0:00 people making money I'm your host Kevin bemel and we are here every Wednesday at 12 30 p.m Pacific Time 3 30 p.m eastern time and then as I always say an hour in for mountain and central time and we talk about all the things related to financial success so for the last few weeks I've been talking about various issues related to starting and having a business talked about business entities ways you can find financing some of the fastest ways
0:35 to get started in a business other times we talk about job hunting and and various issues related to going to a meeting to discuss a job etc etc today I'm going to go on to a little bit different topic that relates not necessarily to making money per se but what do you do with the money once you've made it and how do you prepare for a time when perhaps eventually you won't be working I.E retirement so uh just I I feel compelled to say this
1:13 because it doesn't get um uh discussed very often but the idea of retirement is actually a pretty New Concept um most people in history never retired they could never accumulate enough wealth that would allow them to live and not work so if you think about maybe 150 200 years ago when we lived in a much more class stratified Society so you had the
1:49 very wealthy or in Europe we might have called them you know the aristocratic or the upper class so they had inherited wealth from generation to generation to generation to generation and very much until perhaps the 19th century the 1800s it was considered a a bad thing to work so you wanted to be a Gentleman of Leisure and of course women of that class for sure did not work even even during the 1800s it was very very unusual for a woman of the upper class
2:26 to work so you know they spent their men spent their time um conferring with you know their estate manager perhaps that was about as much work as they did other than that they might get involved in scientific work writing politics something like that that they would not have had a profession they would not have had a business that is not what the upper class did they they were retired from birth in many ways um and women spent their time making calls visiting each other perhaps doing charitable work and and
3:02 um in some very limited cases they might have done some writing or scientific work that was pretty unusual as well um and by the way you the probably the best portrayal that I've ever seen of the transition of the upper class is Downton Abbey um I I'm a bit of a Downton Abbey uh you know lover I guess you would call it I and and if you so if you're interested in that but by all means if you have not seen it um it it is it's a wonderfully done show the original show and and what's what's nice is it is pretty historically
3:38 accurate um of course there's a you know dramatized to it to make it more interesting but uh and then so then um you know going back several hundred years you had the upper class or the aristocracy and then you had the lower class you had you know the Surfs or or the poor um and of course they never retired it was it was not possible they worked until they died and then in between there was always kind of a merchant class what we would Now call the middle class okay in between the upper class and the lower class or the the very
4:14 wealthy and and the sort of perpetually poor um but that was a very small segment of society and rarely um did they get to the point where they could accumulate enough money where they didn't have to work although the goal especially as you as you moved forward into the 16 1700s was to and and into the 1800s um even more so was to acquire enough money to buy themselves into the upper class okay so a lot of the
4:50 families that are in the upper class did not start there okay I mean of course there was no sort of nobody you know if you go back a couple thousand years there was just people right so it was through wealth influence power that's then an upper class developed um and so so you know if you were middle class and you could uh make enough money through business or whatever you were doing typically through business some sort of Commerce then you might join the upper class you might buy a title you might be able to convince the crown
5:28 um for example in England the king or the queen uh to to sort of grant you um some sort of uh you know landed estate um perhaps for service uh to to to The Sovereign to the king or queen and then that way you joined the upper class um although people who joined the upper class oftentimes um didn't become complete you know people of leisure because they were used to working right so retirement is more of a modern day um idea post really kind of post World
6:05 War II almost so maybe about 75 years and the ability to retire came largely from the fact that the post-world War II years the post-world war decades 50s 60s um were were a decade of tremendous uh ability for people in the United States to create wealth that was that was one part of it and by then labor unions had become strong enough um and that they were able to negotiate
6:41 for pension plans that allowed even middle class workers to retire and so the you know we might call the World War II generation the the so-called greatest generation many of them were are able to retire um because this by then the systems were in place whereby they could accumulate enough wealth um that they didn't have to work um as as well the idea of a sort of mandatory retirement age
7:16 um grew uh typically around 65 and and part of that was I think and I I don't know this historically so this is just me guessing now but it seems to me that there was a a a a desire by younger people to sort of get the older people out number one number two um when you only had so many top positions so then nobody could move up unless these people were forced to move on and so that system of retiring people you you may have heard like
