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  2. 2. This publication has been printed by the U.S. Department of Labor,Employee Benefits Security Administration (EBSA), and is available on theWeb at For a complete list of the agencys publicationsor to speak with a benefits advisor, call toll free:1-866-444-3272.Or contact the agency electronically at material will be made available in alternate format upon request:Voice phone: 202-693-8664 TTY: 202-501-3911Certified Financial Planner Board of Standards Inc. is a partner in the preparationof this publication. CFP Board owns the marks CFP®, CERTIFIED FINANCIALPLANNER™ and in the U.S., which it awards to individuals who successfullycomplete initial and ongoing certification requirements. Visit CFP Board’s Web site,, for interactive tools, polls, quizzes and eNewsletter updatesabout financial planning.This booklet constitutes a small entity compliance guide for purposes of the Small BusinessRegulatory Enforcement Act of 1996.
  4. 4. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREMost of us know it is smart to save money for those big-ticket items we really want to buy — a new television or car or home. Yet you may not realize that probably the most expensive thing you will ever buy in your lifetime is your…retirement. Perhaps you’ve never thought of “buying” your retirement. Yet that is exactly what you do when you put money into a retirement nest egg. You are paying today for the cost of your retirement tomorrow. The cost of those future years is getting more expensive for most Americans, for two reasons. First, we live longer after we retire — with many of us spending 15, 25, even 30 years in retirement — and we are more active. Second, you may have to shoulder a greater chunk of the cost of your retirement because fewer companies are providing traditional pension plans. Many retirement plans today, such as the popular 401(k), are paid for primarily by the employee, not the employer. You may not have a retirement plan available at work or you may be self- employed. This puts the responsibility of choosing retirement investments squarely on your shoulders. Unfortunately, just about 57 percent of all workers are earning retirement benefits at work, and many are not familiar with the basics of investing. Many people mistakenly believe that Social Security will pay for all or most of their retirement needs. The fact is, since its inception, Social Security has provided a minimum foundation of protection. A comfortable retirement usually requires Social Security, employer-based retirement plan benefits, personal savings and investments. In short, paying for the retirement you truly desire is ultimately your responsibility. You must take charge. You are the architect of your financial future. That may sound like an impossible task. Many of us live paycheck to paycheck, barely making ends meet. You may have more pressing financial needs and goals than “buying” something so far in the future. Or perhaps you’ve waited until close to retirement before starting to save. Yet you still may be able to afford to buy the kind of retirement you want. Whether you are 18 or 58, you can take steps toward a better, more secure future. 2
  5. 5. A FINANCIAL WARMUP That’s what this bookletis all about. The U.S.Department of Labor andCertified Financial PlannerBoard of Standards Inc. (CFPBoard) want you to succeed insetting financial and retirementgoals. Savings Fitness: A Guideto Your Money and YourFinancial Future starts you onthe way to setting goals andputting your retirement high onthe list of personal priorities. The Department ofLabor’s interest in retirementplanning stems from its desireto improve the security ofAmerican workers in retirement. In 1995, the Department launched its RetirementSavings Education Campaign. Saving is now a national priority, with the passage of theSavings Are Vital to Everyone’s Retirement Act of 1997 (SAVER). With this congressionalmandate, the Department brings front and center the need to educate Americans aboutretirement savings. CFP Board also has a keen interest in helping Americans meet their personaland financial goals. A nonprofit, certifying and standards-setting organization, CFP Boardexists to benefit the public by granting the CFP certification and upholding it as the ®recognized standard of excellence for personal financial planning. To this end, CFPBoard authorizes individuals who meet its competency, ethics and professional standardsto use its trademarks CFP , CERTIFIED FINANCIAL PLANNER and ® ™ in the U.S. This booklet shows you the key tool for making a secure retirement a reality:financial planning. It will help clarify your retirement goals as well as other financial goals 3
  6. 6. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREyou want to “buy” along the way. It will show Getting how to manage your money so you can Managing Your Financial Lifeafford today’s needs yet still fund tomorrow’s It starts with a dream, the dream of a secure retirement. Yet like many people you may wonder howgoals. It will help you make saving for you can achieve that dream when so many otherretirement and other goals a habit. You’ll financial issues have priority. Besides trying to pay forlearn there is no such thing as starting to daily living expenses, you may need to buy a car, pay offsave too early or too late — only not debts, save for your children’s education, take a vacation, or buy a home. You may have aging parents tostarting at all! You’ll learn how to save your support. You may be going through a major event inmoney to make it work for you, and how to your life such as starting a new job, getting married orprotect it so it will be there when you need it divorced, raising children, or coping with a death infor retirement. It explains how you can take the family. How do you manage all these financialthe best advantage of retirement plans at challenges and at the same time try to "buy" a securework, and what to do if you’re on your own. retirement? How do you turn your dreams into reality? Yes, retirement is a big purchase. The Start by writing down each of your goals on abiggest one you may ever make. Yet you can 3"x 5" card so you can organize them easily. You mayafford it — with determination, hard work, want to have family members come up with ideas. Don’t leave something out at this stage because youa sound savings habit, the right knowledge, don’t think you can afford it. This is your “wish list.”and a well-designed financial plan. Sort the cards into two stacks: goals you want to accomplish within the next 5 years or less, and goals that will take longer than 5 years. It’s important to separate them because, as you’ll see later, you save for short-term and long-term goals differently. Sort the cards within each stack in order of priority. Make retirement a priority! This needs to be among your goals regardless of your age. Some goals you may be able to borrow for, such as college, but you can’t borrow for retirement. Write on each card what you need to do to accomplish that goal: When do you want to accomplish it, what will it cost (we’ll tell you more about that later), what money have you set aside already, and how much more money will you need to save each month to reach the goal.4
