savings-fitness

SAVINGS FITNESS
A GUIDE TO YOUR MONEY

AND YOUR FINANCIAL FUTURE
This publication has been printed by the U.S. Department of Labor,
Employee Benefits Security Administration (EBSA), and is available on the
Web at dol.gov/agencies/ebsa.
For a complete list of EBSA publications visit the agency’s Website at

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This material will be made available in alternative format to persons

with disabilities upon request:
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Certified Financial Planner Board of Standards Inc. (CFP Board) is a partner in the
preparation of this publication. CFP Board owns the certification marks CFP®,
CERTIFIED FINANCIAL PLANNER™, and in the U.S., which it awards to
individuals who successfully complete initial and ongoing certification requirements.
Visit CFP Board’s Website, LetsMakeAPlan.org, for information about financial
planning and to find a financial planner who fits your needs and who is required to
act in your best interest when providing financial planning advice.
This booklet constitutes a small entity compliance guide for purposes of the Small
Business Regulatory Enforcement Act of 1996.
CONTENT HIGHLIGHTS
A Financial Warmup 1
Your Savings Fitness Dream 3
How’s Your Financial Fitness? 6
Boost Your Financial Performance 9
Avoiding Financial Setbacks 11
Strengthening Your Fitness Plan 13
Personal Financial Fitness 15
Maximizing Your Workout Potential 17
Employer Fitness Program 19
Financial Fitness For the Self-Employed 23
A Lifetime of Financial Growth 27
Staying on Track 30
A Workout Worth Doing 32
Resources 33
Worksheets 35
SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE

A FINANCIAL WARMUP
Most of us know it is smart to save money for those
big-ticket items we really want to buy – a new television
or car or home. Yet you may not realize that probably
the most expensive thing you will ever buy in your
lifetime is your … retirement.
Perhaps you’ve never thought of “buying” your its inception, Social Security has provided a
retirement. Yet that is exactly what you do when minimum foundation of protection. A comfortable
you put money into a retirement nest egg. You retirement usually requires Social Security,
are paying today for the cost of your retirement employer-based retirement plan benefits, personal
tomorrow. savings, and investments.
The cost of those future years is getting more In short, paying for the retirement you truly desire
expensive for most Americans, for two reasons. is ultimately your responsibility. You must take
First, we live longer after we retire – with many charge. You are the architect of your financial
of us spending 15, 25, even 30 years in retirement future.
– and we are more active.
That may sound like an impossible task. Many
Second, you may have to shoulder a greater of us live paycheck to paycheck, barely making
chunk of the cost of your retirement because ends meet. You may have more pressing financial
fewer companies are providing traditional needs and goals than “buying” something so far
pension plans. Many retirement plans today, in the future. Or perhaps you’ve waited until
such as the popular 401(k), are paid for primarily close to retirement before starting to save. Yet
by the employee, not the employer. You may you still may be able to afford to buy the kind
not have a retirement plan available at work of retirement you want. Whether you are 18 or
or you may be self-employed. This puts the 58, you can take steps toward a better, more
responsibility of choosing retirement investments secure future.
squarely on your shoulders.
Unfortunately, just about 54 percent of all
workers are earning retirement benefits at work,
and many are not familiar with the basics of
investing. Many people mistakenly believe
that Social Security will pay for all or most
of their retirement needs. The fact is, since
SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 1

That’s what this booklet is all about. The U.S. Board authorizes individuals who meet its
Department of Labor and Certified Financial competency, ethics and professional standards to
Planner Board of Standards Inc. (CFP Board) use its trademarks CFP®, CERTIFIED
want you to succeed in setting financial and FINANCIAL PLANNER™, , and in the
retirement goals. Savings Fitness: A Guide to U.S. CFP Board currently oversees more than
Your Money and Your Financial Future starts 75,000 CFP® professionals in the U.S. who advise
you on the way to setting goals and putting your individuals and families on a broad range of
retirement high on the list of personal priorities. personal finance topics, including retirement,
budgeting, taxes, investments, estate planning,
The Department of Labor’s interest in retirement and insurance, among many others.
planning stems from its desire to improve the
security of American workers in retirement. In This booklet shows you the key tool for making a
1995, the Department launched its Retirement secure retirement a reality: financial planning. It
Savings Education Campaign. Saving is now a will help clarify your retirement goals as well as
national priority, with the passage of the Savings other financial goals you want to “buy” along the
Are Vital to Everyone’s Retirement Act of 1997 way. It will show you how to manage your money
(SAVER). The Department continues to educate so you can afford today’s needs yet still fund
Americans about retirement savings. tomorrow’s goals. It will help you make saving
for retirement and other goals a habit. You’ll learn
CFP Board also has a keen interest in helping there is no such thing as starting to save too early
Americans meet their personal and financial or too late — only not starting at all! You’ll learn
goals. A nonprofit, certifying and standards- how to save your money to make it work for you,
setting organization, CFP Board’s mission is to and how to protect it so it will be there when you
benefit the public by granting the CFP® need it for retirement. It explains how you can
certification and upholding it as the recognized take the best advantage of retirement plans at
standard of excellence for competent and ethical work, and what to do if you’re on your own.
personal financial planning. To this end, CFP
“
The worksheets in the back of the booklet
can help you begin your savings fitness plan.
A comfortable Interactive versions of the worksheets are
also available online at askebsa.dol.gov/
retirement usually SavingsFitness/Worksheets.
requires Social Yes, retirement is a big purchase. The biggest
Security, employer- one you may ever make. Yet you can afford it —
with determination, hard work, a sound savings
based retirement habit, the right knowledge, and a well-designed
plan benefits, financial plan.
”
personal savings,
and investments.
2 U.S. DEPARTMENT OF LABOR

YOUR SAVINGS
FITNESS DREAM
Getting Fit … Managing Your Financial Life
It starts with a dream, the dream of a secure retirement.
Yet like many people you may wonder how you can
achieve that dream when so many other financial issues
have priority.
Besides trying to pay for daily living expenses, Write down on Worksheet 1 what you need to
you may need to buy a car, pay off debts, save for do to accomplish each goal: When do you want
your children’s education, take a vacation, or buy to accomplish it, what will it cost (we’ll tell you
a home. You may have aging parents to support. more about that later), what money have you set
You may be going through a major event in your aside already, and what you are willing to do to
life such as starting a new job, getting married or reach the goal.
divorced, raising children, or coping with a death
in the family. Look again at the order of priority. How hard
are you willing to work and save to achieve a
How do you manage all these financial particular goal? Would you work extra hours, for
challenges and at the same time try to “buy” example? How realistic is a goal when compared
a secure retirement? How do you turn your with other goals? Reorganize their priority if
dreams into reality? necessary. Put those goals that are unrealistic into
your wish list. Maybe you can turn them into
Start by writing down each of your goals in reality too.
Worksheet 1 – Goals and Priorities in the back
of this booklet. You may want to have family Beginning Your Savings
members come up with ideas. Don’t leave Fitness Plan
something out at this stage because you don’t
think you can afford it. This is your “wish list.” Now let’s look at your current financial resources.
This is important because, as you will learn later
Organize them into goals you want to accomplish in this booklet, your financial resources affect
within the next 5 years or less, and goals that will not only your ability to reach your goals, but also
take longer than 5 years. It’s important to separate your ability to protect those goals from potential
them because, as you’ll see later, you save for financial crises. These are also the resources
short-term and long-term goals differently. you will draw on to meet various life events.
Worksheet 2 – Financial Documents Checklist in
Next, organize your goals in order of priority.
the back of this booklet can help you get organized.
Make retirement a priority! This needs to be
among your goals regardless of your age. Some Calculate your net worth
goals you may be able to borrow for, such as This isn’t as difficult as it might sound. Your net
college, but you can’t borrow for retirement. worth is simply the total value of what you own

(assets) minus what you owe (liabilities). It’s a Review your net worth annually
snapshot of your financial health. Use Worksheet Recalculate your net worth once a year. It’s a way
3 – Balance Sheet to Calculate Net Worth in to monitor your financial health.
the back of this booklet to write down your
information and do the calculation. Identify other financial resources
You may have other financial resources that aren’t
First, add up the approximate value of all your
included in your net worth but that can help you
assets. This includes your home (if you own one)
through tough times. These include the death
and your checking and savings accounts. Include
benefits of your life insurance policies, Social
the current value of investments, such as stocks,
Security survivor’s benefits, health care coverage,
real estate, certificates of deposit, retirement
disability insurance, liability insurance, and auto
accounts, IRAs, and any other retirement benefits
and home insurance. Although you may have
you have.
to pay for some of these resources, they offer
Now add up your liabilities: the remaining financial protection in case of illness, accidents,
mortgage on your home, credit card debt, auto or other catastrophes.
loans, student loans, income taxes due, taxes due
on the profits of your investments, if you cashed Envision Your Retirement
them in, and any other outstanding bills. Retirement is a state of mind as well as a financial
issue. You are not so much retiring from work as
Subtract your liabilities from your assets. Do you you are moving into another stage of your life.
have more assets than liabilities? Or the other Some people call retirement a “new career.”
way around?
What do you want to do in that stage? Travel?
Your aim is to create a positive net worth, Relax? Move to a retirement community or to be
and you want it to grow each year. Your net near grandchildren? Pursue a favorite hobby? Go
worth is part of what you will draw on to pay for fishing or join a country club? Work part time or
financial goals and your retirement. A strong net do volunteer work? Go back to school? What is
worth also will help you through financial crises.
“
the outlook for your health? Do you expect your
family to take care of you if you are unable to
care for yourself? Do you want to enter this stage
You are not so much of your life earlier than normal retirement age or
later?
retiring from work
The answers to these questions are crucial when
as you are moving determining how much money you will need for
”
into another stage the retirement you desire – and how much you’ll
need to save between now and then. Let’s say
of your life. you plan to retire early, with no plans to work
even part time. You’ll need to build a larger nest
egg than if you retire later because you’ll have to
depend on it far longer.

