the 1960s, a group of four-year olds were given a marshmallow and promised another, only if they could wait 20 minutes before eating the first one. Some children could wait and others could not. The researchers then followed the progress of each child into adolescence, and demonstrated that those with the ability to wait were better adjusted and more dependable (determined via surveys of their parents and teachers), and scored an average of 210 points higher on the Scholastic Aptitude Test.
  • I really need that 48” LCD Plasma! That would really make me happy! (My personal example of almost talking myself into thinking I needed a 48” LCD Plasma to watch the Super Bowl on!) As part of determining if your goals are SMART, you need you determine if they are needs or wants? Page 12 – 15 of the Instructor’s manual has activities and ideas to help students with this step. For example on Instructors Guide pg. 12 there is a great Try It! Activity: Exercise 1A: Needs and Wants: Can I tell the difference? Students can complete this by themselves or as a group. Students are instructed to write down five things you spend money on. Then think about each item and decide if it is a need or a want by checking the appropriate box. The students can then have a discussion about if they agree with others wants and needs. The needs and wants can also be taught by using the polarity activity on instructors guide pg. 13. Read one of the students list or use the one provided and have the students who think it is a need walk to one side of the room labeled need and the students who think it is a want go to the opposite side labeled want. This will also spark a good discussion. Ask your students…Do You need it or Do You want it? Needs have to come first!
  • The first step to be covered with the students is Setting SMART Goals. Explain to the students that these steps are all needed in the process of financial planning in order to create a successful and useful personal financial plan. Each step builds up to the next one. This slide (1-B) will actually help your students visualize the financial planning process. Explain that it is important to begin visualizing your financial plan with the end in mind-it helps you maximize your ability to reach your goal. Ex. Runners visualize themselves crossing the finish line at a certain time. Visualizing a mental picture of your desired outcome can actually help you attain it. Instructor Guide pg. 11 has a Discussion box: Ask the following Questions: What happens if you don’t meet a goal or accomplish it on time? What would you say to someone who says goal setting is a waste of time? Discuss the following quote: “If one does not know to which port one is sailing, no wind is favorable.” (Seneca).
  • Group activity Exercise 1C, Are the Goals SMART?, on page 14 helps you guide students to rewrite statements and add missing SMART elements that are needed in a team-work setting. Next, Assignment 1.1: My SMART Goals pg. 15 allows students to apply this information and develop their own SMART goals. Assignment 1-2, 30 Day Countdown to Goal keeps the student thinking about his or her goal for 30 days. The instructions for this assignment can be found on page 15 of your instructor’s manual. In this assignment students establish their own short-term goal. The students are too keep a copy for themselves and give one to the you. You are then able to make a note on your calendar to check the status of the students’ goals in 30 days. Also on pg. 15 is the going further activities using the supplemental materials from the back of your instructors guide. (Have the participants flip back to the Green Supplemental Materials tab and briefly look at the following 3 activities. Point out that all 7 units have supplemental materials they can use.) SM1-1: Develop SMART goals for a school organization or event. SM1-2: Assess sample SMART goals and give advice to clarify the goals. SM1-3: Complete the Values Survey Activity to examine personal values. ANOTHER IDEA….“Visual goals” NEED POST-ITS AND INSTRUCTIONS
  • http://blogs.forbes.com/financialfinesse/2011/07/13/5-financial-moves-to-make-by-30/#post_comments
  • http://www.ssa.gov/oact/trsum/index.html
  • Read more: http://www.time.com/time/specials/packages/article/0,28804,1968812_1968807_1968798,00.html #ixzz1T9wiRe9L
  • To get started with a broker, you’ll have to open an account with a brokerage firm, which means signing an agreement with detailed terms governing how your transactions will be handled, among other things. Read this agreement carefully, line by line. If there’s something you don’t understand, call up and ask. Don’t sign until you understand why every clause is there. You’ll learn a lot about investing by understanding the agreement; some terms are written for your benefit, some are written to benefit the broker. When it comes time to actually place the trade, however, you don’t necessarily have to deal with a human being. Many discount brokerages will let you trade online by yourself, where your orders are routed along with those placed by human brokers. As a beginner, you’ll want to start slowly. Stocks don’t guarantee an income for retirement — in fact, they are a fairly risky way to get started. So you may want to start with a mutual fund or a stock index fund (which tracks the overall performance of an index like the S&P 500.) You can always ask the broker for ideas about which stocks to buy, but remember that the broker makes money whether the stock goes up or down. Many of the so-called “experts” who recommend stocks on TV or in the newspaper may already own the stock they're so enthusiastic about; if they can convince more people to buy that stock, it could help the price go up — and help themselves make money. The hardest part about any kind of financial advice is knowing whether the advice is being given for the benefit of the advisor or the client. If you decide to pick your own stocks or mutual funds, research every one thoroughly – just as you would if you were buying a car or a flat screen TV. Advice from your sister-in-law is fine. But understand what you’re buying and why you’re buying it. And start thinking about when you’re going to sell as soon as you buy. Fees : transfer fee of $39 + $10 shipping and handling
  • Time is money. 3 factors that determine how much money will be available to meet your financial goals The more time you have to save, the more money you will have at the end of the period. The higher the rate on interest you can earn, the more money you will have at the end of the time period.