  7. 7. YOUR SAVINGS FITNESS DREAM Look again at the order ofpriority. How hard are you willing towork and save to achieve a particulargoal? Would you work extra hours, forexample? How realistic is a goal whencompared with other goals? Reorganizetheir priority if necessary. Put those thatare unrealistic back into your wish list.Maybe later you can turn them intoreality too. We’ll come back to these goalswhen we put together a spending plan.Beginning YourSavings Fitness PlanNow let’s look at your current financialresources. This is important because, asyou will learn later in this booklet, yourfinancial resources affect not only yourability to reach your goals, but alsoyour ability to protect those goals frompotential financial crises. These are also the resources Subtract your liabilities from your will draw on to meet various life events. Do you have more assets than liabilities? Or the otherCalculate your net worth. This isn’t as difficult as it way around?might sound. Your net worth is simply the total value Your aim is to create a positive net worth, andof what you own (assets) minus what you owe you want it to grow each year. Your net worth is part of(liabilities). It’s a snapshot of your financial health. what you will draw on to pay for financial goals and First, add up the approximate value of all your retirement. A strong net worth also will help youyour assets. This includes personal possessions, through financial crises.vehicles, home, checking and savings accounts, and Review your net worth annually. Recalculate yourthe cash value (not the death benefits) of any life net worth once a year. It’s a way to monitor yourinsurance policies you may have. Include the current financial health.value of investments, such as stocks, real estate, Identify other financial resources. You may have othercertificates of deposit, retirement accounts, IRAs, and financial resources that aren’t included in your netthe current value of any pensions you have. worth but that can help you through tough times. Now add up your liabilities: the remaining These include the death benefits of your life insurancemortgage on your home, credit card debt, auto loans,student loans, income taxes due, taxes due on theprofits of your investments, if you cashed them in, andany other outstanding bills. 5
  8. 8. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREpolicies, Social Security survivors benefits, health care Envision Your Retirementcoverage, disability insurance, liability insurance, and Retirement is a state of mind as well as a financialauto and home insurance. Although you may have to issue. You are not so much retiring from work as youpay for some of these resources, they offer financial are moving into another stage of your life. Some peopleprotection in case of illness, accidents, or other call retirement a "new career."catastrophes. What do you want to do in that stage? Travel? Relax? Move to a retirement community or to be near grandchildren? Pursue a favorite hobby? Go fishing or Planning for Retirement While You Are Still Young R etirement probably seems vague and far off at this stage of your life. Besides, you have other things to buy right now. Yet there are some crucial reasons to start preparing now for retirement. You’ll probably have to pay for more of your own retirement than earlier generations. The sooner you get started, the better. You have one huge ally — time. Let’s say that you put $1,000 at the beginning of each year into an IRA from age 20 through age 30 (11 years) and then never put in another dime. The account earns 7 percent annually. When you retire at age 65 you’ll have $168,514 in the account. A friend doesn’t start until age 30, but saves the same amount annually for 35 years straight. Despite putting in three times as much money, your friend’s account grows to only $147,913. You can start small and grow. Even setting aside a small portion of your paycheck each month will pay off in big dollars later. Company retirement plans are the easiest way to save. If you’re not already in your employer’s plan, sign up. You can afford to invest more aggressively. You have years to overcome the inevitable ups and downs of the stock market. Developing the habit of saving for retirement is easier when you are young. join a country club? Work part time or do volunteer work? Go back to school? What is the outlook for your health? Do you expect your family to take care of you if you are unable to care for yourself? Do you want to enter this stage of your life earlier than normal retirement age or later? The answers to these questions are crucial when determining how much money you will need for the retirement you desire — and how much you’ll6
  9. 9. HOW’S YOUR FINANCIAL FITNESS?need to save between now and then.Let’s say you plan to retire early, with noplans to work even part time. You’llneed to build a larger nest egg than ifyou retire later because you’ll have todepend on it far longer.Estimate How MuchYou Need to Save ForRetirementNow that you have a clearer picture ofyour retirement goal, it’s time toestimate how large your retirement nestegg will need to be and how much youneed to save each month to buy thatgoal. This step is critical! The vastmajority of people never take this step,yet it is very difficult to save adequatelyfor retirement if you don’t at least have arough idea of how much you need tosave every month. There are numerous worksheets and software Think of this as your annual “cost” of retirement. Theprograms that can help you calculate approximately lower your income, generally the higher the portion ofhow much you’ll need to save. Professional financial it you will need to replace.planners and other financial advisers can help as well. However, no rule of thumb fits everyone.At the end of this booklet, we provide some sources you Expenses typically decline for retirees: taxes arecan turn to for worksheets. smaller (though not always) and work-related costs Regardless of what source you use, here are usually disappear. But overall expenses may notsome of the basic questions and assumptions the decline much if you still have a home and college debtscalculation needs to answer. to pay off. Large medical bills may keep yourHow much retirement income will I need? retirement costs high. Much will depend on the kind ofAn easy rule of thumb is that you’ll need to replace 70 retirement you want to enjoy. Someone who plans toto 90 percent of your pre-retirement income. If you’re live a quiet, modest retirement in a low-cost part of themaking $50,000 a year (before taxes), you might need country will need a lot less money than someone who$35,000 to $45,000 a year in retirement income to enjoy plans to be active, take expensive vacations, and live inthe same standard of living you had before retirement. an expensive region. 7
  10. 10. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE For younger people in the early stages of their retirement. A female retiring today at age 65 canworking life, estimating income needs that may be 30 expect to live approximately 20 40 years in the future is obviously difficult. At least These are average figures and how long youstart with a rough estimate and begin saving can expect to live will depend on factors such as yoursomething — 10 percent of your gross income would general health and family history. But using today’sbe a good start. Then every 2 or 3 years review your average or past history may not give you a completeretirement plan and adjust your estimate of retirement picture. People are living longer today than they did inincome needs as your annual earnings grow and your the past, and virtually all expert opinion expects thevision of retirement begins to come into focus. trend toward living longer to continue. How To Prepare For Retirement When There’s Little Time Left W hat if retirement is just around the corner and you haven’t saved enough? Here are some tips. Some are painful, but they’ll help you toward your goal. • It’s never too late to start. It’s only too late if you don’t start at all. • Sock it away. Pump everything you can into your tax-sheltered retirement plans and personal savings. Try to put away at least 20 percent of your income. • Reduce expenses. Funnel the savings into your nest egg. • Take a second job or work extra hours. • Aim for higher returns. Don’t invest in anything you are uncomfortable with, but see if you can’t squeeze out better returns. • Retire later. You may not need to work full time beyond your planned retirement age. Part time may be enough. • Refine your goal. You may have to live a less expensive lifestyle in retirement. • Delay taking Social Security. Benefits will be higher when you start taking them. • Make use of your home. Rent out a room or move to a less expensive home and save the profits. • Sell assets that are not producing much income or growth, such as undeveloped land or a vacation home, and invest in income-producing assets.How long will I live in retirement? What other sources of income will I have?Based on current estimates, a male retiring at age Since October 1999, Social Security has been mailing65 today can expect to live approximately 17 years in statements to workers age 25 and older showing all the wages reported and an estimate of retirement, survivors and disability benefits. You can also request a statement by visiting the Social Security Administration’s Web site at or by calling 800-772-1213 and requesting a free Social Security Statement.8
