Saving for the Future - Retirement
From Metropolitan Life
The average American spends 18 years in retirement and less than half of Americans have put aside money specifically for retirement.*
Before Retirement
                                                           In Retirement
                    1. Housing Costs     (rent or mortgage, insurance/taxes, utilities, maintenance)
                    2. Necessities           (groceries, clothing, etc.)
                    3. Income Taxes
                   4. Health Care
                    5. Other Insurance
                    6. Transportation  (car payments, gas, insurance, maintenance)
                    7. Leisure Activities  (hobbies, travel, entertainment)
                    8.Other Expenses (charities, gifts, etc.)
ANNUAL EXPENSES       (in today's dollars)  =___________
                  After you've completed the worksheet, think about the following

                      1.How much should I save for retirement?
                      2.How long do I have to save that amount before retirement?
                      3.Where can I invest my retirement money?
                      4.How much risk am I willing to take on my investments?

                   Don't just skip past Question 1. Many people in the work force
                   assume the answer to that question is zero because their
                   retirement money will come from a company-sponsored pension
                   plan and Social Security. Unfortunately, both these options
                   combined may not provide a sufficient
                   retirement income. Also, you don't control these
                   amounts, so you can't guarantee how much will
                   truly be available to you when you retire.

Investmet Retirement Accounts

Know Your Income and Expenses

  The next step is to keep track of your income and your expenses for every
  month. Write down what you and others in your family earn, and then your
  monthly expenses.

  Pay Yourself or Your Family First

  Include a category for saving and investing. What are you paying yourself every
  month? Many people get into the habit of saving and investing by following this
  advice: Always pay yourself or your family first. Many people find it easier to pay
  themselves first if they allow their bank to automatically remove money from
  their paycheck and deposit it into a savings or investment account. That way
  they are never tempted to spend the money before they pay themselves first.

  "But I Spend Everything I Make!"

  Finding Money to Save or Invest

  If you are spending all your income, and never have money to save or invest,
  youíll need to look for ways to cut back on your expenses. When you watch
  where you spend your money, you will be surprised how little everyday expenses
  that you can do without add up over a year.

   5.Step 3

   Know Your Income and What You Spend

   Monthly Income and Expenses

   Income _______
   Savings _______
   Investments ____
     rent or
     mortgage _____
     electricity _____
     gas/oil ________
     telephone _____
     property tax____
     furniture _______
   Food __________
   Loans _________
   Insurance ______
   Education ______
   Recreation _____
   Health care _____
   Gifts __________
   Other _________
   Total __________

  Small Savings Add Up to Big Money
  How much does a cup of coffee cost you?
  Would you believe $465.84?

  If you buy a cup of coffee every day at $1.00, that adds up to $365.00 a year. If
  you saved that $365.00 for just one year, and put it into a savings account or
  investment that earns 5% a year, it would grow to $465.84 by the end of 5 years,
  and by the end of 30 years, to $1,577.50.

  Thatís the power of "compounding." With compound interest, you earn interest
  on the money you save and on the interest that money earns. Over time, even a
  small amount saved can add up to big money.

  If you are willing to watch what you spend and look for little ways to save on a
  regular schedule, you can make money grow. You just did it with one cup of

  If a small cup of coffee can make such a huge difference, start looking at how you
  could make your money grow if you decided to spend less on other things and
  save those extra dollars.

  If you buy on impulse, make a rule that youíll always wait 24 hours to buy
  anything. You may lose your desire to buy it after a day. And try saving your
  spare change at the end of each day. Youíll be surprised how quickly those
  nickels and dimes add up!

  Now, once you have set aside some money to save and invest, what are your

Making Money Grow

  The Two Ways to Make Money

  There are basically two ways to make money.

  1. You work for money.

  Someone pays you to work for them or you have your own business.

  2. Your money works for you.

  You take your money and you save or invest it.

  Your money can work for you in two ways:

  Your money earns money. When your money goes to work, it may earn a
  steady paycheck. Someone pays you to use your money for a period of time.
  When you get your money back, you get it back plus "interest." Or, if you buy
  stock in a company that pays "dividends," the company may pay you a portion of
  its earnings on a regular basis. Your money can make an "income," just like you.
  You can make more money when you and your money work.

  You buy something with your money that could increase in value. You
  become an owner of something that you hope increases in value over time. When
  you need your money back, you sell it, hoping someone else will pay you more
  for it. For instance, you buy a piece of land thinking it will increase in value as
  more businesses or people move into your town. You expect to sell the land in
  five, ten, or twenty years when someone will buy it from you for a lot more
  money than you paid.

  And sometimes, your money can do both at the same timeóearn a steady
  paycheck and increase in value.