PLANNING FOR RETIREMENT until age 30, but saves the same amount
WHILE YOU ARE STILL annually for 37 years straight. Despite
putting in three times as much money,
YOUNG your friend’s account grows to only
Retirement probably seems vague and $171,561.
far off at this stage of your life. Besides,
you have other things to buy right now. You can start small and grow. Even
Yet there are some crucial reasons to setting aside a small portion of your
start preparing now for retirement. paycheck each month will pay off in big
dollars later. Company retirement plans
You’ll probably have to pay for more are the easiest way to save. If you’re not
of your own retirement than earlier already in your employer’s plan, sign up.
generations. The sooner you get
started, the better. You can afford to invest more
aggressively. You have years to
You have one huge ally – time. Let’s say overcome the inevitable ups and downs
that you put $1,000 at the beginning of the stock market.
of each year into an IRA from age 20
through age 30 (11 years) and then Developing the habit of saving for
never put in another dime. The account retirement is easier when you are young.
earns 7 percent annually. When you
retire at age 67 you’ll have $192,933
in the account. A friend doesn’t start

HOW’S YOUR
FINANCIAL FITNESS?
Estimate How Much You Need to Save
for Retirement
Now that you have a clearer picture of your retirement
goal, it’s time to estimate how large your retirement
nest egg will need to be and how much you need to save
each month to buy that goal. This step is critical!
The vast majority of people never take this step, may keep your retirement costs high. Much will
yet it is very difficult to save adequately for depend on the kind of retirement you want to
retirement if you don’t at least have a rough idea enjoy. Someone who plans to live a quiet, modest
of how much you need to save every month. retirement in a low-cost part of the country will
need a lot less money than someone who plans to
There are numerous worksheets and software be active, take expensive vacations, and live in an
programs that can help you calculate expensive region.
approximately how much you’ll need to save.
Professional financial planners and other financial For younger people in the early stages of their
advisors can help as well. At the end of this working life, estimating income needs that may
booklet, we provide Worksheet 4 – Retirement be 30 to 40 years in the future is obviously
Savings to get you started. difficult. Worksheet 4 can help you come up
with a rough estimate. Every year or two, review
Here are some of the basic questions and your retirement plan and adjust your retirement
assumptions to keep in mind. savings estimate as your annual earnings grow
and your vision of retirement begins to come into
How much retirement income focus.
will I need?
An easy rule of thumb is that you’ll need to How long will I live in retirement?
replace about 80 percent of your pre-retirement Based on current estimates, a male retiring at
income. If you’re making $50,000 a year (before age 65 today can expect to live approximately 21
taxes), you might need about $40,000 a year in years in retirement. A female retiring today at age
retirement income to enjoy the same standard of 65 can expect to live approximately 24 years.
living you had before retirement. Think of this as
your annual “cost” of retirement. These are average figures and how long you can
expect to live will depend on factors such as
However, no rule of thumb fits everyone. your general health and family history. But using
Expenses typically decline for retirees: taxes are today’s average or past history may not give you
smaller (though not always) and work-related a complete picture. People are living longer today
costs usually disappear. But overall expenses than they did in the past, and virtually all expert
may not decline much if you still have a home opinion expects the trend toward living longer to
and other debts to pay off. Large medical bills continue.

What other sources of income lower, rate and have your money buy more than
will I have? you previously thought.
You can get your Social Security statement
and an estimate of your retirement benefits on What will my investments return?
the Social Security Administration’s Website, Any calculation must take into account what
www.socialsecurity.gov/myaccount. For more annual rate of return you expect to earn on the
information, visit their Website or call 1-800-772- savings you’ve already accumulated and on the
1213. savings you intend to make in the future. You
also need to determine the rate of return on your
Will you have other sources of income? savings after you retire. These rates of return will
For instance, will you receive retirement benefits depend in part on whether the money is inside or
that provide a specific amount of retirement outside a tax-deferred account.
income each month? Is the benefit adjusted for
It’s important to choose realistic annual returns
inflation?
when making your estimates. Most financial
planners recommend that you stick with the
What savings do I already have
historical rates of return based on the types of
for retirement?
investments you choose or even slightly lower.
You’ll need to build a nest egg sufficient to make
up the gap between the total amount of income How many years do I have left until
you will need each year and the amount provided I retire?
annually by Social Security and any retirement
The more years you have, the less you’ll have to
income. This nest egg will come from your
save each month to reach your goal.
retirement plan accounts at work, IRAs, annuities,
and personal savings. How much should I save each month?
Once you determine the number of years until
What adjustments must be made
you retire and the size of the nest egg you need to
for inflation?
“buy” in order to provide the income not provided
The cost of retirement will likely go up every
by other sources, you can estimate how much you
year due to inflation – that is, $40,000 won’t buy
need to save.
as much in year 5 of your retirement as it will the
first year because the cost of living usually rises. It’s a good idea to revisit this worksheet at least
Although Social Security benefits are adjusted every year or two. Your vision of retirement, your
for inflation, any other estimates of how much earnings, and your financial circumstances may
income you need each year – and how much change. You’ll also want to check periodically to
you’ll need to save to provide that income – must be sure you are achieving your objectives along
be adjusted for inflation. The annual inflation the way.
rate is about 3 percent, but it varies over time. In
1980, for instance, the annual inflation rate was
13.5 percent; in 1998, it reached a low of 1.6
percent. When planning for your retirement it is
always safer to assume a higher, rather than a

HOW TO PREPARE FOR diversify your holdings and keep
RETIREMENT WHEN THERE’S an eye on fees. But don’t take risks
you can’t afford and don’t trade too
LITTLE TIME LEFT much.
What if retirement is just around the
corner and you haven’t saved enough? n Retire later. You may not need to
Here are some tips. Some are painful, work full time beyond your planned
but they’ll help you toward your goal. retirement age. Part time may be
enough.
n It’s never too late to start. It’s only
too late if you don’t start at all. n Refine your goal. You may have
to live a less expensive lifestyle in
n Sock it away. Pump everything you retirement.
can into your tax-sheltered retirement
plans and personal savings. Try to n Delay taking Social Security. Benefits
put away at least 20 percent of your will be higher when you start taking
income. them.
n Reduce expenses. Funnel the savings n Make use of your home. Rent out a
into your nest egg. room or move to a less expensive
home and save the profits.
n Take a second job or work extra
hours. n Sell assets that are not producing
much income or growth, such as
n Make sure your investments are undeveloped land or a vacation
part of the solution, not part of the home, and invest in income-
problem. To boost your returns, producing assets.

BOOST YOUR FINANCIAL
PERFORMANCE
“Spend” for Retirement
Now comes the tough part. You have a rough idea of
how much you need to save each month to reach your
retirement goal. But how do you find that money?
Where does it come from?
There’s one simple trick for saving for any goal: car insurance or self-employment taxes. Review
spend less than you earn. That’s not easy if you your checkbook, credit and debit card records,
have trouble making ends meet or if you find and receipts to estimate expenses. You will
it difficult to resist spending whatever money probably need to track how you spend cash for
you have in hand. Even people who make high a month or two. Most of us are surprised to find
incomes often have difficulty saving. But we’ve out where and how much cash “disappears” each
got some ideas that may help you. month.
Let’s start with a “spending plan” – a guide for Include savings as an expense
how we want to spend our money. Some people
Better yet, put it at the top of your expense list.
call this a budget, but since we’re thinking of
Here’s where you add in the total of the amounts
retirement as something to buy, a spending plan
you need to save each month to accomplish the
seems more appropriate.
goals you wrote down earlier in Worksheet 1.
A spending plan is simple to set up. Consider
the following steps as a guide as you fill in Subtract expenses from income
the information in Worksheet 5 – Cash Flow What if you have more expenses (including
Spending Plan in the back of this booklet. savings) than you have income? Not an
uncommon problem. You have three choices:
Income cut expenses, increase income, or both.
Add up your monthly income: wages, average
tips or bonuses, alimony payments, investment Cut expenses
income, and so on. Don’t include anything you There are hundreds of ways to reduce expenses,
can’t count on, such as lottery winnings or a from clipping grocery coupons and bargain
bonus that’s not definite. hunting to comparison shopping for insurance
“
Expenses
Add up monthly expenses: mortgage or rent, car
payments, average food bills, medical expenses,
Make saving a habit.
It’s not difficult once
”
entertainment, and so on. Determine an average
for expenses that vary each month, such as
clothing, or that don’t occur every month, such as
you start.

TIPS paycheck. Or deposit your retirement
savings yourself, the first thing. What
Even after you’ve tried to cut expenses
you don’t see, you don’t miss.
and increase income, you may still have
trouble saving enough for retirement n Put bonuses and raises toward
and your other goals. Here are some savings.
tips.
n Make saving a habit. It’s not difficult
n Pay yourself first. Put away first once you start.
the money you want to set aside for
goals. Have money automatically n Revisit your spending plan every
withdrawn from your checking few months to be sure you are on
account and put into savings or an track. Income and expenses change
investment. Join a retirement plan at over time.
work that deducts money from your
and buying new cars less often. The section that Increase income
follows on debt and credit card problems will Take a second job, improve your job skills or
help. You also can find lots of expense-cutting education to get a raise or a better paying job,
ideas in books, magazine articles, and financial make money from a hobby, or jointly decide that
newsletters. another family member will work.