  • Touched on time and then expanded and on this key point. The more time you have to reach your savings goal, the more money you will have at the end of that time. This example is very graphic and illustrates the impact of time. Assume you start investing $2000 every year when you are 18. You put it into an account that grows by 7% each year, and continue to invest the same amount for 10 years. Then you stop and just let the money sit for the next 38 years, where it continues to grow at 7% a year, until you’re 65. Now your sister decides to invest at age 31 and puts $2000 a year into an account that also earns 7% a year— and does it for the next 35 years, until she turns 65. Who will have the most money? Even though you sister invested more than twice as much as you did, you end up with $84,944 more. Why? You took advantage of time , by started to save earlier.
  • At 90, after 30 years of retirement, Thiermann is back at work for $10 an hour, handing out the weekly specials Their $700,000 in retirement money seemed like enough to keep them going with some left over for charity.
  • Transcript

    • 1. Achieving Financial Security in the Times of New Normal Fahzy Abdul-Rahman, Ph.D., M.P.H., M.S. New Mexico State University Extension [email_address]
    • 2. Presentation Topics <ul><li>“ New Normal” </li></ul><ul><li>Personal Finance </li></ul><ul><ul><li>Importance </li></ul></ul><ul><ul><li>Basics </li></ul></ul><ul><li>Areas of Focus: Retirement, Investment, and Savings </li></ul>
    • 3. What is the “New Normal”? <ul><li>A constellation of economic events coming together </li></ul><ul><li>Different trends than those experienced previously </li></ul><ul><li>Puts a “framework” on recent events </li></ul><ul><li>People like to identify patterns to make sense of them </li></ul><ul><li>Instructive but always subject to change </li></ul><ul><li>Dangerous to assume “New Normal” will last indefinitely </li></ul><ul><li>Some trends will have long-lasting impact (e.g., lower benefits) </li></ul>
    • 4. New Economic Reality?
    • 5. Characteristics of the “New Normal” <ul><li>An extended period of:- </li></ul><ul><li>Slow U.S. economic growth: GDP growth &lt; 2% </li></ul><ul><li>Low single-digit average annual stock returns </li></ul><ul><li>Stubbornly high unemployment levels: 9.1% </li></ul><ul><ul><li>Precarious job security (public and private sector) </li></ul></ul><ul><ul><li>Youth, &lt;25: 24% </li></ul></ul><ul><ul><ul><li>College debt --- Next financial crisis wave </li></ul></ul></ul><ul><li>Tightened credit standards </li></ul><ul><li>Declining asset values (e.g., housing) </li></ul><ul><li>Increased precautionary household savings and debt repayment </li></ul><ul><li>Decreased household spending </li></ul>
    • 6. Unemployment rate = 16.6%? <ul><li>Including </li></ul><ul><ul><li>underemployed </li></ul></ul><ul><ul><li>discouraged </li></ul></ul><ul><li>Unemployment rate </li></ul><ul><ul><li>16.6% (U6) </li></ul></ul>
    • 7. Five Stages: How People Receive “Bad News” (Elizabeth Kubler-Ross Model)
    • 8. The “Retirement Planning Grief Cycle” <ul><li>Denial: “Not to Worry. This is just a blip and things will get back to normal soon” OR “I’ll be OK. I’ve had this job for 20 years” </li></ul><ul><li>Anger: “This isn’t fair. They’re taking away [X]” OR “I’m really mad. They’re cutting my retirement benefits” </li></ul><ul><li>Depression: “It’s hopeless. I’ll never be able to retire” OR “I’ll probably end up a bag lady when I’m older” </li></ul><ul><li>Bargaining: “If I adjust my spending or work a little longer, I could probably still retire comfortably” OR “I’ll do some work on the side to make up for what I lost from the pay freeze” </li></ul><ul><li>Acceptance: “I’m OK. I have a new financial plan for my retirement” OR “I’ve figured out a few good ways to live on less” </li></ul>
    • 9. Basics Personal Finance Foundation
    • 10. Marshmallow <ul><li>1. Delayed Gratification </li></ul>
    • 11. 2. Wants and Needs <ul><li>NEEDS </li></ul><ul><li>Food for breakfast </li></ul><ul><li>Clothes for school </li></ul><ul><li>Transportation to school or work </li></ul><ul><li>WANTS </li></ul><ul><li>An iPad2 </li></ul><ul><li>Blue-Ray DVD Players </li></ul><ul><li>Brand New Car </li></ul>Don&apos;t Buy Stuff You Can’t …
    • 12. The Five-Step Financial Planning Process 3. Planning
    • 13. SMART Goals? SMART Goals S pecific…….. M easurable… T ime-Limited.. R ealistic……. A ttainable….. “ Pay for lodging, transportation, meals for a 5-day trip to Washington, D.C.” “ $300 through fundraising, $50 from birthday money, save $25 a week.” “ If I stick to my plan, I’ll have the money when I need it.” “ I still have enough money to live on while I work toward this goal.” “ I need to have all the money by 6 months from now.”