  11. 11. AVOIDING FINANCIAL SETBACKSWill you have other sourcesof income?For instance, will you receive a pensionthat provides a specific amount ofretirement income each month? Is thepension adjusted for inflation?What What savings do I already havefor retirement?You’ll need to build a nest egg sufficientto make up the gap between the totalamount of income you will need eachyear and the amount provided annuallyby Social Security and any retirementincome. This nest egg will come fromyour retirement plan accounts at work,IRAs, annuities, and personal savings.What adjustments must be madefor inflation?The cost of retirement will likely go upevery year due to inflation — that is,$35,000 won’t buy as much in year 5of your retirement as it will the first year because the What will my investments return?cost of living usually rises. Although Social Security Any calculation must take into account what annualbenefits are adjusted for inflation, any other estimates rate of return you expect to earn on the savings you’veof how much income you need each year — and how already accumulated and on the savings you intend tomuch you’ll need to save to provide that income — make in the future. You also need to determine themust be adjusted for inflation. The annual inflation rate of return on your savings after you retire. Theserate is 2.2 percent currently, but it varies over time. In rates of return will depend in part on whether the1980, for instance, the annual inflation rate was 13.5 money is inside or outside a tax-deferred account.percent; in 1998, it reached a low of 1.6 percent. When It’s important to choose realistic annualplanning for your retirement it is always safer to returns when making your estimates. Most financialassume a higher, rather than a lower, rate and have planners recommend that you stick with the historicalyour money buy more than you previously thought. rates of return based on the types of investments youRetirement calculators should allow you to make your choose or even slightly lower.own estimate for inflation. How many years do I have left until I retire? The more years you have, the less you’ll have to save each month to reach your goal. 9
  12. 12. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREHow much should I save each month? A spending plan is simple to set up. ConsiderOnce you determine the number of years until you the following steps as a guide, but you may want to useretire and the size of the nest egg you need to "buy" in a computer program.order to provide the income not provided by other Income. Add up your monthly income: wages, averagesources, you can calculate the amount to save each tips or bonuses, alimony payments, investment income,month. unemployment benefits, and so on. Don’t include It’s a good idea to revisit this worksheet at anything you can’t count on, such as lottery winnings orleast every 2 or 3 years. Your vision of retirement, your a bonus that’s not definite.earnings, and your financial circumstances may Expenses. Add up monthly expenses: mortgage or rent,change. You’ll also want to check periodically to be sure car payments, average food bills, medical expenses,you are achieving your objectives along the way. entertainment, and so on. Determine an average for expenses that vary each month, such as clothing, or“Spend” For Retirement that don’t occur every month, such as car insurance orNow comes the tough part. You have a rough idea of self-employment taxes. Review your checkbook, credithow much you need to save each month to reach your card records, and receipts to estimate expenses. Youretirement goal. But how do you find that money? probably will need to track how you spend cash for aWhere does it come from? month or two. Most of us are surprised to find out There’s one simple trick for saving for any goal: where and how much cash “disappears” each month.spend less than you earn. That’s not easy if you have Include savings as an expense. Better yet, put it at thetrouble making ends meet or if you find it difficult to top of your expense list. Here’s where you add in theresist spending whatever money you have in hand. total of the amounts you need to save each month toEven people who make high incomes often have accomplish the goals you wrote down earlier on thedifficulty saving. But we’ve got some ideas that may 3"x 5" you. Subtract income from expenses. What if you have Let’s start with a “spending plan” — a guide more expenses (including savings) than you havefor how we want to spend our money. Some people call income? Not an uncommon problem. You have threethis a budget, but since we’re thinking of retirement as choices: cut expenses, increase income, or both.something to buy, a spending plan seems more Cut expenses. There are hundreds of ways to reduceappropriate. expenses, from clipping grocery coupons and bargain hunting to comparison shopping for insurance and buying new cars less often. The section that follows on debt and credit card problems will help. You also can find lots of expense-cutting ideas in books, magazine articles, and financial newsletters. Increase income. Take a second job, improve your job skills or education to get a raise or a better paying job, make money from a hobby, or jointly decide that another family member will work.10
  13. 13. BOOST YOUR FINANCIAL PERFORMANCETips. Even after you’ve tried to cutexpenses and increase income, you maystill have trouble saving enough forretirement and your other goals. Hereare some tips.Pay yourself first. Put away first themoney you want to set aside for goals.Have money automatically withdrawnfrom your checking account and putinto savings or an investment. Join aretirement plan at work that deductsmoney from your paycheck. Ordeposit your retirement savingsyourself, the first thing. What you don’tsee you don’t miss.Put bonuses and raises towardsavings.Make saving a habit. It’s not difficultonce you start.Revisit your spending plan every fewmonths to be sure you are on track.Income and expenses change over time. What’s the difference between “good debt” and “bad debt”? Yes, there is such a thing as good debt.Avoid Debt And Credit Problems That’s debt that can provide a financial pay off.High debt and misuse of credit cards make it tough to Borrowing to buy or remodel a home, pay for a child’ssave for retirement. Money that goes to pay interest, education, advance your own career skills, or buy a carlate fees, and old bills is money that could earn money for getting to work can provide long-term financialfor retirement and other goals. benefits.How much debt is too much debt? Debt isn’t Bad debt is when you borrow for things thatnecessarily bad, but too much debt is. Add up what you don’t provide financial benefits or that don’t last as longpay monthly in car loans, student loans, credit card and as the loan. This includes borrowing for vacations,charge card loans, personal loans — everything but clothing, furniture, or dining out.your mortgage. Divide that total by the money youbring home each month. The result is your “debt ratio.”Try to keep that ratio to 10 percent or less. Totalmortgage and nonmortgage debt should be no morethan 36 percent of your take-home pay. 11