AVOIDING FINANCIAL
SETBACKS
Avoid Debt and Credit Problems
High debt and misuse of credit cards make it tough to
save for retirement. Money that goes to pay interest, late
fees, and old bills is money that could earn money for
retirement and other goals.
How much debt is too much debt? Do you have debt problems?
Debt isn’t necessarily bad, but too much debt Here are some warning signs:
is. Add up what you pay monthly in car loans,
student loans, credit card and charge card loans, n Borrowing to pay off other loans.
personal loans – everything but your mortgage. n Creditors calling for payment.
Divide that total by the money you bring home
each month. The result is your “debt ratio.” Try n Paying only the minimum on credit cards.
to keep that ratio to 10 percent or less. Total
n Maxing out credit cards.
mortgage and nonmortgage debt payments should
be no more than 36 percent of your take-home n Borrowing to pay regular bills.
pay.
n Being turned down for credit.
What’s the difference between “good
debt” and “bad debt”? Avoid high-interest rate loans
Yes, there is such a thing as good debt. That’s debt Loan solicitations that come in the mail, pawning
that can provide a financial pay off. Borrowing items for cash, or “payday” loans in which people
to buy or remodel a home, pay for a child’s write postdated checks to check-cashing services
education, advance your own career skills, or buy are usually extremely expensive. For example,
a car for getting to work can provide long-term rolling over a payday loan every 2 weeks for
financial benefits. a year can run up interest charges of over 600
percent! While the Truth-in-Lending Act requires
Bad debt is when you borrow for things that don’t lenders to disclose the cost of your loan expressed
provide financial benefits or that don’t last as long as an annual percentage rate (APR), it is up to
as the loan. This includes borrowing for vacations, you to read the fine print telling you exactly what
clothing, furniture, or dining out. the details of your loan and its costs are.
The key to recognizing just how expensive these
loans can be is to focus on the total cost of the
loan – principal and interest. Don’t just look at
the monthly payment, which may be small, but
adds up over time.

HERE ARE SOME
ADDITIONAL TIPS FOR
HANDLING CREDIT
CARDS WISELY
n Keep only one or two cards, not
the usual eight or nine.
n Don’t charge big-ticket items. Find

less expensive loan alternatives.
n Shop around for the best interest

rates, annual fees, service fees, and
grace periods.
n Pay off the card each month, or at

least pay more than the minimum.
n Still have problems? Leave the

cards at home or cut them up.
Handle credit cards wisely
Credit cards can serve many useful purposes, but
people often misuse them. Take, for example,
the habit of making only the 2 percent minimum How to climb out of debt
payment each month. On a $2,000 balance with a Despite your best efforts, you may find yourself
credit card charging 18 percent interest, it would in severe debt. Worksheet 6 – Debt Reduction
take 30 years to pay off the amount owed. Then in the back of this booklet can help you come
imagine how fast you would run up your debts if up with a plan to pay down your credit card
you did this with several credit cards at the same and other bad debt. A credit counseling service
time. (For more information on handling credit can help you set up a plan to work with your
wisely, see the “Resources” section at the end of creditors and reduce your debts. Or you can work
this booklet.) with your creditors directly to try and work out
payment arrangements.

STRENGTHENING
YOUR FITNESS PLAN
Saving for Retirement
Once you’ve reduced unnecessary debt and created a
workable spending plan that frees up money, you’re
ready to begin saving toward retirement.
You may do this through a company retirement Choosing where to put

plan or on your own – options that are covered in
more detail later in this booklet. First, however,
your money
let’s look at a few of the places where you might How do you decide where to put your money?
put your money for retirement. Look back at the short-term goals you wrote
down earlier – a family vacation, perhaps, or
n Savings accounts, money market mutual the down payment for a home. Remember, you
funds, certificates of deposit, and U.S. should always be saving for retirement. But, for
Treasury bills. These are sometimes referred goals you want to happen soon – say, within a
to as cash or cash equivalents because you can year – it’s best to put your money into one or
get to them quickly and there’s little risk of more of the cash equivalents – a bank account or
losing the money you put in. CD, for example. You’ll earn a little interest and
n Domestic bonds. You loan money to a U.S. the money will be there when you need it.
company or a government body in return for For goals that are at least 5 years in the future,
its promise to pay back what you loaned, with however, such as retirement, you may want to
interest. put some of your money into stocks, bonds, real
n Domestic stocks. You own part of a U.S. estate, foreign investments, mutual funds, or
company. other assets. Unlike savings accounts or bank
CDs, these types of investments typically are not
n Mutual funds. Instead of investing directly in insured by the federal government. There is the
stocks, bonds, or real estate, for example, you risk that you can lose some of your money. How
can use mutual funds. These pool your money much risk depends on the type of investment.
with money of other shareholders and invest Generally, the longer you have until retirement
it for you. A stock mutual fund, for example, and the greater your other sources of income,
would invest in stocks on behalf of all the the more risk you can afford. For those who will
fund’s shareholders. This makes it easier to be retiring soon and who will depend on their
invest and to diversify your money. investment for income during their retirement
years, a low-risk investment strategy is more
prudent. Only you can decide how much risk
to take.

Why take any risk at all? Because the greater
the risk, the greater the potential reward. By
investing carefully in such things as stocks and
bonds, you are likely to earn significantly more
money than by keeping all of your retirement
“ Even setting aside
a small portion of
your paycheck each
money in a savings account, for example.
month will pay off in
”
The differences in the average annual returns
of various types of investments over time are big dollars later.
dramatic. Over the past 50 years, the compound
annual rate of return of short-term U.S. Treasury
bills, which roughly equals the return of other
cash equivalents such as savings accounts, has Many financial experts feel it is important to save
been 4.8 percent. The compound annual rate of at least a portion of your retirement money in
return of long-term government bonds over the higher risk – but potentially higher returning –
same period has been 6.7 percent. Large-company assets. These higher risk assets can help you stay
stocks, on the other hand, while riskier, have ahead of inflation, which eats away at your nest
averaged an annual return of 10.1 percent. egg over time.
Let’s put that into dollars. If you had invested Which assets you want to invest in, of course, is
$1 in Treasury bills 50 years ago, it would have your decision. Never invest in anything you don’t
grown to approximately $10 today. However, thoroughly understand or don’t feel comfortable
inflation, at an annual average of 4.1 percent, about.
would have eaten about $9 of that gain, leaving
$1 as the return. If the $1 had been invested in
government bonds, it would have grown to about
$26, with $3 left after inflation. If the $1 had
been invested in large-company stocks, it would
have grown to nearly $123, with about $17 left
after inflation. None of these rates of return is
guaranteed in the future, but they clearly show the
relationship between risk and potential reward.

PERSONAL FINANCIAL
FITNESS
Reducing investment risk
Diversification lets you manage your risk in a particular
investment or category of investments and decreases your
chances of losing money.
There are two main ways to reduce risk. Why diversify?

Because at any given time one investment or
n First, diversify within each category of
type of investment might do better than another.
investment. You can do this by investing in
Diversification lets you manage your risk in a
pooled arrangements, such as mutual funds,
particular investment or category of investments
index funds, and bank products offered by
and decreases your chances of losing money. In
reliable professionals. These investments
fact, the factors that can cause one investment to
typically give you a small share of different
do poorly may cause another to do well. Bond
individual investments and will allow you
prices, for example, often go down when stock
to spread your money among many stocks,
prices are up. When stock prices go down, bonds
bonds, and other financial instruments, even
often increase in value. Over a long time – the
if you don’t have a lot of money to invest.
time you probably have to save for retirement –
Your risk of losing money is less than if
the risk of losing money or earning less than you
you buy shares in only a few individual
would in a savings account tends to decline.
companies. Distributing your investments in
this way is called diversification. By diversifying into different types of assets,
you are more likely to reduce risk, and actually
n Second, you can reduce risk by investing
improve return, than by putting all of your money
among categories of investments.
into one investment or one type of investment.
Generally speaking, you should put some of
The familiar adage “Don’t put all your eggs in
your money in cash, some in bonds, some
one basket” definitely applies to investing.
in stocks, and some in other investment
vehicles. Studies show that once you have
Deciding on an investment mix
diversified your investments within each
category, the choices you make about how How you diversify – that is, how much you
much to put in these major categories is the decide to put into each type of investment – is
most important decision you will make and called asset allocation. For example, if you
should define your investment strategy. decide to invest in stocks, how much of your
retirement nest egg should you put into stocks: 10
percent ... 30 percent ... 75 percent? How much
into bonds and cash? Your decision will depend
on many factors: how much time you have until
retirement, your life expectancy, the size of your

current nest egg, other sources of retirement Here’s how rebalancing works: Let’s say your
income, how much risk you are willing to take, original investment called for 10 percent in U.S.
and how healthy your current financial picture is, small company stocks. Because of a stock market
among others. decline, they now represent 6 percent of your
portfolio. You would sell assets that had increased
Your asset allocation also may change over time. and purchase enough U.S. small company
When you are younger, you might invest more stocks so they again represent 10 percent of your
heavily in stocks than bonds and cash. As you get portfolio.
older and enter retirement, you may reduce your
exposure to stocks and hold more in bonds and How do you know when to rebalance?
cash. You also might change your asset allocation There are two methods of rebalancing: calendar
because your goals, risk tolerance, or financial and conditional.
circumstances have changed.
n Calendar rebalancing means that once a
Rebalancing your portfolio quarter or once a year you will reduce the
Once you’ve decided on your investment mix investments that have gone up and will add to
and invested your money, over time some of investments that have gone down.
your investments will go up and others will go
down. If this continues, you may eventually have n Conditional rebalancing is done whenever an
a different investment mix than you intended. asset class goes up or down more than some
Reassessing your mix, or rebalancing, as it is percentage, such as 25 percent. This method
commonly called, brings your portfolio back lets the markets tell you when it is time to
to your original plan. Rebalancing also helps rebalance.
“
you to make logical, not emotional, investment
decisions.
For instance, instead of selling investments
in a sector that is declining, you would sell The familiar
an investment that has made gains and, with adage “Don’t
that money, purchase more in the declining
investment sector. This way, you rebalance put all your eggs
your portfolio mix, lessen your risk of loss, and in one basket”
increase your chance for greater returns in the
definitely applies
”
long run.
to investing.