    • 14. Activity <ul><li>What are your SMART financial goals? </li></ul><ul><li>Short- &amp; long-terms </li></ul><ul><li>Remember to be specific </li></ul><ul><li>It can also involve less important things (wants) </li></ul>
    • 15. The Five-Step Financial Planning Process
    • 16. Financial Moves to Make at Age: 30 40 50 <ul><li>Develop good spending habits </li></ul><ul><li>Free yourself of credit card debt </li></ul><ul><li>Build an emergency fund </li></ul><ul><li>Start saving for retirement </li></ul><ul><li>When you’re ready to settle down, consider buying  a home </li></ul><ul><li>Write a net worth statement each year </li></ul><ul><li>Pay cash for (mostly) everything </li></ul><ul><li>Plan to have your mortgage paid off when you retire </li></ul><ul><li>Create multiple streams of income for retirement </li></ul><ul><li>Run a retirement calculator annually </li></ul><ul><li>Investigate LT care insurance </li></ul><ul><li>Consider converting term policies to permanent life insurance policies </li></ul><ul><li>Review your estate planning documents </li></ul><ul><li>Adjust your investment risk tolerance </li></ul><ul><li>Diversify out of company stock </li></ul>
    • 17. Retirement &amp; Savings
    • 18. Retirement Reality <ul><li>Social Security </li></ul><ul><ul><li>2010: SS pays more benefits than it receives in payroll taxes </li></ul></ul><ul><ul><li>By 2036, SS is expected to be bankrupt </li></ul></ul><ul><li>Medicare too </li></ul><ul><ul><li>By 2024, SS is expected to be bankrupt </li></ul></ul><ul><ul><li>Living longer, living less healthy, high health cost, </li></ul></ul>
    • 19. “ Three-Legged Stool&amp;quot; <ul><li>The old stool: </li></ul><ul><ul><li>Pension </li></ul></ul><ul><ul><ul><li>Defined-benefit </li></ul></ul></ul><ul><ul><ul><li>Defined-contribution </li></ul></ul></ul><ul><ul><li>Social Security, and </li></ul></ul><ul><ul><li>Savings </li></ul></ul><ul><ul><ul><li>Including investments </li></ul></ul></ul>Within your control?