  14. 14. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREDo you have debt problems? Here are some Avoid high-interest rate loans. Loan solicitations thatwarning signs: come in the mail, pawning items for cash, or “payday”Borrowing to pay off other loans. loans in which people write postdated checks to check-Creditors calling for payment. cashing services are usually extremely expensive. ForPaying only the minimum on credit cards. example, rolling over a payday loan every 2 weeks for aMaxing out credit cards. year can run up interest charges of over 600 percent!Borrowing to pay regular bills. While the Truth-in-Lending Act requires lenders toBeing turned down for credit. disclose the cost of your loan expressed as an annual percentage rate (APR), it is up to you to read the fine Facts Women Should Know About Preparing For Retirement W omen face challenges that often make it more difficult for them than men to adequately save for retirement. In light of these challenges, women need to pay special attention to making the most of their money. • Women tend to earn less than men and work fewer years. • Women stay at jobs for a shorter period of time, work part time more often, and interrupt their careers to raise children. Consequently, they are less likely to qualify for company-sponsored retirement plans or to receive the full benefits of those plans. • On average, women live 5 years longer than men, and thus need to build a larger retirement nest egg for themselves. • Some studies indicate women tend to invest less aggressively than men. • Women tend to lose more income than men following a divorce. • Women age 65 or older are almost twice as likely as men the same age to receive income below the poverty level. For more information, call the Employee Benefits Security Administration at 1-866-444-3272 and ask for the booklets Women and Retirement Savings, Taking the Mystery Out of Retirement Planning, and QDROs: The Division of Retirement Benefits through Qualified Domestic Relations Orders (for example, divorce orders). Also call the Social Security Administration at (800) 772-1213 for their booklet What Every Woman Should Know, or visit the agency’s Web site at
  15. 15. STRENGTHENING YOUR FITNESS PLANprint telling you exactly what the detailsof your loan and its costs are. The key to recognizing just howexpensive these loans can be is to focuson the total cost of the loan — principaland interest. Don’t just look at themonthly payment, which may be small,but adds up over time.Handle credit cards wisely. Creditcards can serve many useful purposes,but people often misuse them. Take, forexample, the habit of making only the 2percent minimum payment eachmonth. On a $2,000 balance with acredit card charging 18 percent interest,it would take 30 years to pay off theamount owed. Then imagine how fastyou would run up your debts if you didthis with several credit cards at thesame time. (For more informationon handling credit wisely, see the“Resources” section at the end of this publication.) Saving For Retirement Here are some additional tips for handling Once you’ve reduced unnecessary debt and created acredit cards wisely. workable spending plan that frees up money, you’reKeep only one or two cards, not the usual eight ready to begin saving toward retirement. You may door nine. this through a company retirement plan or on yourDon’t charge big-ticket items. Find less expensive own — options that are covered in more detail later inloan alternatives. this booklet. First, however, let’s look at a few of theShop around for the best interest rates, annual fees, places where you might put your money for retirement.service fees, and grace periods. Savings accounts, money market mutual funds,Pay off the card each month, or at least pay more certificates of deposit, and U.S. Treasury bills. Thesethan the minimum. are sometimes referred to as cash or cashStill have problems? Leave the cards at home or cut equivalents because you can get to them quickly andthem up. there’s little risk of losing the money you put in.How to climb out of debt. Despite your best efforts, you Domestic bonds. You loan money to a U.S. companymay find yourself in severe debt. A credit counseling or a government body in return for its promise toservice can help you set up a plan to work with your pay back what you loaned, with interest.creditors and reduce your debts. Or you can work withyour creditors directly to try and work out paymentarrangements. 13
  16. 16. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREDomestic stocks. You own part of a U.S. company. Choosing where to put your money. How do youMutual funds. Instead of investing directly in stocks, decide where to put your money? Look back at thebonds, or real estate, for example, you can use short-term goals you wrote down earlier — a familymutual funds. These pool your money with money of vacation, perhaps, or the down payment for a home.other shareholders and invest it for you. A stock Remember, you should always be saving formutual fund, for example, would invest in stocks on retirement. But, for goals you want to happen soonbehalf of all the fund’s shareholders. This makes it — say, within a year — it’s best to put your moneyeasier to invest and to diversify your money. into one or more of the cash equivalents — a bank account or CD, for example. You’ll earn a little Tips On How To Save Smart For Retirement • Start now. Don’t wait. Time is critical. • Start small, if necessary. Money may be tight, but even small amounts can make a big difference given enough time, the right kind of investments, and tax-favored vehicles such as company retirement plans and IRAs. • Use automatic deductions from your payroll or your checking account for deposit in mutual funds, IRAs, or other investment vehicles. • Save regularly. Make saving for retirement a habit. • Be realistic about investment returns. Never assume that a year or two of high market returns will continue indefinitely. The same goes for market declines. • Roll over retirement account money if you change jobs. • Don’t dip into retirement savings. interest and the money will be there when you need it. For goals that are at least 5 years in the future, however, such as retirement, you may want to put some of your money into stocks, bonds, real estate, foreign investments, mutual funds, or other14
  17. 17. PERSONAL FINANCIAL FITNESSassets. Unlike savings accounts or bankCDs, these types of investments typicallyare not insured by the federalgovernment. There is the risk that youcan lose some of your money. Howmuch risk depends on the type ofinvestment. Generally, the longer youhave until retirement and the greateryour other sources of income, the morerisk you can afford. For those who willbe retiring soon and who will depend ontheir investment for income duringtheir retirement years, a low-riskinvestment strategy is more prudent.Only you can decide how muchrisk to take. Why take any risk at all?Because the greater the risk, thegreater the potential reward. Byinvesting carefully in such things asstocks and bonds, you are likely to earnsignificantly more money than by keeping all of your grown to over $6,495. None of these rates of returns isretirement money in a savings account, for example. guaranteed in the future, but they clearly show the The differences in the average annual returns relationship between risk and potential reward.of various types of investments over time is dramatic. Many financial experts feel it is important toSince 1928, the average annual return of short-term save at least a portion of your retirement money inU.S. Treasury bills, which roughly equals the return of higher risk — but potentially higher returning —other cash equivalents such as savings accounts, has assets. These higher risk assets can help you staybeen 3.7 percent. The annual return of long-term ahead of inflation, which eats away at your nest egggovernment bonds over the same period has been 5.2 over time.percent. Large-company stocks, on the other hand, Which assets you want to invest in, of course,while riskier in the short term, have averaged an is your decision. Never invest in anything you don’tannual return of 11.3 percent. thoroughly understand or don’t feel comfortable about. Let’s put that into dollars. If you had invested$1 in Treasury bills in 1928, that $1 would have grownto approximately $20 today. However, inflation, at anannual average of 2.2 percent, would have eatenalmost $6 of that gain. If the $1 had been invested ingovernment bonds, it would have grown to over $63.But invested in large-company stocks, it would have 15