MAXIMIZING YOUR
WORKOUT POTENTIAL
The Power of Compounding
Regardless of where you choose to put your money — cash,
stocks, bonds, real estate, or a combination of places — the
key to saving for retirement is to make your money work for
you. It does this through the power of compounding.
Compounding investment earnings is what can Also notice that when you double your rate of
make even small investments become larger return from 4 percent to 8 percent, the end result
given enough time. after 30 years is over three times what you would
have accumulated with a 4 percent return. That’s
You’re probably already familiar with the the power of compounding!
principle of compounding. Money you put into
a savings account earns interest. Then you earn The real power of compounding comes with time.
interest on the money you originally put in, plus The earlier you start saving, the more your money
on the interest you’ve accumulated. As the size can work for you.
of your savings account grows, you earn interest
on a bigger and bigger pool of money. Look at it another way. For every 10 years you
delay before starting to save for retirement, you
The chart below provides an example of how will need to save three times as much each month
an investment grows at different annual rates of to catch up. That’s why no matter how young you
return over different time periods. Notice how the are, the sooner you begin saving for retirement,
amount of gain gets bigger each 10-year period. the better.
That’s because money is being earned on a bigger
and bigger pool of money.
Power of compounding
The value of $1,000 compounded at various
rates of return over time is as follows:
Years 4% 6% 8% 10%
10 $1,481 $1,791 $2,159 $2,594
20 $2,191 $3,207 $4,661 $6,728
30 $3,243 $5,743 $10,063 $17,449

TIPS ON HOW TO SAVE
SMART FOR RETIREMENT
n Start now. Don’t wait. Time is
critical.
n Start small, if necessary. Money

may be tight, but even small
amounts can make a big difference
given enough time, the right
kind of investments, and tax-
favored vehicles such as company
retirement plans and IRAs.
n Use automatic deductions from
your payroll or your checking
account for deposit in mutual funds,
IRAs, or other investment vehicles.
n Save regularly. Make saving for
“
retirement a habit.
n Be realistic about investment

returns. Never assume that a year
The real power or two of high market returns will
of compounding continue indefinitely. The same
goes for market declines.
comes with time. n If you change jobs, keep your
The earlier you start retirement account money in your
saving, the more former employer’s plan or roll it
over into your new employer’s plan
your money can
”
or an IRA.
work for you. n Don’t dip into retirement savings.

EMPLOYER FITNESS
PROGRAM
Using Employer-Based Retirement Plans
Does your employer provide a retirement plan? If so, say
retirement experts … grab it! Employer-based plans are
the most effective way to save for your future. What’s
more, you’ll gain certain tax benefits.
Employer-based plans come in one of two In the past 20 years, defined contribution plans
varieties (some employers provide both): defined have become more common than traditional
benefit and defined contribution. defined benefit retirement plans. Employers
fund most types of defined contribution plans,
Defined Benefit Plans though the amount of their contributions is not
These plans pay a lump sum upon retirement necessarily guaranteed.
or a guaranteed monthly benefit. The amount
Workers with a retirement plan are more likely
of payout is typically based on a set formula,
to be covered by a defined contribution plan,
such as the number of years you have worked
usually a 401(k) plan, rather than the traditional
for the employer times a percentage of your
defined benefit plan. In many defined contribution
highest earnings on the job. Usually the employer
plans, you are offered a choice of investment
funds the plan – commonly called a traditional
options, and you must decide where to invest
pension plan – though in some plans workers also
your contributions. This shifts much of the
contribute. Most defined benefit plans are insured
responsibility for retirement planning to workers.
by the federal government.
Thus, it is critical that you choose to contribute to
Defined Contribution Plans the plan once you become eligible (usually after
working full time for a minimum period) and,
The popular 401(k) plan is one type of defined
even if you are automatically enrolled in the plan,
contribution plan. Unlike a defined benefit
to contribute as much as possible. Invest wisely
plan, this type of savings arrangement does not
– review your plan investment options and revisit
guarantee a specified amount for retirement.
your choices at least once a year.
Instead, the amount you have available in the
plan to help fund your retirement will depend
Tax Breaks
on how long you participate in the plan, how
Even though you may be responsible for funding
much is invested, and how well the investments
a defined contribution plan, you receive important
do over the years. The federal government does
tax breaks. The money you invest in the plan and
not guarantee how much you accumulate in your
the earnings on those contributions are deferred
account, but it does protect the account assets
from income tax until you withdraw the money
from misuse by the employer.
(hopefully not until retirement). Why is that
important? Because postponing taxes on what
you earn allows your nest egg to grow faster.

Remember the power of compounding?
The larger the amount you have to
compound, the faster it grows. Even after
the withdrawals are taxed, you typically
come out ahead.
“ It is critical that
you choose to
contribute as
The tax deduction also means that the decline
in your take-home pay, because of your
much as possible
contribution, won’t be as large as you might and revisit your
think. For example, let’s assume you are thinking
about putting $100 into a retirement plan each
investment
choices at least
”
month and that the rate you pay on income taxes
is 15 percent. If you don’t put that $100 into a
retirement plan, you’ll pay $15 in taxes on it. If
once a year.
you put in $100, you postpone the taxes. Thus,
your $100 retirement plan contribution would
actually reduce your take-home pay by only $85. Be aware of the vesting rules in your employer’s
If you’re in the 25 percent tax bracket, the cost plan.
of the $100 contribution is only $75. This is like
buying your retirement at a discount. Make sure you know when you’re vested.
Changing jobs too quickly can mean losing part
Vesting Rules or all of your retirement benefits or, at the very
Any money you put into a retirement plan out of least, your employer’s matching contributions.
your pay, and earnings on those contributions,
always belong to you. However, contrary to Retirement Plan Rights
popular belief, employees don’t always have The federal government regulates and monitors
immediate access to the money their employer company retirement plans. The vast majority of
puts into their pension fund or their defined employers does an excellent job in complying
contribution plan. Under some plans, such as a with federal law. Unfortunately, a small fraction
401(k) or a traditional pension plan, you have doesn’t. For warning signs that your 401(k)
to work for a certain number of years – say, 3 contributions are being misused and other
– before you become “vested” and can receive information on protecting your retirement
benefits. Some plans vest in stages. Other benefits, visit EBSA’s Website at dol.gov/
defined contribution plans, such as the SEP and agencies/ebsa or call EBSA’s toll-free number
the SIMPLE IRA, vest immediately. You have at 1-866-444-3272 and request the booklet What
access to the employer’s contributions the day the You Should Know About Your Retirement Plan.
money is deposited. No employer can require you
to work longer than 7 years before you become
vested in your retirement benefit.

Types Of Defined Profit Sharing Plan
Contribution Plans The employer shares company profits with
employees, usually based on the level of each
The following are some of the most common employee’s wages.
types of defined contribution plans. For a more
detailed description and comparison of some of ESOP
these plans, see What You Should Know About
Employee stock ownership plans are similar to
Your Retirement Plan.
profit sharing plans, except that an ESOP must
invest primarily in company stock. Under an
401(k) Plan
ESOP, the employees share in the ownership of
This is the most popular of the defined the company.
contribution plans and is most commonly offered
by larger employers. Employers often match SEP
employee contributions.
Simplified employee pension plans are used by
both small employers and the self-employed.
403(b) Plan
Think of this as a 401(k) plan for employees Other retirement plans you may want to learn
of school systems and certain nonprofit more about include 457 plans, which cover
organizations. Investments are made in tax- state and local government workers, and the
sheltered annuities or mutual funds. Federal Thrift Savings Plan, which covers federal
employees. If you are eligible, you may also want
SIMPLE IRA to open a Roth IRA.
The Savings Incentive Match Plan for Employees
of Small Employers is a simpler type of
employer-based retirement plan. There is also a
401(k) version of the SIMPLE.

HOW TO MAKE THE MOST OF A investment goals, the more likely you
will choose wisely.
DEFINED CONTRIBUTION PLAN
n Study your employee handbook and n Many companies match employee
talk to your benefits administrator contributions with stock instead
to see what plan is offered and what of cash. Financial experts often
its rules are. Read the summary plan recommend that you don’t let your
description for specifics. Plans must account get overloaded with company
follow federal law, but they can still stock, particularly if the account
vary widely in contribution limitations, makes up most of your retirement
investment options, employer matches, nest egg. Too much of a single stock
and other features. increases risk.
n Join as soon as you become eligible. n Plan fees and expenses reduce the
amount of retirement benefits you
n Put in the maximum amount allowed. ultimately receive from plans where
you direct the investments. It’s in your
n If you can’t afford the maximum, try
interest to learn as much as you can
to contribute enough to maximize any
about your plan’s administrative fees,
employer matching funds. This is free
investment fees, and service fees.
money!
Read the plan documents carefully.
n Study carefully the menu of For more information on fees, call
investment choices. Some plans EBSA’s toll-free line at 1-866-444-
offer only a few choices, others may 3272 or visit askebsa.dol.gov and
offer hundreds. The more you know request the booklet A Look at 401(k)
about the choices, investing, and your Plan Fees.

