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Financial Facts
Catalogue code: B07
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Slide numbers: B07-1 to B07-28
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Date updated: 2014-12-31
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Financial Facts
Basic Concepts You Need to Know
B07-1
FINANCIAL FACTS
You won’t work forever.
 Financial planners suggest you will need to replace
70–90% of your annual income when you retire.
 On average, Social Security was designed to only
replace 25–40% of your income.
 You may live one-third of your life in retirement.
1
Fact
B07-2
Longer Lifespan
1946 — age 67
2014 — age 78
11 years longer
Source: CIA — the World Fact Book
B07-3
FINANCIAL FACTS
The earlier you save, the better.
Compound return — the return on your original
investment, plus the return on your previous
earnings — can make a huge difference in your
retirement account balance over time.
2
Fact
B07-4
FINANCIAL FACTS
Compound Return
Original investment:
$100
Invested for one year with
an 8% return adding $8 for
a total of:
$108
Invested for another year
with an 8% return adding
around $9 for a total of:
$117
B07-5
FINANCIAL FACTS
Retirement Plan Contributions
Invest $100 per month
beginning at age:
When you retire at age 65,
you have:*
25
$349,101
30
$229,338
35
$149,012
40
$95,103
45
$58,896
50
$34,604
55
$18,295
60
$7,348
*Accounts in this column are based on an 8% annual investment return in a tax-deferred retirement plan. Your
return may be more or less. Note that the funds will be subject to income tax when you receive your distribution(s).
B07-6
FINANCIAL FACTS
To Accumulate $100,000 by Age 65
Age 50
Monthly contribution
$290
Total contributions
$52,200
Total return
$47,800
Total accumulation
$100,000
Based on 8% annual earnings.
This is an illustration to show the concept of compound return and is not intended to imply the past or future performance.
B07-7
FINANCIAL FACTS
To Accumulate $100,000 by Age 65
Age 50
Monthly contribution
Age 40
$290
$105
Total contributions
$52,200
$31,500
Total return
$47,800
$68,500
$100,000
$100,000
Total accumulation
Based on 8% annual earnings.
This is an illustration to show the concept of compound return and is not intended to imply the past or future performance.
B07-8
FINANCIAL FACTS
To Accumulate $100,000 by Age 65
Age 50
Monthly contribution
Age 40
Age 30
$290
$105
$44
Total contributions
$52,200
$31,500
$18,480
Total return
$47,800
$68,500
$81,520
$100,000
$100,000
$100,000
Total accumulation
Based on 8% annual earnings.
This is an illustration to show the concept of compound return and is not intended to imply the past or future performance.
B07-9
FINANCIAL FACTS
Yes, you have money to invest.
 Monitor your spending for one month.
 Determine where your money is going and where
you can economize.
 Start with 1% and increase it 1% each time you
get a raise.
3
Fact
B07-10
FINANCIAL FACTS
Finding Extra Money
 Lower your tax
withholding through your
employer.
 Check fees and interest
rates on all credit cards
(these can be
negotiated).
 Consider consolidating
credit card debt to a lowinterest loan.
 Average your utility bills.
 Utilize all “pre-tax”
programs offered by your
employer.
 Watch ATM and checking
account fees.
 Raise deductibles on
insurance.
 Consider refinancing
your home or car if market
interest rates are 1½%
lower than what you are
paying.
B07-11
FINANCIAL FACTS
A percentage is better than a “fixed dollar” amount.
Monthly salary = $2,000
$100 monthly “fixed” investment (5%)
Five years later with 3% annual raises:
Monthly salary = $2,318
$100 monthly “fixed” investment (4.3%)
4
Fact
B07-12
FINANCIAL FACTS
A “Fixed Dollar”
Contribution
 Remains flat when your
salary increases
 Does not keep pace
with inflation
 Makes it impossible to
maintain your standard
of living when you retire
B07-13
FINANCIAL FACTS
Your investment choice is important.