  18. 18. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREReducing investment risk. There are two main ways to Deciding on an investment mix. How you diversify —reduce risk. First, diversify within each category of that is, how much you decide to put into each type ofinvestment. You can do this by investing in pooled investment — is called asset allocation. For example,arrangements, such as mutual funds, index funds, and if you decide to invest in stocks, how much of yourbank products offered by reliable professionals. These retirement nest egg should you put into stocks:investments typically give you a small share of different 10 percent … 30 percent … 75 percent? How muchindividual investments and will allow you to spread into bonds and cash? Your decision will depend onyour money among many stocks, bonds, and other many factors: how much time you have untilfinancial instruments, even if you don’t have a lot of retirement, your life expectancy, the size of yourmoney to invest. Your risk of losing money is less than if current nest egg, other sources of retirement income,you buy shares in only a few individual companies. how much risk you are willing to take, and how healthyDistributing your investments in this way is called your current financial picture is, among others.diversification. Your asset allocation also may change over Second, you can reduce risk by investing time. When you are younger, you might invest moreamong categories of investments. Generally speaking, heavily in stocks than bonds and cash. As you get olderyou should put some of your money in cash, some in and enter retirement, you may reduce your exposure tobonds, some in stocks, and some in other investment stocks and hold more in bonds and cash. You alsovehicles. Studies have shown that once you have might change your asset allocation because your goals,diversified your investments within each category, the risk tolerance, or financial circumstances havechoices you make about how much to put in these changed.major categories is the most important decision you Rebalancing your portfolio. Once youve decided onwill make and should define your investment strategy. your investment mix and invested your money, over Why diversify? Because at any given time one time some of your investments will go up and othersinvestment or type of investment might do better than will go down. If this continues, you may eventuallyanother. Diversification lets you manage your risk in a have a different investment mix than you intended.particular investment or category of investments and Reassessing your mix, or rebalancing, as it is commonlydecreases your chances of losing money. In fact, the called, brings your portfolio back to your original plan.factors that can cause one investment to do poorly may Rebalancing also helps you to make logical, notcause another to do well. Bond prices, for example, emotional, investment decisions.often go down when stock prices are up. When stock For instance, instead of selling investments inprices go down, bonds often increase in value. Over a a sector that is declining, you would sell an investmentlong time — the time you probably have to save for that has made gains and, with that money, purchaseretirement — the risk of losing money or earning less more in the declining investment sector. This way,than you would in a savings account tends to decline. you rebalance your portfolio mix, lessen your risk of By diversifying into different types of assets, loss, and increase your chance for greater returns inyou are more likely to reduce risk, and actually the long run.improve return, than by putting all of your money into Heres how rebalancing works: Lets say yourone investment or one type of investment. The familiar original investment called for 10 percent in U. S. smalladage “Don’t put all your eggs in one basket” definitely company stocks. Because of a stock market decline,applies to investing. they now represent 6 percent of your portfolio. You would sell assets that had increased and purchase16
  19. 19. MAXIMIZING YOUR WORKOUT POTENTIALenough U. S. small company stocks sothey again represent 10 percent of yourportfolio. How do you know when torebalance? There are two methods ofrebalancing: calendar and conditional.Calendar rebalancing means that oncea quarter or once a year you will reducethe investments that have gone up andwill add to investments that have gonedown. Conditional rebalancing is donewhenever an asset class goes up ordown more than some percentage, suchas 25 percent. This method lets themarkets tell you when it is time torebalance.The Power Of CompoundingRegardless of where you choose to putyour money — cash, stocks, bonds, realestate, or a combination of places —the key to saving for retirement is to make your money The chart provides an example of how anwork for you. It does this through the power of investment grows at different annual rates of returncompounding. Compounding investment earnings is over different time periods. Notice how the amount ofwhat can make even small investments become larger gain gets bigger each 10-year period. That’s becausegiven enough time. money is being earned on a bigger and bigger pool of You’re probably already familiar with the money.principle of compounding. Money you put into a Also notice that when you double your rate ofsavings account earns interest. Then you earn interest return from 4 percent to 8 percent, the end result afteron the money you originally put in, plus on the interest 30 years is over three times what you would haveyou’ve accumulated. As the size of your savings account accumulated with a 4 percent return. That’s the powergrows, you earn interest on a bigger and bigger pool of of compounding!money. The real power of compounding comes with time. The earlier you start saving, the more your money POWER OF COMPOUNDING can work for you. Look at it another way. For every 10 The value of $1,000 compounded at various rates of return over time is as follows: years you delay before starting to save for retirement, you will need to save three times as much each month to catch up. That’s why no matter how young you are, the sooner you begin saving for retirement, the better. 17
  20. 20. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREUsing Employer-Based Defined Benefit Plans. These plans pay a lump sumRetirement Plans upon retirement or a guaranteed monthly benefit. TheDoes your employer provide a retirement plan? If so, amount of payout is typically based on a set formula,say retirement experts . . . grab it! Employer-based such as the number of years you have worked for theplans are the most effective way to save for your future. employer times a percentage of your highest earningsWhat’s more, you’ll gain certain tax benefits. on the job. Usually the employer funds the plan —Employer-based plans come in one of two varieties commonly called a traditional pension plan — though(some employers provide both): defined benefit and in some plans workers also contribute. Most defineddefined contribution. benefit plans are insured by the federal government. How To Make The Most Of A Defined Contribution Plan • Study your employee handbook and talk to your benefits administrator to see what plan is offered and what its rules are. Read the summary plan description for specifics. Plans must follow federal law, but they can still vary widely in contribution limitations, investment op- tions, employer matches, and other features. • Join as soon as you become eligible. • Put in the maximum amount allowed. • If you can’t afford the maximum, try to contribute enough to maximize any employer matching funds. This is free money! • Study carefully the menu of investment choices. Some plans offer only a few choices, others may offer hundreds. The more you know about the choices, investing, and your investment goals, the more likely you will choose wisely. • Many companies match employee contributions with stock instead of cash. Financial experts often recommend that you don’t let your account get overloaded with company stock, particularly if the account makes up most of your retirement nest egg. Too much of a single stock increases risk. • Plan fees and expenses reduce the amount of retirement benefits you ultimately receive from plans where you direct the investments. It’s in your interest to learn as much as you can about your plan’s administrative fees, investment fees, and service fees. Read the plan documents carefully. For more information on fees, call EBSA’s toll-free line at 1-866-444-3272 and request the booklet A Look at 401(k) Plan Fees. Defined Contribution Plans. The popular 401(k) plan is one type of defined contribution plan. Unlike a defined benefit plan, this type of savings arrangement does not guarantee a specified amount for retirement. Instead, the amount you have available in the plan to help fund your retirement will depend on how long you participate in the plan, how much is invested, and how18
