What could go right or wrong
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What Could Go Right or Wrong?. Retirement Funds. Factors. Unemployment Inflation Knowledge of Finance/Wealth Management. Illness/disability Family. Economic. Health and Family. Unemployment. Cannot retire without first working Firm’s ongoing attempt to cut costs

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Retirement Funds

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What could go right or wrong

What Could Go Right or Wrong?

Retirement Funds


Factors

Factors

  • Unemployment

  • Inflation

  • Knowledge of Finance/Wealth Management

  • Illness/disability

  • Family

Economic

Health and Family


Unemployment

Unemployment

  • Cannot retire without first working

  • Firm’s ongoing attempt to cut costs

  • Increased use (and abuse) of public assistance

    • WIC: Women, Infants, and Children

    • HUD: Housing and Urban Development

    • CHIP: Children’s Health Insurance Program

  • Increase in government spending

    • Labor Force

    • Productivity

    • Capital Accumulation

    • Rent-seeking


Firms cut costs

Firms Cut Costs

  • Saving on payroll- benefit in the short run, but may hurt in the long run

    • First in, first out- may be a better idea to cut some of the middle management instead?

    • Younger generation is the future of the firm

  • Mergers/Acquisitions-

    • You may quickly be replaced if your firm is bought by another


Government spending its effects

Government Spending- Its effects

  • Labor Force

    • Reduces participation by creating disincentives to work

    • Makes labor markets more rigid by hampering efficient flow of workers from declining industries to expanding industries

  • Productivity

    • Inhibits innovation and capital accumulation

    • Resources are withdrawn from the private sector and placed in the unproductive public sector


Government spending its effects1

Government Spending- Its effects

  • Capital Accumulation

    • Increases interest rates which decrease private investment

    • Creates uncertainty that reduces the return of long-term investments

  • Rent-Seeking

    • Creates opportunities for rent-seekers to waste resources to curry political favor

    • Distorts economic markets, reduces economic growth, and destroys the free market ethic


Public assistance

Public Assistance

Example-WIC

  • Pregnant and breastfeeding women; women who recently had a baby; infants birth through 12 months; children 1 to 5 years; who are:

  • Present at the clinic appointment, and provide proof of identity;

  • Residents of the State of Ohio;

  • Determined by health professionals to be at medical/nutritional risk; and

  • Meets income guidelines - 185% of Federal Poverty Income Guidelines.


Unemployment vs inflation

Unemployment vs. Inflation

  • Phillips Curve:

    • Inverse relationship between unemployment and inflation

    • Tradeoff- we cannot have both low unemployment AND low inflation, we must choose one or the other

    • Why have we had both in recent years?


Individuals finances saving and spending

Individuals’ Finances- saving and spending

  • Cost of living vs. Standard of living

    • Because the cost of living will likely increase, we must save in order to maintain our standard of living

    • What’s good for us now, won’t necessarily be good for us later

  • Save for retirement later, but ‘later’ comes too soon

    • 70% of families live paycheck to paycheck

    • Those entering the workforce now will likely make less and save more; probably for the rest of their lives


Individuals finances planning for retirement

Individuals’ Finances- Planning for retirement

  • Investing: diversification of risk

  • Options:

    • IRAs

    • Pensions

    • Annuities

    • 401(k)

    • Social Security?

      “Save 10% of your salary each year and you'll be fine!” -- Walter Updegrave , CNN Money


Investing in stock apple

Investing in stock: Apple

  • Buy low, sell high

    • Low: January 20, 2009 at $78.20

    • Many shareholders decided to sell and invest in a safer option lost opportunity

    • Current: $338.04 (Apr 6, 6:25PM EDT )

  • There was money to be made, provided we chose our investments more wisely


Investing in stock apple1

Investing in stock: Apple


Health and family

Health and Family

  • Illness/disability

    • Benefits may decrease, premiums may increase

    • Leading cause for foreclosures

    • Normal time for being out of work

      • Average of 2.5 years

      • 1 out of 7 will be on disability for 5 years or more


Health and family1

Health and Family

  • Life insurance

    • Leaving the family to pay the expenses

    • May acquire the expenses of another family member

  • Children

    • It now costs an average middle-income American family $222,360 to raise a child from birth to 18.

    • 22% higher than it was in 1960, adjusted for inflation


How much to save

How much to save?

  • The 25 year old starter invests $55,000 and ends up with $615,580 at retirement.

  • The 35 year old starter invests $130,000 and still has less at retirement: $431,754


How much to save1

How much to save?


Preparation

Preparation

  • Many factors are beyond your control- plan for the worst case scenario

  • Begin saving early- compounding will give more benefit

  • Diversify your risk- never place all funds into a single asset or type of asset


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