Fixed Income Assets (Bonds)
 “Loaned” investment
 Bonds, money market
instruments, Treasury
notes, etc.
 Less volatile returns with
reduced risk
 Historically, fixed-income
assets have less potential
risk and lower potential
returns than equity assets
Equity Assets (Stocks)
 “Owned” investment
 Shares of American and
international companies
 Volatile returns with
increased risk
 Historically, equities
have a higher
potential for
long-term
return
5
Fact
B07-14
FINANCIAL FACTS
Which type of investment
is right for you?
 Time horizon
 Risk tolerance
 Diversification
B07-15
FINANCIAL FACTS
Stock Performance from 1930–2010
Percentage of time stocks had positive returns, 1930–2010
1 Year Periods
5 Year Periods
10%
10 Year Periods
20 Year Periods
7%
28%
100%
72%
90%
Positive Returns
93%
Negative Returns
Source: Ibbotson Associates
While past performance is no guarantee of future performance, the market itself has been resilient through the years.
Illustration based on S&P 500 Index from 1/1/1930 to 12/31/2010.
B07-16
FINANCIAL FACTS
Asset Allocation matters.
 Return on investment — the rate at which your
investment grows as a result of earnings.
 Higher return usually means greater risk.
 A small difference in a rate of return can make a big
difference in the size of your investment over time.
6
Fact
B07-17
FINANCIAL FACTS
A little risk can be a good thing.
Conservative Portfolio
 Invests $250/month
 6% average return
for 35 years
 Investment total: $356,000
Aggressive Portfolio
 Invests $250/month
 8% average return
for 35 years
 Investment total: $574,000
This hypothetical illustration is not intended to represent or predict the return on an actual investment.
B07-18
FINANCIAL FACTS
Free money is a big deal.
If matching contributions are offered, you should always
try to take advantage of them.
7
Fact
B07-19
FINANCIAL FACTS
Debt can derail your plan.
 Paying off debt
 Checking your credit record
8
Fact
B07-20
FINANCIAL FACTS
Dealing with Debt
Avoid the minimum payment trap
Monthly Payment
Total Paid
Years to Pay Off
Minimum
$7,431
12
$200 fixed
$6,123
2.6
$225 fixed
$5,970
2.25
$250 fixed
$5,854
2
Assumes $5,000 debt, 16% interest, no additional charges
Source: Bankrate.com
B07-21
FINANCIAL FACTS
Using Debt Wisely
 Importance of your credit
history
 Obtaining your
credit report
• www.annualcreditreport.com
• Call 1-877-322-8228
 Correcting mistakes in
your credit report
B07-22
FINANCIAL FACTS
You can’t time the market.
Market timing — trying to move out of an
investment when you think it is about to lose
value or move into an investment just as you
think it is about to grow in value.
9
Fact
B07-23
FINANCIAL FACTS
Missing the Best Days in the Market — 1990–2010
Market Returns: S&P 500 Index from 1990–2010
0%
2%
4%
6%
Missed 20
best days
10%
8.97%
Stayed fully invested all 5,295 days
Missed 10 best days
8%
5.25%
2.82%
0.76% Missed 30 best days
Sources: FactSet, Standard & Poor’s as of 12/31/2010
B07-24
FINANCIAL FACTS
You’re in it for the long haul.
Dollar cost averaging — Investing the same
amount of money at regular intervals over a
long period of time resulting in a lower
average cost per share.
10
Fact
B07-25
FINANCIAL FACTS
Be a long-term investor.
 Be aware of the
ups and downs
 Remember your
objectives
B07-26
FINANCIAL FACTS
Stuff to Do
 Figure out where you can find more money
in your budget
 Invest a percentage of your income
• Join the 1% Club
 Check your portfolio allocation
• Consider GuideStone’s three approaches
to investing
 Deal with your debt
 Use GPS: Guided Planning Services® *
Financial advice provided by GuideStone Advisors, a controlled-affiliate of GuideStone Financial Resources.
B07-27
B07-28