  21. 21. EMPLOYER FITNESS PROGRAMwell the investments do over the years. Thefederal government does not guarantee howmuch you accumulate in your account, butit does protect the account assets frommisuse by the employer. In the past 20 years, defined contri-bution plans have become more commonthan traditional pension plans. Employersfund most types of defined contributionplans, though the amount of their contribu-tions is not necessarily guaranteed. Workers with a retirement planare more likely to be covered by a definedcontribution plan, usually a 401(k) plan,rather than the traditional defined benefitplan. In many defined contribution plans,you are offered a choice of investment op-tions, and you must decide where to investyour contributions. This shifts much of theresponsibility for retirement planning toworkers. Thus, it is critical that you chooseto contribute to the plan once you become eligible (usually each month and that the rate you pay on incomeafter working full time for a minimum period) and, even if taxes is 15 percent. If you don’t put that $100 into ayou are automatically enrolled in the plan, to contribute as retirement plan, you’ll pay $15 in taxes on it. If you putmuch as possible. Invest wisely — review your plan invest- in $100, you postpone the taxes. Thus, your $100ment options and revisit your choices at least once a year. retirement plan contribution would actually reduceTax Breaks. Even though you may be responsible for your take-home pay by only $85. If you’re in the 25funding a defined contribution plan, you receive important percent tax bracket, the cost of the $100 contributiontax breaks. The money you invest in the plan and the is only $75. This is like buying your retirementearnings on those contributions are deferred from income at a until you withdraw the money (hopefully not until Vesting Rules. Any money you put into a retirementretirement). Why is that important? Because postponing plan out of your pay, and earnings on thosetaxes on what you earn allows your nest egg to grow faster. contributions, always belong to you. However, contraryRemember the power of compounding? The larger the to popular belief, employees don’t always haveamount you have to compound, the faster it grows. immediate access to the money their employer putsEven after the withdrawals are taxed, you typically come into their pension fund or their defined contributionout ahead. plan. Under some plans, such as a traditional pension The tax deduction also means that the decline inyour take-home pay, because of your contribution, won’t beas large as you might think. For example, let’s assume youare thinking about putting $100 into a retirement plan 19
  22. 22. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREplan or a 401(k), you have to work for a certain Be aware of the vesting rules in yournumber of years — say, 3 — before you become employer’s plan."vested" and can receive benefits. Some plans vest in Make sure you know when you’re vested.stages. Other defined contribution plans, such as the Changing jobs too quickly can mean losing part or allSEP and the SIMPLE IRA, vest immediately. You have of your retirement benefits or, at the very least, youraccess to the employer’s contributions the day the employer’s matching is deposited. No employer can require you to Retirement Plan Rights. The federal governmentwork longer than 7 years before you become vested in regulates and monitors company retirement plans.your retirement benefit. The vast majority of employers does an excellent job Retirement Planning For Employees In Small Companies I f you don’t have a plan available at work, encourage your employer to start one. Many small employers believe their workers prefer higher salaries or other benefits, and they believe the rules are too complex and the costs too high. Mention the following benefits: • A retirement plan can attract and retain valued employees in a competitive labor market, as well as motivate workers. • Establishing a retirement plan and encouraging employee participation can help employers fund their own retirement. Even after taking into account the cost of establishing an employee plan, employers may still be better off than funding retirement on their own. • Some plans cost less and have fewer administrative hassles than employers may realize. Alternatives to traditional defined benefit plans and the 401(k) include the SIMPLE IRA and the SEP. For more information, contact EBSA at 1-866-444-3272 and request Choosing a Retirement Solution for Your Small Business, SIMPLE IRA Plans for Small Businesses, SEP Retirement Plans for Small Businesses, 401(k) Plans for Small Businesses, Automatic Enrollment 401(k) Plans for Small Businesses, Profit Sharing Plans for Small Businesses, or Payroll Deduction IRAs for Small Businesses. in complying with federal law. Unfortunately, a small fraction doesn’t. For warning signs that your 401(k) contributions are being misused and other information on protecting your retirement benefits, visit EBSA’s Web site at or call EBSA’s toll-free number at 1-866-444-3272 and request the booklet What You Should Know About Your Retirement Plan.20
  23. 23. FINANCIAL FITNESS FOR THE SELF-EMPLOYEDTypes OfDefined Contribution PlansThe following are some of the mostcommon types of defined contributionplans. For a more detailed descriptionand comparison of some of these plans,visit the Web site go to “Retirement Savings,” thenfollow the prompt to the Small BusinessAdvisor under “For Employers.”401(k) Plan. This is the most popular ofthe defined contribution plans and ismost commonly offered by largeremployers. Employers often matchemployee contributions.403(b) Tax-Sheltered Annuity Plan.Think of this as a 401(k) plan foremployees of school systems andcertain nonprofit organizations.Investments are made in tax-shelteredannuities or mutual funds.SIMPLE SIMPLE IRA. The Savings Incentive Match What To Do If You Can’t Join anPlan for Employees of Small Employers is a simpler Employer-Based Plantype of employer-based retirement plan. There is also a You may not be able to join an employer-based401(k) version of the SIMPLE. retirement plan because you are not eligible or becauseProfit Sharing Plan. The employer shares company the employer doesn’t offer one. Fortunately, there areprofits with employees, usually based on the level of steps you can still take to build your retirementeach employee’s wages. strength.ESOP. Employee stock ownership plans are similar to Take a job with a plan. If two jobs offer similar pay andprofit sharing plans, except that an ESOP must invest working conditions, the job that offers retirementprimarily in company stock. Under an ESOP, the benefits may be the better choice.employees share in the ownership of the company. Start your own plan. If you can’t join a company plan,SEP. Simplified employee pension plans are used by you can save on your own.both small employers and the self-employed. You can’t put away as much on a tax-deferred Other retirement plans you may want to learn basis, and you won’t have an employer match. Still, youmore about include 457 plans, which cover state and can build a healthy nest egg if you work at it.local government workers, and the Federal ThriftSavings Plan, which covers federal employees. If youare eligible, you may also want to open a Roth IRA. 21