FINANCIAL FITNESS FOR
THE SELF-EMPLOYED
What To Do If You Can’t Join an
Employer-Based Plan
You may not be able to join an employer-based
retirement plan because you are not eligible or because
the employer doesn’t offer one.
Fortunately, there are steps you can still take to Consider an annuity
build your retirement strength. An annuity is an agreement with an insurance
company in which you pay money in return for
Take a job with a plan its paying either a regular fixed amount when
If two jobs offer similar pay and working you retire or an amount based on how much your
conditions, the job that offers retirement benefits investment earns. There is no limit on how much
may be the better choice. you can invest in a private annuity, and earnings
aren’t taxed until you withdraw them.
Start your own plan
If you can’t join a company plan, you can save However, annuities present complex issues
on your own. You can’t put away as much as regarding taxes, fees, and withdrawal strategies
on a tax-deferred basis and you won’t have an that may not make them the best investment
employer match. Still, you can build a healthy choice for you. Consider discussing this type of
nest egg if you work at it. investment first with a financial planner.
Open an IRA Build your personal savings

You can put up to $5,500 a year into an individual You can always save money on your own, either
retirement account on a tax-deductible basis if in mutual funds, stocks, bonds (such as U.S.
your spouse isn’t covered by a retirement plan Savings Bonds), real estate, CDs, or other assets.
at work, or as long as your combined incomes It’s best to mark these investments as part of your
aren’t too high. Persons who are 50 or older can retirement fund and don’t use them for anything
contribute an additional $1,000. You also can put else unless absolutely necessary.
the same amount tax-deferred into an IRA for a Investing in an IRA, an annuity, or in personal
nonworking spouse if you file your income tax savings means you are totally responsible
return jointly. (By the way, you don’t have to put
for directing your own investments. How
in the full amount; you can put in less.) With a
conservatively or aggressively you invest is up
traditional IRA, you delay income taxes on what
to you. It will depend in part on how willing
you put in and on the earnings until you withdraw
you are to take investment risks, your age, the
the money. With a Roth IRA, the money you
stability of your job, and other financial needs.
put in is already taxed, but you won’t ever pay
Learn as much as you can about investing and
income taxes on the earnings as long as the
about specific investments you are considering.
account is open at least 5 years.

You also may want to seek the help of
a professional financial planner. Go to
LetsMakeAPlan.org for tips on choosing a
financial planner who is required to act in your
best interest when providing financial planning
“ No one will work
harder or care
more about your
advice.
retirement and your
What To Do If You Are other financial goals
”
Self-Employed
Many people today work for themselves, either
than you.
full time or in addition to their regular job. They
have several tax-deferred options from which to
choose. SIMPLE IRA
Described earlier under employer-based
SEP
retirement plans, a SIMPLE IRA can be used by
This is the same type of SEP described earlier the self-employed. However, generally you can’t
under employer-based retirement plans. Only save as much as you can with a SEP or “Keogh”.
here, you’re the employer and you fund the SEP
from your earnings. You can easily set up a SEP IRA
through a bank, mutual fund, or other financial Usually you are better off funding a SEP or a
institution. “Keogh” unless your self-employment income is
small.
“Keogh”
“Keoghs” are more complicated to set up and Annuities
maintain, but they offer more advantages than See annuities under the section on “What to Do
a SEP. For one thing, they come in several if You Can’t Join an Employer-Based Plan.”
varieties. Some of the varieties allow you to
sock away more money — sometimes a lot more
money — than a SEP.

RETIREMENT PLANNING n Some plans cost less and have fewer
FOR EMPLOYEES IN SMALL administrative hassles than employers
may realize. Alternatives to traditional
COMPANIES defined benefit plans and the 401(k)
If you don’t have a plan available at include the SIMPLE IRA and the SEP.
work, encourage your employer to start
one. Many small employers believe their For more information, contact EBSA at
workers prefer higher salaries or other askebsa.dol.gov or call 1-866-444-3272
benefits, and they believe the rules are and request:
too complex and the costs too high. n Choosing a Retirement Solution for
Mention the following benefits: Your Small Business,
n A retirement plan can attract n SIMPLE IRA Plans for Small
and retain valued employees in a Businesses,
competitive labor market, as well as n SEP Retirement Plans for Small
motivate workers. Businesses,
n Establishing a retirement plan and n 401(k) Plans for Small Businesses,
encouraging employee participation n Automatic Enrollment 401(k) Plans for
can help employers fund their own Small Businesses,
retirement. Even after taking into
account the cost of establishing an n Profit Sharing Plans for Small
employee plan, employers may still be Businesses, or
better off than funding retirement on n Payroll Deduction IRAs for Small
their own. Businesses.

CAUTION
n Don’t borrow from your retirement their jobs rolled over at least some
plan or permanently withdraw of the money they received from
funds before retirement unless their former employer’s retirement
absolutely necessary. plan to an IRA or another
employer-sponsored plan.
n Your retirement plan may allow
you to borrow from your account, n Pre-retirement withdrawals reduce
often at very attractive rates. the ultimate size of your nest
However, borrowing reduces the egg. In addition, you’ll probably
account’s earnings, leaving you pay federal income taxes on the
with a smaller nest egg. Also, if amount you withdraw (10 percent
you fail to pay back the loan, you to as high as 39.6 percent) and a
could end up paying income taxes 10 percent penalty may be tacked
and penalties. As an alternative, on if you’re younger than age 59½.
consider budgeting to save the In addition, you may have to pay
needed money or pursue other state taxes. If you’re in a SIMPLE
affordable loan options. IRA plan, that early withdrawal
penalty climbs to 25 percent if you
n Also avoid permanently
take out money during the first 2
withdrawing funds before
years you’re in the plan.
retirement. This often happens
when people change jobs. Roughly
one-quarter of workers leaving

A LIFETIME OF FINANCIAL
GROWTH
Managing for a Lifetime of Financial Growth
As mentioned earlier, you probably will experience
several major events in your life that can make it more
difficult to start or keep saving toward retirement and
other goals.
The key is to have a clear plan, to stay focused Raising children

on your goals, and to manage your money so The U.S. Department of Agriculture estimates
that life events don’t prevent you from keeping that it costs the average American middle-income
on target. Here are a few suggestions for saving family approximately $233,610 to raise a child
for retirement while financially managing some to age 17. Furthermore, in some cases a spouse
common life events. may stay out of the workforce to raise children,
thus cutting into income and the opportunity to
Marriage fund retirement. Having a child may alter your
Getting married creates new financial demands major financial goals, but should never eliminate
that compete for retirement dollars, such as them. Make the best effort you can. Also,
changing life insurance needs and saving to buy many financial planners stress that saving for
a home. But it’s usually less expensive for two retirement should have priority over saving for a
people to live together, thus freeing up dollars. child’s college education. There are financial aid
Also, you probably still have time on your side. programs for college-bound students but not for
A spending plan is essential. Remember, every retirement.
little bit helps.
“ The key is to have a clear plan, to stay

focused on your goals, and to manage
your money so that life events don’t
”
prevent you from keeping on target.

Changing jobs Disability
It’s estimated that the average worker changes A severe or long-lasting disability can undermine
jobs more than 10 times in a working lifetime. efforts to save for retirement. Although Social
Changing jobs often puts you at risk of not Security Disability benefits can help sustain a
vesting in your current job, or a new job may not family if severe disability strikes, you may wish
offer a retirement plan. Consider keeping your to explore the availability and cost of other forms
money in your former employer’s retirement of disability insurance.
plan or rolling it into a new company plan or an
individual retirement account (IRA). Don’t cash Death
out and spend the money, however small the The premature death of a spouse can undermine
amount. efforts for the partner to save for retirement,
particularly if there are dependent children. That’s
Divorce why it’s important to check your Social Security
It’s important that you know the laws regarding statement to find out how much children will
your spousal rights to Social Security and receive if a parent dies. Maintaining adequate
retirement benefits. Under current law, spouses life insurance is also important. Be sure that you
and dependents have specific rights. Remember, have properly named the beneficiaries for any
retirement assets may well be the biggest insurance policies, retirement plans, IRAs, and
financial asset in the marriage. Be sure to divide other retirement vehicles.
those assets carefully. It’s also critical to review
your overall financial situation before and after
your divorce. Income typically drops for partners
in the wake of a divorce, particularly for women.

FACTS WOMEN SHOULD n Some studies indicate women tend to
KNOW ABOUT PREPARING invest more conservatively than men.
FOR RETIREMENT n Women tend to lose more income than
Women face challenges that often make men following a divorce.
it more difficult for them than men to n Women age 65 or older are nearly 50
adequately save for retirement. In light percent more likely than men age 65
of these challenges, women need to pay or older to live on an income below the
special attention to making the most of poverty level.
their money.
For more information, call the Employee
n Women tend to earn less than men Benefits Security Administration at 1-866-
and work fewer years. 444-3272 and ask for the booklets:
n Women stay at jobs for a shorter Women and Retirement Savings, Taking
period of time, work part time more the Mystery Out of Retirement Planning,
often, and interrupt their careers to and QDROs: The Division of Retirement
raise children. Consequently, they are Benefits through Qualified Domestic
less likely to qualify for company- Relations Orders (for example, divorce
sponsored retirement plans or to orders). Also visit the Social Security
receive the full benefits of those plans. Administration’s Website at www.
socialsecurity.gov/pubs to order their
n On average, women live 5 years booklet What Every Woman Should
longer than men, and thus need to Know.
build a larger retirement nest egg for
themselves.