    • 20. Retirement Plans <ul><ul><li>The Thrift Savings Plan (VA’s 401(k)) </li></ul></ul><ul><ul><li>“ The Government automatically contributes 1 percent of your salary with additional matching contributions up to a total of 5 percent.” </li></ul></ul><ul><ul><ul><li>Maximize the matching ( free money ) </li></ul></ul></ul><ul><ul><li>Consult VA’s HR personnel </li></ul></ul><ul><li>IRA or Roth IRA </li></ul><ul><ul><li>When your employer doesn’t offer a retirement plan </li></ul></ul>
    • 21. Investing <ul><li>Why? Let the money grow </li></ul><ul><li>How? Personally vs. broker companies </li></ul><ul><ul><li>Watch out for those fees </li></ul></ul><ul><li>Risks involved </li></ul><ul><ul><li>Higher risks, higher returns/loss </li></ul></ul><ul><ul><li>Lower risks, lower returns/loss </li></ul></ul>
    • 22. Risks and Returns Higher risks, higher returns/loss Lower risks, lower returns/loss Penny Stock Commo- dities Collectibles Speculative Stock / Bonds / Mutual Funds Real Estate Blue-Chip Common Stock Growth Mutual Funds High-Grade Convertible Bonds High-Grade Preferred Stock Balanced Mutual Funds High-Grade Corporate Bonds or Mutual Funds High-Grade Municipal Bonds or Mutual Funds Money Market Accounts or Mutual Funds Certificates of Deposit U.S. Savings Bonds Insured Savings / Checking Accounts Treasury Issues
    • 23. Where to Invest? The Other Interest ::: The One that You are Paying
    • 24. Invest vs. Pay Debt? <ul><li>Interest %s </li></ul><ul><li>Emergency Fund </li></ul><ul><li>401(k) Match </li></ul>
    • 25. Invest vs. Pay Debt? <ul><li>Highest interest rates: </li></ul><ul><ul><li>Debts vs. Savings/Investing </li></ul></ul><ul><ul><ul><li>14% Credit Card interest rate, $4,000 balance vs. </li></ul></ul></ul><ul><ul><ul><li>Savings with 3% interest rate </li></ul></ul></ul><ul><li>Emergency funds: 3-6 months </li></ul><ul><li>Match in 401(k) </li></ul><ul><ul><li>Dollar-per-dollar matching is equivalent to 100% interest rate. </li></ul></ul>
    • 26. Key Investment Principle <ul><li>Time is money </li></ul><ul><li>More time </li></ul><ul><ul><li>Start early </li></ul></ul><ul><ul><li>Marshmallow </li></ul></ul><ul><li>More money </li></ul><ul><li>More interest (risks?) </li></ul>
    • 27. Investing Early Who has the most at retirement? <ul><li>Interest = 7% </li></ul><ul><li>You </li></ul><ul><li>Invest $2000 every year </li></ul><ul><ul><li>when you are 18 </li></ul></ul><ul><ul><li>for 10 years </li></ul></ul><ul><li>let the money sit for the next 38 years </li></ul><ul><li>Your sister </li></ul><ul><li>Invest $2000 every year </li></ul><ul><ul><li>when she is 31 </li></ul></ul><ul><ul><li>for 35 years </li></ul></ul><ul><li>Even though you sister invested more than twice as much as you did, you end up with $84,944 more. Why? You took advantage of time, by started to save earlier. </li></ul>
    • 28. Investment Mix <ul><li>Factors </li></ul><ul><li>Diversification: Reduce risk </li></ul><ul><li>When do you expect/need the money </li></ul><ul><ul><li>Age </li></ul></ul><ul><ul><li>Short-Term Priorities: Buy a home in a few years </li></ul></ul><ul><ul><li>Obligations </li></ul></ul><ul><li>Examples </li></ul><ul><li>All children ’s health system </li></ul><ul><li>60% stocks and 40% bonds </li></ul><ul><ul><li>most of the stocks would be part of S&amp;P&apos;s 500-stock index </li></ul></ul><ul><li>↘ stock allocation by 1% once tapping into retirement savings </li></ul><ul><ul><li>60% in stocks at age 65, then by age 80 you&apos;d be down to 45% in stocks. </li></ul></ul>
    • 29. Resources <ul><li>Full control of your wealth </li></ul><ul><ul><li>Governmental sites: investor.gov , consumerfinance.gov/ </li></ul></ul><ul><ul><li>Companies: mint.com , Morningstar , Investopedia , </li></ul></ul><ul><ul><li>Other: American Association of Individual Investors ( AAII ) </li></ul></ul>
    • 30. Resources <ul><li>Hire professionals </li></ul><ul><ul><li>Certified Financial Planner® (CFP®) </li></ul></ul><ul><ul><li>Chartered Financial Analyst (CFA®) </li></ul></ul><ul><ul><li>Certified Fund Specialist (CFS) </li></ul></ul><ul><ul><li>Chartered Financial Consultant (ChFC) </li></ul></ul><ul><ul><li>Certified Investment Management Analyst (CIMA) </li></ul></ul><ul><ul><li>Certified Public Accountant and Personal Financial Specialist (CPA and PFS) </li></ul></ul><ul><li>Selecting Investment Professionals ( FINRA ) </li></ul>
    • 31. Investment Knowledge <ul><li>At 90, after 30 years of retirement, Thiermann is back at work for $10 an hour </li></ul><ul><li>$700,000 in retirement money </li></ul><ul><li>Know the basics </li></ul>
    • 32. Achieving Financial Security in the Times of New Normal Fahzy Abdul-Rahman, Ph.D., M.P.H., M.S. New Mexico State University Extension [email_address]

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