7:51 um you know after 30 years you get a you know a pension and a gold watch and you know off you go into retirement right so that became a fairly common thing um for several decades and and but despite that people in the lower economic strata they never retired they never did they could never accumulate enough money to to retire so so now here we sit in contemporary the Contemporary United States and you know
8:26 on the one hand in some ways it's getting harder to retire life is more expensive and on the other hand the ability for anyone to accumulate wealth or maybe not anyone per literally anyone but the the broadened ability for people in this country to accumulate wealth um it is such that functionally most people if they work hard plan judiciously can probably acquire enough money to be able to retire now of course it depends what
9:02 kind of lifestyle that you want to lead when you retire and and so when when we when you think about that I think the first question to answer is what do I want retirement to look like what am I going to do who you know who who's going to be in my life when I retire these sort of very basic questions so retirement is not solely a financial function okay there are other aspects because I remember when my mother first retired after working you know most of her adult life
9:37 she was bored out of her head she just couldn't she actually went back to work for a while I think it was at a garden store or something and then she didn't like that and eventually she she sort of found all these things to do and and she she made a lot of friends who were retired and she traveled and you know so she built herself a life um but I think in the beginning her idea was oh thank goodness I don't have to you know go to work every day anymore and life is going to be great that that is typically not the case many many people who stop working end up
10:14 getting depressed even clinically depressed and and and losing a sense of purpose uh losing their purpose and a sense of mission in their life so you know again I think the first step in deciding about retirement is what do I want my retirement to look like so I know for myself I don't think I'll ever completely retire in the sense of you know become I'm literally a man of leisure if you will um I I I I like talking to people about
10:50 business I like helping them establish their careers build their careers build their businesses I I get a lot of enjoyment out of that I it's it's part of my purpose in life and so I just don't see myself ever completely retiring um in the way say my mother did devoting her time to travel and fixing up her house and and those kind of things and and this is not to criticize her at all everybody should figure out their own path um the key thing is what will you know what will you enjoy what what will make
11:27 you what will make your life full right in the same way that we talk about that during the you know during the earlier phases of our life the same thing happens in in retirement and I've spoken to many people um who say I'm I'm I don't ever want to retire I love what I do um and and I don't ever want to stop so um I think you know just as we've talked which I think I've talked about this before 50 years ago and or and earlier you know the the rails with it within which we lived our lives were much more set
12:04 right I was having this conversation with somebody yesterday I was saying you know when I was heading into college I already knew I was going to college I was getting married I was having children right that is what you did that is that was my generation right that is not the case anymore today and and it makes life much more difficult we we have to really figure out what does success mean to each of us individually what what you know what is our individual definition of it what do we want to do with our lives okay and
12:39 and our society our culture is nowhere near as directive of us as it used to be and so that that's a very difficult thing to figure out it's really a matter of figuring out what is what is my identity who am I and what you know what makes me tick and and and and what will help me to feel I'm I'm living a life well lived so so I'm coming back now to the to the financial aspects of retirement If part of the plan is to not work or to
13:14 dramatically scale back how much you work then the reality is you're gonna have to have some Financial Resources to do that it's inescapable right um and you know so so how do we do that what does that entail so today I'm going to talk about just a few um basic concepts of retirement plans retirement accounts however you want to term that um and and just just to give you a a brief overview now I you know I feel
13:51 compelled to say this because it's the world we live in nothing that I'm saying today is meant to be specific device for any individual this is general information for you to consider your specific situation I have no idea what it is I I can't even begin to comment on it um so so nothing I'm saying is is targeted for you as an individual this is information for you to think about hopefully learn more and more and consult with your uh you know your your
14:26 financial professionals about what it what you should do for your specific case okay that's crucially important just like each one of us has to have our own definition of of what is success and and what will help us to live a fulfilling life what each of us needs to do for our financial well-being is is very individualized okay so um what may be the right decision for me would not by any means be necessarily the right decision uh for you okay so um we're I put together just a a real
15:02 short um PowerPoint so let me uh wow let's see um I'm not sure this is huh open system preferences well okay let's see there we go oh well okay something happened with zoom all right so you know what uh I'm just
