University of Wyoming – Delta Alpha ChapterUniversity of Wyoming – Delta Alpha Chapter

Financial LiteracySavings Information

Savings

• Why is saving important?• It is important to start saving now

because the U.S. Government is in a financial crisis, and it is very likely that social security will not be available by the time you reach retirement. There is a downward trend of personal savings, and the sooner you start saving the sooner you will be able to retire.

• How much is the U.S. government in debt?• The U.S government is in debt 56 trillion dollars (56,000,000,000,000),

and each year the debt grows one to two trillion dollars.

• How does the government pay back the debt? • The only way the government can pay back its debt is to cut

governmental spending, or to raise taxes.

U.S. Debt

U.S. Debt • What does the U.S. debt

have to do with me?• Taxes will need to increase in near

future in order to pay off debt• The Government cannot afford

programs like Social Security and Medicare

If you want to learn more about the upcoming U.S. financial crisis follow the link below to watch a

Glenn Beck Interview with the Head U.S. Government Accountant, David Walker

Source: http://youtube.com/watch?v=I-16u9x3tfE

Social Security

Social Security Long-Term Projections

• Why won’t Social Security be available?• Social Security expenses will

exceed costs by 2015• Social Security will be unfunded

by 2041

Source: 2007 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds, Figure II.D4 www.ssa.gov/OACT/TR/TR07/II_project.html#wp108221

Social Security

• Why is not having Social Security a concern?• This chart shows a downward

trend of Personal Savings• It means that Americans need to

change this trend if they ever want to retire

• Saving now is better than saving later

Source: http://www.bea.gov

• Why is saving early beneficial?• Albert Einstein: “The most

powerful force in the universe is compounding interest.”

• The chart to the right is an illustration of the difference between early versus late investing.

Saving Early

Source: http://www.fool.com/money/401k/401k01.htm

Retirement

• How much money will I need if I want to retire when I am 65?• If you are 30 and have NO savings and want to live on $80,000 per

year when you retire, then you will need $1,388,000 when you are 65.• Being able to save $1,388,000* means that you need to save $22,208

each year. *Assuming you will live to age 89 and have no Social Security

Source: http://www.choosetosave.org/ballpark/ballparkWorksheet-2005final.pdf

• What are employer saving options? • There are three types of employer saving options: 401K, 457, or

403(b)

• What is the difference between a 401K, 457, and 403 (b)?• A 401k is an employer sponsored retirement plan that is generally a

part of an employee benefit package• A 457 Plan was created for state and local government employees• A 403 (b) was created for non-profit employees

Employer Saving Options

Employer Saving Options

• What are the advantages of a 401K, 457, or 403(b) Plan?• Employers will match contributions

up to a certain % of income. That means FREE MONEY! (There are limitations on the amount you can contribute based on income.)

• Money you put into a plan is not TAXED until you take it out. (Generally taxed when you retire, and have lower tax rate.)

401K, 457, or 403(B)-Additional Information

• Plans invest contributions in stocks, bonds, money markets or a mix of the three.

• Equity index funds are usually safer funds.

• Be aware of the costs that the plan itself charges. Make sure that the costs of running the plan are not unnecessarily eating into your retirement savings.

Source: http://www.fool.com/money/401k/401k08.htm

Non-Employer Saving Options

• What if my employer does not offer a retirement savings plan?• Traditional IRAs and Roth IRAs are

non-employer saving options

IRAs

• What are IRAs?• A traditional IRA works like a 401K in that contributions are not taxed

until received at retirement. (There is a $4000/year limit on amount you can contribute)

• A Roth IRA works in a reverse manner to traditional IRAs in that contributions are taxed and cash receipts at retirement are tax-free. (The advantage of this option is that earnings are never taxed)

Source: http://www.extension.iastate.edu/finances/personal/retirement/first_steps.htm

Savings

• Where can I find other helpful information about retirement planning and savings?• This website offers information about Mutual funds and other retirement

options from CNN Money• http://money.cnn.com/pf/funds/

• This website offers information on CDs and investment rates• http://www.bankrate.com/brm/rate/deposits_home.asp

• This website offers information to help you start saving• FeedThePig.org

04/21/23

For additional financial literacy information please visit the links below.

Credit Card InformationStudent Loan Information

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04/21/23

You Tube. (2008). Glenn Beck-The Real Story, Touching the Third Rail. Retrieved March 10, 2008. http://youtube.com /watch ?v=I-16u9x3tfE

The Motley Fool. (2008). Is Your 401(k) Foolish. Retrieved March 10, 2008. http://www.fool.com/money/401k/ 401k01.htm

Employee Research Benefit Institute (2008). Get a Ballpark E$timate of Your Retirement Needs. Retrieved March 10, 2008. http://www.choosetosave.org/ballpark/ballparkWorksheet-2005final.pdf

United State Bureau of Economic Analysis (BEA). (2007). Retrieved March 10, 2008. http://www.bea.gov

United States Social Security Administration (SSA). (2007). 2007 OASDI Trustees Report. Retrieved March 10, 2008. www.ssa.gov/OACT/TR/TR07/II_project.html#wp108221

Wollan, Bob. (2008). First Steps in Retirement Planning. Iowa State University: University Extension. Retrieved March 10, 2008. http://www.extension.iastate.edu/finances/personal/retirement/ first_steps.htm

References