STAYING ON TRACK
Coping With Financial Crises

Life has a way of throwing unexpected financial
roadblocks, detours and potholes in our path. These might
be large medical bills, car or home repairs, a death in the
family, loss of a job, or expensive legal problems.
Such financial emergencies can derail your efforts (Worker’s compensation only helps if the
to save for retirement or other goals. Here are disability is work-related.) In addition, your
some strategies for managing financial crises. employer may offer some disability coverage,
but you may need to supplement it with
Establish an emergency fund private coverage.
This can lessen the need to dip into retirement
n Renters. Homeowners usually are insured
savings for a financial emergency. Building an
against hazards such as fire, theft, and liability,
emergency fund is tough if income is tight, but
but the majority of renters aren’t. Renter’s
every few dollars help. Fund it with pay from
insurance is inexpensive.
extra working hours or a temporary job, a tax
refund, or a raise. Put the money into a low-risk, n Automobile. Don’t drive “bare.” It’s usually
accessible account such as a savings account or a against the law to drive without auto coverage,
money market fund. to say nothing of being costly if you are in an
accident.
Insure yourself
Insurance protects your financial assets, such as n Umbrella. This provides additional liability
your retirement funds, by helping to take care of coverage, usually through your home or auto
the really big financial disasters. Here’s a list of insurance policies, in the event you face a
insurance coverage you should consider buying: lawsuit.
n Health. If you and your family aren’t n Life. Having life insurance can help you or
covered under an employer’s policy, consider your spouse continue to save if either one of
a health plan through the Health Insurance you dies before retirement. Social Security
Marketplace. At least try to buy catastrophic may be able to pay benefits to your spouse
medical coverage on your own. and/or minor children. On the other hand, you
may not need life insurance if no one depends
n Disability. Did you know you are more financially on you. There are many types
likely before age 67 to miss work because of life insurance, with a variety of fees and
of a disability than to die? Social Security commissions attached.
Disability Insurance can pay you and your
family benefits if you are severely disabled and
are expected to be so for at least 12 months.

n Long-term care. This insurance can help pay
for costly long-term health care either at home IF YOU CHOOSE TO
or in a health care facility or nursing home. It WORK WITH A
protects you from draining savings and assets
you otherwise could use for retirement.
FINANCIAL PLANNER
You are the one ultimately responsible
Borrow for the management of your own
financial affairs. However, you may
If you must borrow because of a financial
want additional help along the way
emergency, carefully compare the costs of all
from a professional financial planner.
options available to you. A professional planner can:
Sell investments n Provide expertise you don’t have.

It’s usually advisable to sell taxable investments n Help improve your current financial
first. Try not to touch your faster growing management.
retirement accounts. Taking money out of your
retirement accounts could trigger income taxes n Save you time.
and penalties.
n Provide an objective perspective.
n Help you through a financial crisis.
n Motivate you to take action.
For more information, visit CFP

Board’s Website LetsMakeAPlan.org
or call 1-800-487-1497 to request
free copies of the Consumer Guide to
Financial Planning and the Consumer
Guide to Financial Self-Defense. The
Website also contains a wealth of
information about financial planning
and an advanced search function
that enables you to find a financial
planner who is required to act in your
best interest when providing financial
planning advice.

A WORKOUT
WORTH DOING
Monitor Your Progress
Financial planning is not a one-time process. Life, your
goals, tax laws, and your financial world have a way of
changing, sometimes dramatically.
Go back to Worksheet 5 – Cash Flow Spending Think of this booklet as a starting point. Continue
Plan and complete the last two columns to help to educate yourself about managing your money
you track your progress. and investing. Consider professional resources as
well, such as your benefits department, financial
n Periodically review your spending plan. planners, and other financial experts who can
n Monitor the performance of investments. help you not only with your financial questions,
Make adjustments if necessary. but, more importantly, can help motivate you into
action.
n Make sure you contribute more toward your
retirement as you earn more. Finally, there is only one real key to “buying”
that retirement you’ve dreamed of. It doesn’t
n Update your various insurance safety nets matter whether you are still young or whether
to reflect changes in income or personal retirement is just around the corner. It doesn’t
circumstances. matter whether you’re in your first job, trying
to save for a home, or putting a child through
n Keep your finances in order.
college.
Where To Go From Here All that matters is that you start saving...now!
You now realize that saving for your own
retirement is critical and that it is primarily your
responsibility. You may get help along the way,
but most of the work is going to rest on your
shoulders. No one will work harder or care more
about your retirement and your other financial
goals than you.
Look back at your goals outlined in Worksheet
1. Perhaps they seem more realistic now. Even if
you can’t do as much as you would like to right
away, you can do something.

RESOURCES
This publication is presented by the:
Employee Benefits Security Administration Certified Financial Planner Board of
U.S. Department of Labor Standards, Inc.
200 Constitution Ave., NW 1425 K Street, NW, Suite 800
Washington, DC 20210 Washington, DC 20005
Website: dol.gov/agencies/ebsa Website: LetsMakeAPlan.org
Toll-free publication request line: Toll-free number: 1-800-487-1497
1-866-444-3272
Sample Financial Getting Out of Debt

Calculator Websites consumer.ftc.gov/topics/money-credit – The
Calculator for Workers Federal Trade Commission has information on
Nearing Retirement a number of debt and credit topics, including
dol.gov/sites/default/files/ebsa/about-ebsa/ getting out of debt, credit counseling and repair,
our-activities/resource-center/publications/ and understanding your credit report.
taking-the-mystery-out-of-retirement-
www.federalreserveconsumerhelp.gov – The
planning.pdf
Federal Reserve Board Website has information
EBSA’s publication Taking the Mystery Out of about credit reports and how to improve your
Retirement Planning provides online interactive credit score.
worksheets for workers who are 10 to 15 years
from retirement to help them get an idea of www.consumerfinance.gov – The Consumer
whether their retirement savings are on track. Financial Protection Bureau has information to
educate consumers about credit card debt, student
Other Calculators loans, and mortgages.
kiplinger.com – Under “Menu,” select “Tools”
and then “Retirement Savings Calculator.”
choosetosave.org – Select “Ballpark Estimate.”
www.finra.org – Under “Investors,” select “Tools
& Calculators” and then “Retirement Calculator.”
money.cnn.com – Under “Personal Finance,”
select “Calculators.”
(Note: The sites above are only a sample of
calculators available on the Web. The Department
of Labor does not endorse a specific calculator
or the products and services offered on these
Websites.)

Other Web sources that fdic.gov – The Federal Deposit Insurance
Corporation’s Website offers a financial
highlight savings and education program, “Money Smart,” a
retirement planning comprehensive financial education curriculum
investor.gov – View the U.S. Securities and designed to help individuals outside the financial
Exchange Commission’s investor information mainstream enhance their financial skills and
Website for online help with investing and create positive banking relationships.
consumer protection questions.
HealthCare.gov – The U.S. Department of
mymoney.gov – This Website is sponsored by the Health and Human Services Website where
Financial Literacy and Education Commission, you can find out more about Health Insurance
and has among its offerings the MyMoney Five. Marketplace plans, what they cover, and how to
apply.
www.ftc.gov – Check out the Federal Trade
Commission’s “Tips & Advice” section, which investoreducation.org – Investors of all ages
includes alerts on investment schemes. can learn about the basics of investing at the
Investor’s Clearinghouse, sponsored by the
publications.usa.gov – The USA.gov Website Alliance for Investor Education (AIE).
contains text versions of hundreds of consumer
publications. See the “Money” section for a list of aarp.org – The AARP site provides advice on a
brochures on money management and retirement host of retirement planning issues. Find “Money”
planning. under “Menu” for information on financial
planning.
www.socialsecurity.gov – Visit the Social
Security Administration’s Website for pages nefe.org – Browse the Website of the National
on retirement. Wage earners can estimate their Endowment for Financial Education for a wealth
retirement benefits online. of preretirement information.
irs.gov/retirement – The IRS Website provides www.consumerfed.org – The Consumer
tax information on IRAs, 401(k) plans, SEP and Federation of America offers several financial
SIMPLE plans, and much more. publications, including Your Credit Scores and 66
Ways to Save Money, and runs the America Saves
www.treasurydirect.gov – The U.S. Department campaign to encourage savings among low-to-
of the Treasury’s Website includes information moderate income households.
on savings bonds, a savings bond calculator, and
instructions for buying bonds online.