15:39 gonna I'm just gonna talk about it then unfortunately you you won't be able to see uh the slides that I put together um so uh you know that but uh if if you want um you'll you'll find my um email address my contact information in the show notes I'll be happy to send you a a copy of the presentation so if you were seeing it in front of you right now you would see kind of a green field of wheat very sort of uh you know calm looking um picture that says retirement accounts um and you know as I all as I often do
16:15 um I I start out by talking about the three pillars of attainment that's this graphic back here and and as we always do we're we're talking in the Pursuits pillar and the finances realm so you know finances is not just working or having a business it's it's really the full gamut so when you think about finances we think about Investments we think about insurance all of the you know finances in a very broadly defined way and and so that's what I'm doing today is is approaching that topic um you know more broadly than um than I
16:52 have them in in the past Okay so bring the slide here okay so all right so the first concept is there are basic there are two fundamental types of retirement plans or retirement accounts there's something called a defined benefit account and there's something called a defined contribution account now they're in their names is the way that they worked or that they work I should say not past tense the way that they
17:27 work okay so a defined benefit plan or a defined benefit pension is a pension where the amount of money that the recipient receives is set okay and the unknowns are how much money has to be put in or the unknown is how much money has to be put into the plan in order for that beneficiary that pensioner the person receiving the money from the pension will so that they can
18:03 get the amount of money that they that's been defined for them okay so for example a defined benefit pension you you might the the benefit might be two thousand dollars a month okay so then the open question is how much money needs to be in the plan in order for it to pay two thousand dollars a month for whatever the term of the plan is typically the life of the beneficiary okay I'm going to use the term beneficiary pensioner or plan plan beneficiary all those mean the same thing it's the person receiving the
18:39 money from the plan from the pension okay that's a defined benefit pension okay the other type is a defined contribution plan now in a defined contribution plan we know up front how much is being paid in and oftentimes com uh defined contribution plans have a set amount that's paid in each month okay and so we know that already what we
19:14 don't know is when the beneficiary starts withdrawing money or getting payments from that pension we don't know how much they're going to get that's unknown okay we can make some projections but we we don't know until we actually start taking money out and it typically will vary over the life of the plan okay so you can see that in a defined benefit pension okay the risk is on the person who has to
19:50 contribute the money because the pensioner is getting their what they're getting has already been set and that's it okay in a defined contribution pension okay the risk is on the beneficiary okay whoever is paying in the money whether it's the beneficiary himself or whether it's the company he works for whatever they know this is what I put in periodically each month or whatever whatever the period is the person receiving the money the pensioner he's not going to know how much he's
20:27 gonna get because it's it's going to vary depending on how how well the money is invested what what kind of inflation there is etc etc Okay so let's talk about where you typically see these pensions these days so when I was a kid almost all pensions were defined benefit pensions that's why retirement that's why so many people of my parents generation could retire and that's why they stayed at companies for so long so
21:04 if someone started working for a company let's say at 25 years old okay typically among the benefits that company paid was a pension and it was a defined benefit pension so the person knew if I work for this company until retirement I'm going to be able to retire and get a certain amount of money each month for the rest of my life okay now that's a terrific benefit or it sounds like a terrific benefit but keep
21:40 in mind in a way it trapped people into working for the company because a lot of times if you left you gave up that pension Okay so until your pension benefits vested meaning they be they you you owned them if you left the company that's it you got zero okay and the vesting periods could be long hey you could 20 you it could take 20 years for you to vest in your pension plan okay so you if like if you work there 15 years and you were really unhappy but
22:16 hey you hung in there for another five years in order to get that pension because you you didn't want to give that up because typically you there was a trade-off between how much salary you got versus the pension benefits that you got so to get great pension benefits typically you accepted kind of a lower lifestyle during the time when the pension was building up right and and and that's what allowed that system to work the other thing that allowed it to work was there was a growing Workforce so companies were able to fund those
22:53 pensions because they were growing the economy was growing and there were more and more people sort of paying in benefits to these pensions relative the num to the number of people who were taking their benefits from the pension okay now as our birth rate declined and the rate of employment increase slowed it became harder and harder for companies to maintain those kind of pension plans and they and so what happened was they