   6.Products that earn interest:
        savings accounts
        some checking accounts

        Products that could increase or decrease in value:
        mutual funds
        bonds, if you sell them before they are due

        Products that could do both:
        stocks that earn dividends
        mutual funds

The Differences Between Saving and Investing


  Your "savings" are usually put into the safest places, or products, that allow you
  access to your money at any time. Savings products include saving accounts,
  checking accounts, and certificates of deposit. At some banks and savings &
  loan associations your deposits may be insured by the Federal Deposit Insurance
  Corporation (FDIC). But thereís a tradeoff for security and ready availability.
  Your money is paid a low wage as it works for you.

  Most smart investors put enough money in a savings product to cover an
  emergency, like sudden unemployment. Some make sure they have up to 6
  months of their income in savings so that they know it will absolutely be there
  for them when they need it.

  But how "safe" is a savings account if you leave all of your money there for a
  long time, and the interest it earns doesnít keep up with inflation? What if you
  save a dollar when it can buy a loaf of bread, but years later when you withdraw
  that dollar plus the interest you earned on it, it can only buy half a loaf? This is
  why many people put some of their money in savings, but look to investing so
  they can earn more over long periods of time, say three years or longer.

   7.The Basic Types of Productsó


        saving accounts
        certificates of deposit
        checking accounts


        mutual funds
        real estate
        commodities (like gold or silver)


  When you "invest," you have a greater chance of losing your money than when
  you "save." Unlike FDIC-insured deposits, the money you invest in securities,
  mutual funds, and other similar investments is not federally insured. You could
  lose your "principal"óthe amount youíve invested. But you also have the
  opportunity to earn more money.

  What about risk?

  Investors protect themselves against risk by spreading their money among various
  investments, hoping that if one investment loses money, the other investments
  will more than make up for those losses. This strategy, called "diversification,"
  can be neatly summed up as, "Donít put all your eggs in one basket."

  Once youíve saved money for investing, consider carefully all your options and
  think about what diversification strategy makes sense for you. While the SEC
  cannot recommend any particular investment product, you should know that a
  vast array of investment products existsóincluding stocks and stock mutual
  funds, corporate and municipal bonds, bond mutual funds, certificates of
  deposits, money market funds, and U.S. Treasury securities.

  Diversification canít guarantee that your investments wonít suffer if the market
  drops. But it can help you balance risk.

  What are the best investments for me?

  The answer depends on when you will need the money, your goals, and if you will
  be able to sleep at night if you purchase a risky investment where you could lose
  your principal.

  For instance, if you are saving for retirement, and you have 35 years before you
  retire, you may want to invest in riskier investment products, knowing that if you
  stick to only the "savings" products or to less risky investment products, your
  money will grow too slowlyóor, given inflation and taxes, you may lose the
  purchasing power of your money. A frequent mistake people make is putting
  money they will not need for a very long time in investments that pay a low
  amount of interest.

  On the other hand, if you are saving for a short term goal, you donít want to
  choose risky investments, because when itís time to sell, you may have to take a
  loss. Since investments often move up and down in value rapidly, you want to
  make sure that you can wait and sell at the best possible time.
What are investments all about?

  When you make an investment, you are giving your money to a company or
  enterprise, hoping that it will be successful and pay you back with even more

  Stocks and bonds

  Many companies offer investors the opportunity to buy either stocks or bonds.
  The following example shows you how stocks and bonds differ.

  Letís say you believe that a company that makes automobiles may be a good
  investment. Everyone you know is buying one of its cars. Plus your friends
  report that the companyís cars rarely break down and run well for years. You
  either have an investment professional investigate the company and read as
  much as possible about it, or you do it yourself. After your research, youíre
  convinced itís a solid company that will sell many more cars in the years ahead.

  The automobile company offers both stocks and bonds. With the bonds, the
  company agrees to pay you back your initial investment in ten years, plus pay
  you interest twice a year at the rate of 8% a year.

  If you buy the stock, you take on the risk of potentially losing a portion or all of
  your initial investment if the company does poorly or the stock market drops in
  value. But you may also see the stock increase in value beyond what you could
  earn from the bonds. If you buy the stock, you become an "owner" of the
  company. Youíll only make money, if the company makes profits.

  You wrestle with the decision. If you buy the bonds, you will get your money
  back plus the 8% interest a year. And you think the company will be able to
  honor its promise to you on the bonds because it has been in business for many
  years and doesnít look like it could go bankrupt. The company has a long history
  of making cars and you know that its stock has gone up in price by 12% a year,
  plus it typically paid stockholders a dividend of 4% from its profits each year.

  You take your time and make a careful decision. Only time will tell if you made
  the right choice. Youíll keep a close eye on the company and keep the stock as
  long as the company keeps selling a quality car that consumers want to drive.

   8.The main differences between stocks and bonds


   The company promises to return money plus interest.

   Risk: If the company goes bankrupt, your money may be lost. But if there is any
   money left, you will be paid before stockholders.


   If the company profits, its stock may go up in value and pay dividends. You may make
   more money than from the bonds.
Ask Questions!