WORKSHEETS
WORKSHEETS
Use these worksheets to help you manage your
financial life and begin your savings fitness plan.
Take your time.
You may want to fill out one or two worksheets You may want to make a copy of the worksheets
and then spend some time gathering the before you get started, or print out an extra copy
information you need for the rest. Don’t get online. That way you can come back at a later
stuck on the details. Guessing is okay and you date – in six months or a year – to update the
can always come back later with more accurate worksheets and track your progress. This will
or up-to-date numbers and information. If you help you start saving for a secure retirement, and
are married, remember to include your spouse’s other goals you may have. Interactive versions of
information when filling out the worksheets. the worksheets are also available online at
askebsa.dol.gov/SavingsFitness/Worksheets to
help with the calculations.
WORKSHEET TITLE DATE COMPLETED
1. Goals and Priorities
2. Financial Documents Checklist
3. Balance Sheet to Calculate Net Worth
4. Retirement Savings
5. Cash Flow Spending Plan – first two columns
– last two columns
6. Debt Reduction

1 Goals and
Priorities
Date:
Write down your goals, listing both short-term you have set aside already, and what you are
and long-term goals. Then number them in order willing to do to reach the goal. Remember to
of priority. Think about what you need to do to make saving for retirement a priority!
accomplish each goal, including cost, how much
What money do
How much What are you
Priority What is your goal? By when? you have saved
will it cost? willing to do?
for this goal?
SHORT-TERM GOALS (5 years or less)

Fill out these worksheets
Example:
6 months of 3 months of to find more savings,
1 emergency savings fund 1 year
expenses expenses bring lunch to work
every day
LONG-TERM GOALS (longer than 5 years)
% of pre-
Example: retirement some savings in sign up for
1 tax pay (see
a secure retirement age an IRA workplace plan
worksheet 4)

2
Financial
Documents
Checklist Date:
To help you fill out the worksheets that follow, at www.socialsecurity.gov/myaccount. To

gather together recent copies of the documents get a free credit report every twelve months,
and statements listed below. You can get many visit annualcreditreport.com. The Resources
of these documents from your employer, section has additional Websites, publications, and
financial institutions, and insurance companies. information to help you find and understand these
You can get your Social Security Statement documents.
with an estimate of your retirement benefits
Retirement Planning Documents and Statements

❏ Workplace retirement plan(s), including the Summary Plan Description(s) and benefit statement(s)
❏ Individual IRA account(s)
❏ Retirement benefits information from current or former spouse
❏ Annuity policies
❏ Social Security retirement benefits estimate
Tax Planning Documents
❏ Income tax returns for last year (federal, state and local)
❏ Recent pay stub with cumulative year-to-date information
Financial Documents and Statements
Investment-Related Documents and Statements
❏ Bank accounts (savings accounts, CDs)
❏ Mutual funds
❏ Brokerage accounts
❏ Stocks held outside of mutual funds or brokerage accounts
❏ Bonds held outside of mutual funds or brokerage accounts
❏ Partnership or other business agreements
❏ Other
Loan Documents, Statements, and Credit Reports
❏ Student Loans
❏ Mortgage(s)
❏ Car(s)
❏ Credit cards
❏ Other
❏ Copy of recent credit report
Insurance Documents and Statements
❏ Health, disability, and long term care insurance policies
❏ Homeowners, renters, auto, and umbrella insurance policies
❏ Life insurance policies
❏ Other

3
Balance Sheet
to Calculate
Net Worth Date:
Use this balance sheet to calculate your net worth, accounts, investments, and property, such
which is the total value of what you own (assets) as your home (if you own it). Then add up
minus what you owe (liabilities). Your goal is to your liabilities (debts), including any amounts
have a positive net worth that grows each year. you currently owe on a home mortgage, auto
or student loans, credit card debt, and other
First, add up the approximate value of your outstanding amounts owed. Finally, subtract your
assets, including your checking and savings liabilities from your assets to get your net worth.
ASSETS VALUE LIABILITIES VALUE

Cash Reserves Home mortgage
Cash Second mortgage
Checking Home equity loan
Savings
Savings bonds Student loans
Money market account Auto loan
Certificates of deposit (CDs)
Other
SUBTOTAL
Home or Condo (if owned) Credit cards
SUBTOTAL
Retirement Accounts
401(k), 403(b)
IRAs
Annuities
Other retirement plans
SUBTOTAL Other debt
Personal Investments
Mutual funds
Stocks
Bonds
Brokerage accounts
Real estate
Other
SUBTOTAL
Other Assets
SUBTOTAL
TOTAL ASSETS TOTAL LIABILITIES
NET WORTH
(Total Assets minus Total Liabilities)

4 Retirement
Savings
Date:
Worksheet 4 can help you figure out how much If you are filling this out and are married,
you need to save each year towards your goal consider whether only one spouse is working
of a secure retirement. It estimates how much (either now and/or in the future) and what
you should save as a percentage of your current happens to your Social Security and retirement
annual salary to give you a savings goal. You can benefits if your spouse dies or you divorce? Use a
save through a retirement savings plan at work, longer estimate for years in retirement since one
on your own, or both. While the worksheet does spouse is likely to outlive the other. If you and
not take into account your unique circumstances, your spouse are both working, but are not close
it will give you an idea of how much to save in age, consider filling out separate worksheets
each year and a clearer picture of your retirement with the period of time each spouse has to save.
goals. The sooner you start saving, the longer
your savings have to grow. The worksheet breaks the calculations into four
steps. A 7 percent rate of return is used to keep
As you fill out the worksheet, think about your it simple: remember investing involves risk, so
plans including when you might retire, what investment returns, even assuming a diversified
savings you have, and how many years you hope mix of stocks and bonds, go up and down and
to enjoy in retirement. Of course, your plans cannot be guaranteed. The worksheet, which uses
and circumstances may change, so update this a 3 percent inflation rate, increases your salary 3
worksheet periodically to reflect any changes. percent each year but does not include any other
increases.
Step 1 estimates what your annual salary will be at retirement as a result of inflation and how
much savings you will need in addition to Social Security for the first year of retirement. (The next
three steps will help you determine how much to save to have enough savings to last through your
retirement.)
To start, enter the number of years until you expect to retire on line 1. Next, enter your current annual
salary – this is your total pay before taxes or other deductions. You can probably get this from your
pay statement. Multiply your current annual salary by a projected salary growth factor from the box
below the worksheet and enter the result on line 4. Select the factor that corresponds most closely to
the number of years until you plan to retire. Multiply the amount on line 4 by 40 percent to estimate
the annual income you will need for your first year of retirement.
Where does this 40 percent come from? On average, people need to replace about 80 percent of pre-
retirement income for living in retirement. According to the Social Security Administration, Social
Security retirement benefits replace about 40 percent of an average wage earner’s income after
retiring. This leaves approximately 40 percent to be replaced by retirement savings. However, keep in
mind that this is an estimate. You may need more or less depending on your individual circumstances,
such as whether you are married, will have dependents while in retirement, or have other sources of
retirement income.

Step 1
1. Number of years until retirement (retirement age minus current age)
2. Current annual salary
3. Projected salary growth factor
4. Value of salary at retirement (multiply line 2 X line 3)
5. Replacement rate x.40
6. Income goal for the first year of retirement (multiply line 4 X line 5)
PROJECTED SALARY GROWTH FACTORS (by number of years until retirement)
Years 20 25 30 35 40 45
Growth Factors 1.8061 2.0938 2.4273 2.8139 3.2620 3.7816
For example, if you are now 30 years old, plan to retire in 35 years at age 65, and earn $50,000 a year, the
calculation for Step 1 would look like this:
Example for Step 1

Number of years until retirement 35
Current annual salary $50,000
Projected salary growth factor x 2.8139
Value of annual salary at retirement $140,695
Replacement rate x .40
Income goal for the first year of retirement $56,278

Step 2 takes the result from Step 1, the income you need for the first year of retirement, and
estimates how much you will need to last through retirement. In retirement, while your investments
will continue to grow, the cost of retirement likely will go up every year due to inflation – that is,
today’s dollars will buy less each year because the cost of living usually rises. Step 2 estimates how
much savings you will need, taking into account the growth of your investments and inflation through
your retirement. People are living longer on average which means you could need retirement income
for 30 years or more. Planning to live well into your 90s can help you have a secure retirement and
avoid outliving your income.
Enter the result from Step 1 on the first line. Then enter the number of years you think you will
spend in retirement. Select a projected income factor from the box under the Step 2 worksheet that
corresponds most closely to the number of years you expect to live in retirement and enter it on line 3.
Multiply line 1 by line 3 and enter the result on line 4. This is the estimated value of savings you need
at retirement to last through retirement.
Step 2
1. Income goal for the first year of retirement (from Step 1 line 6)
2. Number of years in retirement
3. Projected income factor
4. Savings needed at retirement (multiply line 1 X line 3)
PROJECTED INCOME FACTORS (by number of years spent in retirement)
Years 20 25 30 35 40
Income Factors 14.2649 16.4305 18.2204 19.6999 20.9228
If, for example, you are planning for 30 years in retirement, multiply the result from Step 1 by the
projected income factor for 30 years in retirement.
Example for Step 2

Income goal for the first year of retirement $56,278
Number of years in retirement 30
Projected income factor x 18.2204
Savings needed at retirement $1,025,408

If you have already started saving for retirement, congratulations! Step 3 estimates how much your
current retirement savings will grow by the time you plan to retire.
On line 1, enter your current retirement savings. Make sure you include all of the savings and assets
you have for retirement. Next, enter the number of years until you plan to retire – use the same
number you used in Step 1. Multiply your current savings by the projected value factor (from the box
below the Step 3 worksheet) that you choose based on the number of years until retirement. The result
is what your current savings will be worth at retirement.
Step 3
1. Current savings
2. Number of years until retirement (from Step 1 line 1)
3. Projected value factor
4. Value of current savings at retirement (multiply line 1 X line 3)
PROJECTED VALUE FACTORS (by number of years until retirement)
Years 20 25 30 35 40 45
Value Factors 3.8697 5.4274 7.6123 10.6766 14.9745 21.0025
If, for example, you have $2,000 in retirement savings and plan to retire in 35 years you would make
this calculation:
Example for Step 3

Current savings $2,000
Projected value factor x 10.6766
Value of current savings at retirement $21,353