23:28 started converting to defined contribution plans and I remember as as a teenager I think is kind of I think it's I think this started kind of in the 70s maybe it started earlier than that but I first remember hearing about it in the 1970s so you would hear about automobile manufacturers negotiating with unions and one of the big issues was pension benefits because of course the unions wanted to maintain Define benefit pensions for their members and the car companies that were
24:03 struggling at the time with competitions from Japan and Germany as well as their own mismanagement they were finding it harder and harder and harder to pay these pension benefits and the pension plans were chronically underfunded meaning they weren't putting in enough money into them in order to actually be able to pay those benefits so they were heading for a huge crisis and there were cases where pension plans essentially went broke and the pensioners after working all that time got little if any benefits
24:39 from them so the whole system was was completely out of whack and so in order to avoid that in the future companies shifted to a defined contribution plan and initially um you know they might contribute money to it every month or they might allow they might deduct money from the employees salary and contribute it to the pension plan each month or a combination if the employee put in a hundred dollars they might match a hundred dollars things there were all kinds of different ways of doing it like that
25:14 but what that did is it shifted the burden of the pension or not the burden the risk of the pension off of the company and on to the employees as we as they talked about a few minutes ago in a defined contribution pension the contributors know how much money they're obligated to put in what they what we don't know is how much in benefits the beneficiary is going to get out when the beneficiary retires okay so that's been a a huge shift in private company pensions over the last
25:51 40 or 50 years we're at to where we where we are today okay so where we are today is very very few private companies offer defined benefit pensions okay I I would imagine in the automobile industry there are still employees who are getting benefits from them who retired you know years ago I but I I as as far as I know even in a highly unionized uh field like automobile manufacturing I I don't think
26:27 workers there get defined benefit pensions anymore they may I'm not 100 sure but in most other places in in the private sector and for that matter in the non-profit sector people do not get defined benefit uh pensions anymore they they they typically will have a defined contribution pension so where do we see defined defined a benefit pensions nowadays two main places well actually it's one Main Place one great big Main Place most
27:03 governments still have defined benefit pensions okay so the federal government state governments and to the extent that local governments um have pensions for their employees they they still tend to be defined benefit pensions and if you follow the news on these things you will hear periodically about how many states pension plans are underfunded or dramatically underfunded so you might have heard of Calpers so Calpers is a
27:38 California public employees pension fund and you I I read periodically that you know either because they had a bad year and all of a sudden they're underfunded or maybe it's a Perpetual underfunding but the benefits promised to beneficiaries in in these public sector pensions is typically outstripping the amount of money that have been paid into these pensions and so there's either going to have to be they're either going to have to borrow to meet their obligations or they're going to have to raise taxes to
28:14 meet them or they're going to have to you know default on some of their pension obligations it's not really clear to me what's going to happen what I can tell you is that that most defined benefit uh defined benefit pensions are now for people who work for various government entities so for example I was in the Navy for many years and and people always ask me oh well so so you go you got a pension right because it's a military pension is a great pension it's a defined benefit pension I say no I didn't get one okay I started too late
28:50 and and the only way I could get into the Navy was by acknowledging that they did not have to let me stay for the minimum 20 years it took to qualify for a pension in essence for pension benefits to vest it's not legally vesting in in the government the way it is in the private sector that's that's a doesn't really matter but the bottom line is um you know you I I I did not I was was not permitted to stay for 20 years um and so there was they they knew going in they weren't going to have to pay me a pension now that's just me
29:27 um for most people who join the military they join young enough that they can they can stay for 20 years if they want to and get a pension um now and um it was about I want to say about five years ago the military moved to a defined benefit I'm sorry A Defined contribution model because what the Department of Defense figured out was ever more of their funding was going for retiree benefits and they didn't have they didn't have the money they needed for current
30:02 military personnel along with equipment and you know all this all the stuff they need so so they've they shifted the model about five years ago and I was at the midpoint in that shift and I had the option of of going one way or the other for me it really didn't matter I wasn't getting a pension no matter what um but uh for for younger people who joined the military a few years ago um they are now getting a defined benefit pension and in many ways it's it's a benefit to them because most people who join the military don't stay for anything close to 20 years they I