  24. 24. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREOpen an IRA. You can put up to $5,000 a year into an an IRA for a nonworking spouse if you file yourindividual retirement account on a tax-deductible basis if income tax return jointly. (By the way, you don’tyour spouse isnt covered by a retirement plan at work, or as have to put in the full amount; you can put in less.)long as your combined incomes arent too high. Persons With a traditional IRA, you delay income taxes onwho are 50 or older can contribute an additional $1,000. what you put in and on the earnings until youYou also can put the same amount tax-deferred into withdraw the money. With a Roth IRA, the money you put in is already taxed, but you won’t ever pay income taxes on the earnings as long as the account is open at least 5 years. CAUTION • Don’t borrow from your retirement plan or permanently withdraw funds before retirement unless absolutely necessary. • Your retirement plan may allow you to borrow from your account, often at very attractive rates. However, borrowing reduces the accounts earnings, leaving you with a smaller nest egg. Also, if you fail to pay back the loan, you could end up paying income taxes and penalties. As an alternative, consider budgeting to save the needed money or pursue other affordable loan options. • Also avoid permanently withdrawing funds before retirement. This often happens when people change jobs. According to a study by the Employee Benefits Research Institute, 47 percent of workers changing jobs rolled over into an IRA or a new employer’s retirement plan at least some of the money they received from their former employer’s retirement plan. • Pre-retirement withdrawals reduce the ultimate size of your nest egg. In addition, you’ll probably pay federal income taxes on the amount you withdraw (10 percent to as high as 35 percent) and a 10 percent penalty may be tacked on if you’re younger than age 591/2. In addition, you may have to pay state taxes. If you’re in a SIMPLE IRA plan, that early withdrawal penalty climbs to 25 percent if you take out money during the first 2 years you’re in the plan. Consider an annuity. An annuity is when you pay money to an insurance company in return for its agreement to pay either a regular fixed amount when you retire or an amount based on how much your investment earns. There is no limit on how much you can invest in a private annuity, and earnings aren’t taxed until you withdraw them.22
  25. 25. STAYING ON TRACKHowever, annuities present complexissues regarding taxes, fees, and with-drawal strategies that may not makethem the best investment choice for you.Consider discussing this type of invest-ment first with a financial planner.Build your personal savings. You canalways save money on your own, either inmutual funds, stocks, bonds (such asU.S. Savings Bonds), real estate, CDs, orother assets. It’s best to mark theseinvestments as part of your retirementfund and don’t use them for anythingelse unless absolutely necessary. Investing in an IRA, an annuity,or in personal savings means you aretotally responsible for directing your owninvestments. How conservatively oraggressively you invest is up to you. It willdepend in part on how willing you are totake investment risks, your age, thestability of your job, and other financial needs. Learn as “Keogh”. “Keoghs” are more complicated to set up andmuch as you can about investing and about specific maintain, but they offer more advantages than a you are considering. You also may want to For one thing, they come in several varieties. Some ofseek the help of a professional financial planner. Go to the varieties allow you to sock away more money — for tips on choosing a financial sometimes a lot more money — than a SEP.planner who puts your interests first. SIMPLE IRA. Described earlier under employer-based retirement plans, a SIMPLE IRA can be used by theWhat To Do If You Are Self-Employed self-employed. However, generally you can’t save asMany people today work for themselves, either full time much as you can with a SEP or “Keogh”.or in addition to their regular job. They have several tax- IRA. Usually you are better off funding a SEP or adeferred options from which to choose. “Keogh” unless your self-employment income is small.SEP. This is the same type of SEP described earlier Annuities. See annuities under the section on “Whatunder employer-based retirement plans. Only here, to Do if You Can’t Join an Employer-Based Plan”you’re the employer and you fund the SEP from your (see page 21).earnings. You can easily set up a SEP through a bank,mutual fund, or other financial institution. 23
  26. 26. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREManaging For A Lifetime Of Changing jobs. It’s estimated that the averageFinancial Growth worker changes jobs more than 10 times in a workingAs mentioned earlier, you probably will experience lifetime. Changing jobs often puts you at risk of notseveral major events in your life that can make it more vesting in your current job, or a new job may not offer adifficult to start or keep saving toward retirement and retirement plan. Consider rolling money fromother goals. The key is to have a clear plan, to stay an existing company retirement plan into a newfocused on your goals, and to manage your money so company plan or an individual retirement accountthat life events don’t prevent you from keeping (IRA). Don’t cash out and spend the money, howeveron target. small the amount. Here are a few suggestions for saving for Divorce. It’s important that you know the lawsretirement while financially managing some common regarding your spousal rights to Social Security andlife events. retirement benefits. Under current law, spouses andMarriage. Getting married creates new financial dependents have specific rights. Remember,demands that compete for retirement dollars, such as retirement assets may well be the biggest financialchanging life insurance needs and saving to buy a asset in the marriage. Be sure to divide those assetshome. But it’s usually less expensive for two people to carefully. It’s also critical to review your overalllive together, thus freeing up dollars. Also, you probably financial situation before and after your divorce.still have time on your side. A spending plan is Income typically drops for partners in the wake of aessential. Remember, every little bit helps. divorce, particularly for women.Raising children. The U.S. Department of Agriculture Disability. A severe or long-lasting disability canestimates that it costs the average American middle- undermine efforts to save for retirement. Althoughincome family approximately $286,000 to raise a child Social Security Disability benefits can help sustain ato age 17. Furthermore, in some cases a spouse may family if severe disability strikes, you may wish tostay out of the workforce to raise children, thus cutting explore the availability and cost of other forms ofinto income and the opportunity to fund retirement. disability insurance.Having a child may alter your major financial goals, but Death. The premature death of a spouse canshould never eliminate them. Make the best effort you undermine efforts for the partner to save forcan. Also, many financial planners stress that saving for retirement, particularly if there are dependentretirement should have priority over saving for a child’s children. That’s why it is important to check yourcollege education. There are financial aid programs for Social Security statement to find out how muchcollege-bound students but not for retirement. children will receive if a parent dies. Maintaining adequate life insurance is also important. Be sure that you have properly named the beneficiaries for any insurance policies, retirement plans, IRAs, and other retirement vehicles.24