Step 4 pulls the prior calculations together so you can see where you are today and how much to
save each year as a percentage of your current salary. This percentage is also called your “target saving
rate.” Saving this amount each year will help you reach your retirement goals.
Start by entering the number of years until you plan to retire from Step 1 on line 1. Next, enter the
estimated savings needed at retirement from Step 2. From Step 3, write down the value of your current
savings at retirement on line 3. Subtract line 3 from line 2 and enter it on line 4 – this is the additional
retirement savings you need.
Enter your current annual salary on line 5. Multiply it by the projected saving rate factor (in the box
below the Step 4 worksheet) that corresponds to the number of years until you plan to retire and enter
it on line 7. This is the maximum amount you would have if you saved your entire salary between now
and retirement including inflation and investment earnings, or the maximum possible savings based on
salary until retirement. Saving this much is not something you would normally do. This number is only
used to help figure out how much of your salary to save. Divide line 4 by line 7. This is your target
saving rate, or the percentage of your salary to save.
The target rate includes any contributions your employer makes to a retirement savings plan for you,
such as an employer matching contribution. If, for example, you are in a 401(k) plan in which you
contribute 4 percent of your salary and your employer also contributes 4 percent, your saving rate
would be 8 percent of your salary.
Remember that the worksheet only gives you a rough idea, a savings goal. Some may face higher
expenses in retirement because of personal circumstances and choose to save more. Some may have
other sources of income in retirement such as a traditional defined benefit pension or money from
selling a home that would lower the target rate.
You can compare your results with what you are currently saving after you complete Worksheet 5. If
you are currently saving less, don’t be discouraged. The important thing is to start saving, even a small
amount, and increase that amount when you can. Come back and update this worksheet from time to
time to reflect changes and track your progress.

Step 4
1. Number of years until retirement (from Step 1 line 1)
2. Savings needed at retirement (from Step 2 line 4)
3. Value of current savings at retirement (from Step 3 line 4)
4. Additional retirement savings needed (subtract line 3 from line 2)
5. Current annual salary (from Step 1 line 2)
6. Projected saving rate factor
7. Maximum possible savings based on salary until retirement
(multiply line 5 X line 6)
8. Target saving rate (divide line 4 by line 7)
PROJECTED SAVING RATE FACTORS (by number of years until retirement)
Years 20 25 30 35 40 45
Value Factors 55.2006 89.1753 138.6986 210.3277 313.3072 460.6579
This step pulls together results from the previous steps and gives you a target saving rate.
Example for Step 4

Savings needed at retirement $1,025,408
Value of current savings at retirement - $21,353
Additional retirement savings needed $1,004,055
Current annual salary $50,000
Projected saving rate factor x 210.3277
Maximum possible savings based on salary until retirement $10,516,385
Target saving rate 9.5%

5
Cash Flow
Spending
Plan Date:
Use the first two columns of Worksheet 5 to Return to this worksheet at the end of the year
create a budget, sometimes called a cash flow to see how you did in following your budget.
spending plan or a guide for how you expect to Use the last two columns to track your actual
spend your money. Don’t worry if you don’t spending and see how it is different from what
have all of the information. You can make a you planned to spend. If what you spent is more
guess now and fill in more specific information than you planned, enter it with a plus sign and if
later. it was less, enter it with a minus sign. This will
make it easier for you to add up the differences
Start with your monthly income. If you know for the year and find ways to spend less, if you
your annual gross income, divide it by 12 to get need to. Each year you can review your cash flow
the monthly amount. Most pay statements or plan and make changes for the next year’s budget
pay stubs list your total (or gross) income and to help you reach your financial goals.
your deductions, along with your net take-home
pay. You can find your net take-home pay by Add up your total retirement savings, both at
subtracting your deductions from your gross work and on your own. If your employer also
income. List all taxes, including federal, state, contributes money to your retirement savings
and local income taxes, plus Social Security and plan, in a 401(k) for example, enter that amount
Medicare taxes. in the row labeled employer match and add it to
Next, enter all of your monthly expenses. You your retirement savings to get the total retirement
can find an average for expenses that are different savings. Divide the total retirement savings by
or don’t occur each month, such as heating or car gross income (the first line in the worksheet) to
insurance, by adding up the bills for the year and get your current retirement savings rate. You can
dividing by 12. Once you know your monthly compare it to the results from Worksheet 4,
income and expenses, multiply it times 12 to get which is your target saving rate.
an annual cash flow spending plan or budget. If
you are spending more than you earn, page 10
of the booklet has ideas on how to cut expenses,
increase income, or both.

1 – Your current
2 – Track how your spending
monthly and
varies from what you planned
annual budget
Was it more (+)
Actual
Monthly Annual or less (-) than
spending
planned?
INCOME:
Gross income (total pay before deductions)

Deductions:
Retirement contributions
Health, dental, vision insurance
Disability, long-term care insurance
Life insurance
Taxes
Other deductions
Net take-home pay (gross income minus

deductions)
Other income
TOTAL NET INCOME
EXPENSES:
Savings and investing

Retirement (outside of workplace plan)
Cash reserves
Down payment for a home
Education
Other
Housing
Mortgage (including condo fees)
Rent
Maintenance
Food (at home)

1 – Your current
monthly and
annual budget
Was it more (+)
Actual
spending
planned?
Utilities
Electricity
Heat
Internet/cable
Phones
Water/sewer
Clothing
Taxes
Real estate
Other property taxes
Other taxes
Insurance
Homeowner or renter
Car
Life (if purchasing outside of work)
Disability, long-term care (if purchasing
outside of work)
Loan payments
Car
Credit card
Education
Other
Caregiving
Child care
Elder care
Personal care
Haircut
Dry cleaning
Gym
Other
Transportation
Car repairs and maintenance
Gas
Parking
Public transportation

1 – Your current
monthly and
annual budget
Was it more (+)
Actual
spending
planned?
Health care – out-of-pocket spending
Health, dental, vision insurance (if
purchasing outside of work)
Doctor visits
Hospital
Medicine
Over-the-counter medicine
Noncovered items
Travel/vacations
Entertainment
Eating out
Hobbies
Movies/theatre
Charitable contributions
Other
Gifts
Membership dues
Pet-related costs
TOTAL EXPENSES
TOTAL NET INCOME – TOTAL EXPENSES
Subtotal retirement savings

(Workplace plan contributions + saving on
your own)
Employer match
Total Retirement Savings
Current retirement savings rate as a

percentage of gross income (total
retirement savings ÷ gross income)
Target saving rate (from Worksheet 4)

6
Debt
Reduction
Date:
This worksheet will help you organize your debt debts you will pay off first, second, and so on.
so that you can plan how you will pay down each Generally, you may want to pay off the debts
debt and track your progress. Money that goes with the highest interest rates first. However, if
to pay interest, late fees, and old bills could be you have a debt with a small balance, you may
saved and invested to earn more for retirement want to pay it off to get it off your list.
and other goals.
The Resources section provides Websites and
In Worksheet 6, list your home mortgage first, if publications on how to get a copy of your credit
you have one. Then list your auto loans, student report, repair your credit, calculate how long it
loans, any credit card debts, or other money that will take to pay off credit card debt, and other
you owe. In the final column, write down which information.
Required minimum Planned

Creditor Interest Rate Balance Priority
monthly payment payment
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
TOTAL $ $ $

SAVING
MATTERS
RETIREMENT SAVINGS EDUCATION CAMPAIGN
EMPLOYEE BENEFITS SECURITY ADMINISTRATION

UNITED STATES DEPARTMENT OF LABOR
September 2017

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SAVINGS FITNESS

A GUIDE TO YOUR MONEY

For a complete list of EBSA publications visit the agency’s Website at

To order publications or to speak with a benefits advisor, contact EBSA

This material will be made available in alternative format to persons

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 1

2 U.S. DEPARTMENT OF LABOR

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 3

4 U.S. DEPARTMENT OF LABOR

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 5

6 U.S. DEPARTMENT OF LABOR

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 7

8 U.S. DEPARTMENT OF LABOR

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 9

10 U.S. DEPARTMENT OF LABOR

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 11

n Don’t charge big-ticket items. Find

n Shop around for the best interest

n Pay off the card each month, or at

n Still have problems? Leave the

12 U.S. DEPARTMENT OF LABOR

You may do this through a company retirement Choosing where to put

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 13

14 U.S. DEPARTMENT OF LABOR

There are two main ways to reduce risk. Why diversify?

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 15

16 U.S. DEPARTMENT OF LABOR

20 $2,191 $3,207 $4,661 $6,728

30 $3,243 $5,743 $10,063 $17,449

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 17

n Start small, if necessary. Money

n Be realistic about investment

work for you. n Don’t dip into retirement savings.

18 U.S. DEPARTMENT OF LABOR

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 19

20 U.S. DEPARTMENT OF LABOR

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 21

22 U.S. DEPARTMENT OF LABOR

Open an IRA Build your personal savings

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 23

24 U.S. DEPARTMENT OF LABOR

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 25

26 U.S. DEPARTMENT OF LABOR

The key is to have a clear plan, to stay focused Raising children

“ The key is to have a clear plan, to stay

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 27

28 U.S. DEPARTMENT OF LABOR

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 29

Coping With Financial Crises

30 U.S. DEPARTMENT OF LABOR

Sell investments n Provide expertise you don’t have.

n Help you through a financial crisis.

n Motivate you to take action.

For more information, visit CFP

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 31

32 U.S. DEPARTMENT OF LABOR

Sample Financial Getting Out of Debt

SAVINGS FITNESS: A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE 33

34 U.S. DEPARTMENT OF LABOR