30:39 think the average uh term length of uh of um Duty in the military is around five years so for for most of the people who join the military now with a defined contribution pension they will walk away with at least a small pension that they own because it's defined online contribution whereas before they would have walked away with nothing and unlike this situation private pensions there was no reduction in pay to offset the the um you know the the defined contribution
31:15 pension paid cap you know at its regular Pace um and this was an added benefit uh put on top so um I I don't know if other sectors of the government are going in that direction um but but suffice it to say um in the in the world today unless you work for a government entity it's very unlikely that you are going to get a defined benefit pension so the pension that most most of us are going to have is a defined contribution pension or
31:51 some kind of defined contribution retirement plan okay and and that really means that in many ways we're going to direct how that works okay so um what I'm going to talk about for the rest of the time then is um what are called Define contribution plans and I'm not going to talk about all of them I'm just going to talk about two to give you an idea of of kind of the very basics of how they work okay so
32:27 over the years if you've if you've heard people talking about um uh retirement plans you may have heard a 401k a 403 b um a Tio a sepira there there's all kinds of plans out there okay but they really come down to two basic types and they have to do with how when the money goes in and how the money grows and how and and
33:03 what happens when you access the money okay and so I'm just going to use two that provide a very basic example one is the traditional IRA and the other is a Roth IRA now you've may have heard of both of those okay the Roth IRA is the newer of the two okay and um the the IRA not the Irish Republican Army the individual retirement account which is sort of the you know the term for
33:38 defined um uh contribution uh uh retirement plans okay individual retirement count it's a an account that's owned by the individual from the get-go okay and that's one of the things that makes it so good is if you have an IRA you're no longer bound to your employer if you want to leave you can and you're not you're not going to lose typically any of your um IRA benefits because they're personal to you they're individual to you okay
34:13 now there are defined contribution plans where especially where the employer makes a matching contribution that kind of thing sometimes you have to be with the company for a certain period of time before they'll do the matching and you have to stay for a certain number of years before it vests in you I'm not going to get into those right now those those are complications and and they there's all kinds of you know permutations in those things but but what we're going to talk about for the rest of the time here again is is a traditional IRA and a Roth IRA okay now in a traditional
34:48 IRA okay you you are contributing before tax dollars meaning the money going in hasn't had income tax paid on it yet okay and and sometimes those payments may be a deductible expense on your income tax okay now that's great because you're investing in pre-tax dollars which means
35:23 they haven't been shrunk by whatever income tax you're paying okay and then once it's in the ira it grows tax-free or well let me let me rephrase that it grows tax deferred there's really no such thing as tax free as you might imagine okay it grows tax deferred which means as let's just say for the sake of example you have a thousand dollars in your IRA okay and over the next year you make a return
36:00 of 10 so you make a hundred dollars on it now that hundred dollars will not be taxed as part of your income that year okay but it's not going to escape taxation forever it's not tax free it's just when you pay taxes is deferred put off to the Future okay and that would and and the reason that's good is ins so starting at the beginning of the second year you now have eleven hundred dollars
36:35 earning a return as opposed to if you had to pay taxes on it let's say you're at a 25 tax bracket so you only have a thousand seventy five dollars earning a return okay so twenty five dollars is no big deal well it may not be in the beginning but as it builds up and builds up so let's say you have a hundred thousand dollars in the account and that year it earns ten percent that's ten thousand dollars So at the end of the year I have a hundred and ten thousand dollars if you had to pay taxes on it you'd only have a
37:10 hundred and seven thousand five hundred dollars so you have another twenty five hundred dollars in the account that continues to earn a return so the tax deferred nature of how the account builds its value is a great aspect of an IRA that's why one of the reasons why they're so so popular and I mentioned that you own it that's a that's one reason they're so popular another is the tax deferred earning uh Power of of an IRA okay and then what happens is
37:46 you can typically start taking money out when you are 59 and a half years old okay you don't have to but you may if you take it out before 59 and a half years old you'll pay a penalty I believe it's 10 but don't quote me on that okay so so that's oh Siri Siri's gonna correct me thank you um so um and then there there's an age at which it's mandatory for you to start