  27. 27. A LIFETIME OF FINANCIAL GROWTHCoping With Financial CrisesLife has a way of throwing unexpectedfinancial roadblocks, detours andpotholes in our path. These might belarge medical bills, car or home repairs,a death in the family, loss of a job, orexpensive legal problems. Suchfinancial emergencies can derail yourefforts to save for retirement or othergoals. Here are some strategies formanaging financial crises.Establish an emergency fund. This canlessen the need to dip into retirementsavings for a financial emergency.Building an emergency fund is tough ifincome is tight, but every few dollarshelp. Fund it with pay from extraworking hours or a temporary job, a taxrefund, or a raise. Put the money into alow-risk, accessible account such as asavings account or money market fund.Insure yourself. Insurance protects your financial AUTOMOBILE. Don’t drive “bare.” It’s usually againstassets, such as your retirement funds, by helping to the law to drive without auto coverage, to say nothingtake care of the really big financial disasters. Here’s a of being costly if you are in an accident.list of insurance coverage you should consider buying: UMBRELLA. This provides additional liabilityHEALTH. If you and your family aren’t covered under coverage, usually through your home or auto insurancean employer’s policy, at least try to buy catastrophic policies, in the event you face a lawsuit.medical coverage on your own. LIFE. Having life insurance can help you or yourDISABILITY. Did you know you are more likely before spouse continue to save if either one of you dies beforeage 65 to miss at least 3 months of work because of a retirement. Social Security may be able to pay benefitsdisability than you are to die? Social Security Disability to your spouse and/or minor children. On the otherInsurance can pay you and your family benefits if youare severely disabled and are expected to be so for atleast 12 months. (Worker’s compensation only helps ifthe disability is work-related.) In addition, youremployer may offer some disability coverage, but youmay need to supplement it with private coverage.RENTERS. Homeowners usually are insured againsthazards such as fire, theft, and liability, but the majorityof renters aren’t. Renter’s insurance is inexpensive. 25
  28. 28. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREhand, you may not need life insurance if no one Borrow. If you must borrow because of a financialdepends financially on you. There are many types of life emergency, carefully compare the costs of all optionsinsurance, with a variety of fees and commissions available to you.attached. Sell investments. It’s usually advisable to sell taxableLONG-TERM CARE. This insurance can help pay for investments first. Try not to touch your faster growingcostly long-term health care either at home or in a retirement accounts. Taking money out of yourhealth-care facility or nursing home. It protects you retirement accounts could trigger income taxes andfrom draining savings and assets you otherwise could penalties.use for retirement. If You Choose To Work With A Financial Planner Y ou are the one ultimately responsible for the management of your own financial affairs. However, you may want additional help along the way from a professional financial planner. A professional planner can: • Provide expertise you don’t have. • Help improve your current financial management. • Save you time. • Provide an objective perspective. • Help you through a financial crisis. • Motivate you to take action. For more information, call Certified Financial Planner Board of Standards Inc. at 1-800-487-1497 and request a free Financial Planning Resource Kit or visit There you will find a personal data organizer, interview checklist, and other tools to help you select a financial planner who will put your interests first.26
  29. 29. A WORKOUT WORTH DOINGMonitor Your ProgressFinancial planning is not a one-timeprocess. Life, your goals, tax laws, andyour financial world have a way ofchanging, sometimes dramatically.Periodically review yourspending plan.Monitor the performance ofinvestments. Make adjustments ifnecessary.Make sure you contributemore toward your retirement as youearn more.Update your various insurancesafety nets to reflect changes inincome or personal circumstances.Keep your finances in order.Where To Go From HereYou now realize that saving for your ownretirement is critical and that it is primar-ily your responsibility. You may get help along the way, as well, such as your benefits department, financialbut most of the work is going to rest on your shoulders. planners, and other financial experts who can help youNo one will work harder or care more about your not only with your financial questions, but, moreretirement and your other financial goals than you. importantly, can help motivate you into action. Look back on those 3"x 5" cards outlining your Finally, there is only one real key to “buying” thatgoals. Perhaps they seem more realistic now. Even if retirement you’ve dreamed of. It doesn’t matter whetheryou can’t do as much as you would like to right away, you are still young or whether retirement is just aroundyou can do something. the corner. It doesn’t matter whether you’re in your first Think of this booklet as a starting point. job, trying to save for a home, or putting a child throughContinue to educate yourself about managing your and investing. Consider professional resources All that matters is that you start! 27
  30. 30. SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTUREResourcesThis publication is presented by the: Getting Out of Debt: (mentioned on page 13)Employee Benefits Security AdministrationU.S. Department of Labor Constitution Ave., N.W. View “Knee Deep in Debt” and “Fiscal Fitness:Washington, DC 20210 Choosing a Credit Counselor” (Go to “In Debt?”).Web site: publication request line: Other Web sources that highlight savings and1-866-444-3272 retirement planning:Certified Financial Planner Board of Standards, Inc. http://investor.gov1425 K Street, NW, Suite 500 View the U.S. Securities and Exchange Commission’sWashington, DC 20005 investor information Web site for online help withWeb site: investing and consumer protection questions.Toll-free number: 1-800-487-1497 Toll-free consumer information number: 1-800-SEC(732)-0330Sample Financial Calculator Web Sites: on page 7) This Web site is sponsored by the Financial LiteracyFrom EBSA and Education Commission, and has among its offer- ings the My Money Tool –Select “Interactive Worksheets.” Check out the Federal Trade CommissionsOther Calculators section “Consumer Protection,” including alerts – Select “Retirement,” then investment schemes.“Retirement Savings Calculator.” – Select “Retirement.” The Federal Citizen Information Center’s – Select “Ballpark contains text versions of hundreds of consumerEstimate.” publications. See the “Money” section for a list of brochures on money management – Select “Investors,” then “Tools & retirement planning.Calculators.” The sites above are only a sample of Visit the Social Security Administrations Web sitecalculators available on the Web. The Department of for pages on retirement. Wage earners can request aLabor does not endorse a specific calculator or the Personal Earnings and Benefits Estimate Statement orproducts and services offered on these Web sites.) can estimate their retirement benefits online. The IRS Web site provides tax information on IRAs, 401(k) plans, SEP and SIMPLE plans, and much more.28
  31. 31. RESOURCESwww.savingsbonds.govThe Bureau of the Public Debts Website features pages on savings bonds, asavings bond calculator, and instruc-tions for buying bonds online.www.fdic.govThe Federal Deposit InsuranceCorporation’s Web site offers a financialeducation program, “Money Smart,” acomprehensive financial educationcurriculum designed to help individualsoutside the financial mainstreamenhance their financial skills and createpositive banking relationships.www.investoreducation.orgInvestors of all ages can learn about thebasics of investing at the Investor’sClearinghouse, sponsored by theAlliance for Investor Education (AIE) www.consumerfed.orgThe AARP site provides advice on a The Consumer Federation of America offers severalhost of retirement planning issues. financial publications, including 66 Ways to SaveLink to “Money” for information on Money and runs the America Saves campaign tofinancial planning. encourage savings among low-to-moderate households.Browse the Web site of the National Endowment forFinancial Education (and especially the “MultimediaAccess” section) for a wealth of preretirementinformation.www.jumpstartcoalition.orgJump$tart Coalition for Personal Financial Literacyoffers personal financial education materials aimed atgrades K-12.October 2010 29
  32. 32. RETIREMENT SAVINGS EDUCATION CAMPAIGNcreated byEmployee Benefits Security Administrationin partnership with