  You can never ask a dumb question about your investments and the people who
  help you choose them.

  Here are some questions you should ask when choosing an investment

       What training and experience do you have? How long have you been in
       What is your investment philosophy? Do you take a lot of risks or are you
       more concerned about the safety of my money?
       Describe your typical client. Can you provide me with references, the
       names of people who have invested with you for a long time?
       How do you get paid? By commission? Amount of assets you manage?
       Another method? Do you get paid more for selling your own firmís
       How much will it cost me in total to do business with you?

  Your investment professional should understand your investment goals, whether
  youíre saving to buy a home, paying for your childrenís education, or enjoying a
  comfortable retirement.

  Your investment professional should also understand your tolerance for risk.
  That is, how much money can you afford to lose if the value of one of your
  investments declines.

  An investment professional has a duty to make sure that he or she only
  recommends investments that are suitable for you. That is, that the investment
  makes sense for you based on your other securities holdings, your financial
  situation, your means, and any other information that your investment
  professional thinks is important.

  The best investment professional is one who fully understands your objectives
  and matches investment recommendations to your goals. Youíll want someone
  you can understand, because your investment professional should teach you
  about investing and investment products.

   10.Steer Clear of Trouble


   Broker not registered with state or SEC


   Promises of quick profits

   Watch Out:

   Pressure to invest


   Broker has been in trouble before

   11.Important Phone Numbers:

   1. _____________
   2. _____________
   3. _____________

  How Should I Monitor My Investments ?

  Investing makes it possible for your money to work for you. In a sense, your
  money has become your employee, and that makes you the boss. Youíll want to
  keep a close watch on how your employee, your money, is doing.

  Some people like to look at the stock quotations every day to see how their
  investments have done. Thatís probably too often. You may get too caught up in
  the ups and downs of the "trading" value of your investment, and sell when its
  value goes down temporarilyóeven though the performance of the company is
  still stellar. Remember, youíre in for the long haul.

  Some people prefer to see how theyíre doing once a year. Thatís probably not
  often enough. Whatís best for you will most likely be somewhere in between,
  based on your goals and your investments.

  But itís not enough to simply check an investmentís performance. You should
  compare that performance against an index of similar investments over the same
  period of time. You should also compare the fees and commissions that youíre
  paying to what other investment professionals charge.

  While you should monitor performance regularly, you should pay close attention
  every time you send your money somewhere else to work.

  Every time you buy or sell an investment you will receive a confirmation slip
  from your broker. Make sure each trade was completed according to your
  instructions. Make sure the buying or selling price was what your broker quoted.
  And make sure the commissions or fees are what your broker said they would be.

  Watch out for "unauthorized" trades in your account. If you get a confirmation
  slip for a transaction that you didnít approve beforehand, call your broker. It may
  have been a mistake. If it happens more than once, or if your broker refuses to
  correct it, call the SEC or your state securities regulator.

  Remember, too, that if you rely on your investment professional for advice, he or
  she has an obligation to recommend investments that match your investment
  goals and tolerance for risk. Your investment professional should not be
  recommending trades simply to generate commissions. Thatís called "churning,"
  and itís illegal.

  How Can I Avoid Problems?

  Choosing someone to help you with your investments is one of the most
  important investment decisions you will ever make.

  While most investment professionals are honest and hardworking, you must
  watch out for those few unscrupulous individuals. They can make your lifeís
  savings disappear in an instant.

  Securities regulators and law enforcement officials can and do catch these
  wrongdoers. But catching them doesnít always get your money back. Too often,
  the money is gone.

  The good news is you can avoid potential problems by protecting yourself.

  Letís say youíve already met with several investment professionals based on
  recommendations from friends and others you trust, and youíve found someone
  who clearly understands your investment objectives. Before you hire this person,
  you still have more homework.

  Make sure the investment professional and her firm are registered with the SEC
  and licensed to do business in your state. And find out from your stateís securities
  regulator whether the investment professional or the firm have ever been
  disciplined or have any complaints against them. You can get that number by
  calling the North American Securities Administrators Association (NASAA)
  toll-free at (888) 84-NASAA.

  You should also find out as much as you can about any investments that your
  investment professional recommends. First, make sure the investments are
  registered. Sometimes a simple phone call to your securities regulator can prevent
  a lot of heartache.

  Be wary of promises of quick profits, offers to share "inside information," and
  pressure to invest before you have an opportunity to investigate. These are all
  warning signs of fraud.

  Ask your investment professional for written materials and prospectuses, and
  read them before you invest. If you have questions, now is the time to ask.

       How will the investment make money?
       How is this investment consistent with my investment goals?
       What must happen for the investment to increase in value?
       What are the risks?
       Where can I get more information?

  Finally, itís always a good idea to write down everything your investment
  professional tells you. Accurate notes will come in handy if ever thereís a