38:22 taking payments okay and uh I I have the figure in my hand now I dropped it 69 72 somewhere around there if you haven't started taking withdrawals from your IRA by then you will get penalized for not doing so because the government does want its taxes okay now on a traditional IRA everything you take out is taxable since you never paid taxes on the money you invested in it when you take it out the principle is taxable
38:58 and of course the the money you earned on it the return whether it's interest dividends whatever it was invested in we'll talk about that next week whatever it was invested in that return is taxable as well okay so all of it is taxable so you see you don't escape paying taxes on the money you invested in the ira you just put it off and the idea is when you're in your Peak earning years you're paying taxes at a higher rate than you will when you retire and so the idea is you'll end up
39:34 paying less taxes by waiting to pay the taxes at the point where you retire that's the idea behind it okay whether that's true for any individual or not that'll depend on your circumstances okay but but that that that is is the idea behind it okay so that's a traditional IRA okay and there's there are limits on the amount of money that each year that you can put in a traditional Iran I think they just changed they the Congress increases them periodically okay they were five thousand dollars for a while then they were six I think I read recently they were increased but I I
40:10 could be wrong about that um but in any event um you know there is a limit to what you can put into them okay and once you've reached that limit then you have to find something else to do and there are other things you can do to save for retirement that may have the tax deferred um benefit to them it's just the IRAs is is is is it's not it's only usable up to a certain level okay so then you have the Roth IRA so the Roth IRA is more recent although it's still been around for quite a long time now the difference for the Roth IRA is
40:46 generally the money you're investing in the Roth IRA is after tax dollars so you've already paid tax on that money and then you put it into the Roth IRA okay once it's in the Roth IRA like with the traditional IRA it grows tax-free okay so you still get the benefit of earning a return on all of the return from the previous periods okay and you build up and builds up and builds up hopefully and then
41:22 again at um the youngest is at 59 and a half years old you can start withdrawing money from it okay and again like with the traditional IRA if you withdraw money prior to 59 and a half okay you'll you'll pay a penalty now by the way there are exceptions um if you withdraw money for certain reasons for certain yeah for certain reasons you may not have to pay penalties okay so if you um withdraw money for uh you know like surgery you know life-saving surgery or
41:57 something I believe you don't have to pay the penalties okay so there are some limited number of reasons when you can withdraw before 59 and a half where you won't pay penalties but in general you're going to pay penalties if you withdraw money for both of them before 59 and a half once you hit 59 and a half you can withdraw money now the different with the Roth IRA since you've already paid taxes on the principal when you withdraw principal you don't have to pay taxes because you already did so you're only going to pay money on the return the amount of money
42:33 accumulated over and above the principal paid in so let's say when you retire you have a Roth IRA that's worth um five hundred thousand dollars okay that's the value of the Roth IRA okay and let's further say that of the five hundred thousand dollars two hundred thousand dollars of it maybe you started you were very young when you started it two hundred thousand dollars of it was money you contributed that you've already paid taxes on
43:09 so you're only going to pay taxes on the three hundred thousand dollars that's accumulated over and above the principal now contrast that with the traditional IRA where because the two hundred thousand dollars you contributed was contributed before taxes you haven't paid taxes on it yet okay so the entire five hundred thousand dollars will be taxable when you withdraw now I'm not saying you have to withdraw it in a lump sum I'm just saying that um you know no portion of the five hundred
43:46 thousand dollars will will ever not be taxed okay whereas with the Roth IRA when you get to the point where you start withdrawing principle you're going to be able to withdraw that and not pay taxes on it because you already did okay now retirement plans Define contribution retirement plans tend to act like either a traditional IRA or a Roth IRA okay that's why I just did these two basic categories and I can't tell you
44:22 which one is right for you or which one is right for you at any given time there are opportunities to convert a traditional to a Roth as I understand okay these are all issues to discuss with your um with your financial services professional okay the key thing is is to understand the main differences so you can ask questions okay because it may be early on in your career you have a very low tax rate okay and it may maybe it's actually
44:58 going to be lower than what it would be when you retire you're thinking or something like that I don't know all of these things should be discussed worked out considered before a decision is made as to what type of retirement plan you set up okay and your financial professional it will be able to help you with that that's that's their job okay okay and by the way it may not be the specific person you're specific but but they will get the information for you from you know the experts because these rules change periodically right there's there'll be a new tax bill they'll tweak
45:34 this rule they'll tweak that rule and it's it's frankly it takes a lot of time and effort to keep up with with all the changes okay and so that's why um you you know you want to have someone advising you on these kind of issues so you make sure you're getting the best information possible and by the way when I say Financial professional it could be your accountant maybe you have a lawyer who deals with these things maybe you have a financial services professional any of these people um should be qualified to help you with this but you know I highly recommend
46:11 that you talk to them before making any of these decisions unless you know the information yourself in which case why are you watching this um right to try and see if I made any mistakes so then you can let me know um I get it it's it's fine um so so that's the real basics of retirement accounts okay and and again I'm going to repeat what I said in the beginning the best thing you can do is engage in making decisions about this issue as early as possible okay even if
46:49 you're not able to put away much money and maybe you're young you're just starting out you're not making a whole lot of money but even if you could just put put aside a little bit um on a periodic basis that's that's much better than waiting to you know you're an old guy like me to start a pension all right because um it takes so much time so you might have heard of the rule of 72 okay so the rule of 72 is take the the rate of return you're making on an investment
47:25 and divide 72 by that rate of return and that will tell you how long it will take for your money to double okay so if you're getting a one percent return on your investment it's going to take you 72 divided by one or 72 years in order for the money to double if you're getting a six percent return okay and right now the the 10-year treasury is at four okay so six percent is should be should be very doable okay so if you invest your money at six
48:02 percent 72 divided by 6 is 12 so it'll take 12 years to double your money okay and if you can get a 12 return which again it's certainly possible in the in the investment environment today okay so 72 divided by 12 is 6 which means every six years your money will double right and that's how to make your money work for you that's the benefit of saving your money and that's what will allow you to accumulate enough money to where you can meet your financial goals
48:39 whether it's complete retirement whether it's being able to have money to supplement so you don't have to work as much as you did before or something like whatever whatever it is whatever whatever you decide you want to do okay the main thing is plan ahead so you have the financial resources that you need okay I'm just going to take a look at my slides real quickly to make sure I covered everything I wanted to let's see yes um it's interesting I'm one of the slides dropped off okay well
49:14 so um the only other slide I had in there was where you can go to ask questions okay and that'll be in the show notes all the the contact information um that I mentioned will be uh in the show notes so um just to to review uh one last time two basic types of pension Define benefit pension Define contribution pension these days Define benefit pension probably only if you're working for a government entity okay maybe some Legacy uh like automobile manufacturing and places like that
49:49 um Define contribution pension probably what you're going to have okay and basically two types of defined contribution pensions one is in sort of a traditional IRA where you're contributing free tax dollars the money grows tax-free and then when you withdraw everything you withdraw is taxable and then the Roth IRA where the the money you contribute is contributed on an after-tax basis you've already paid taxes on the contributions and then it grows tax-free or tax deferred I should say and then when you take the
50:26 money out the growth is taxed but the principal is not taxed because you already paid taxes on it so those are real basic concepts for you to know in figuring out you're starting to figure out your retirement um your financial financial needs for your retirement or for the the later years of your life your your work slowing down period so that's what I have for you today next week I'm going to talk about various types of um of Investments
51:01 um because when it comes to putting money in for retirement um you know there's lots of different places you can invest the money and so we should know some of the basics of that as well so tune in next week at uh on Wednesday at 12 30 PM Pacific Time 3 30 p.m Eastern Time an hour in for mountain and Central Time right and we will continue on the way to wow show people making money as we work toward meeting our financial goals and with that said I I just want to mention I do
51:37 have um some some really great guests booked coming up in in a few weeks very excited for you to meet them and hear hear their stories so stay tuned for that and also I have a second show now it's on Tuesdays at 10 30. it's a half hour show it's called the way to wow business lessons from the military so I invite you to tune in for that show and if you can't tune in live then uh you can always go to our YouTube channel the way to wow show on YouTube and all of our
52:12 episodes are there from the first three seasons of the show we're now in season four for people making money we're in season one for uh business lessons from the military so I invite you to to check those out and as always if if you have something you want to learn about or if you know someone you think would make an interesting guess by all means do contact me I'd be happy to talk to you or or your associate and perhaps we'll we'll have them on as a guest and that just leads me to say as I always do in sign off to my my dear friend who was
52:47 such an inspiration to me Marie darling you are and ever will be my bell thank you very much for watching and look forward to seeing you next week