Make Your Retirement Dreams a Reality

If you’re like most people, you don’t want to work for the rest of your life. You probably look forward to the day when you retire and spend more time doing the things you enjoy. And that time will come much sooner than you think. To be ready for it, you need a plan. You need to save. You need to invest. And you need to start now.

Why Plan for Retirement?
Planning, saving and investing for your retirement can help you achieve financial independence during retirement. You probably don’t want to lower your standard of living when you retire. In fact, you may want to increase it to travel more and enjoy other leisure activities.

To do that, most financial professionals agree you will need about 70 percent to 90 percent of the income you had before you retired. Generally, your pension benefit and Social Security will cover only a portion of this amount. The rest will have to come from what you do on your own – from how much you save and how you invest.

Need Another Reason to Invest?
Consider this:

• Sara and Spencer have the same annual income and have similar investment goals.
• Spencer starts saving at age 25, contributes $10 a week each year for 10 years ($5,200 in total), then stops adding money to his account.
• Sara starts saving at age 35 and contributes $10 a week each year for 30 years ($15,600 in total), then stops adding money to her account.
• Both Spencer and Sara earn an investment return of 7 percent per year after expenses.

So, who will have more money at age 65 … Spencer or Sara? Spencer will – $54,691 to Sara’s $49,120 – almost 11 percent more than Sara. That’s the “magic” of compounding – money earning more money through investing over time – which Einstein supposedly called “the most powerful force in the universe.”

It’s never too early or too late to start investing. The more you save and invest now, the better your chance of meeting your retirement goals.

You can save and invest in the 401(k) and the 457 taxdeferred savings plans offered through the South Carolina Deferred Compensation Program. For more information, see Pages 10-11.

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What’s Inside?
Make Your Retirement Dreams a Reality ......................................................... 1
Why Plan for Retirement? ................................................................................ 1
Need Another Reason to Invest? ...................................................................... 1
Think You Can’t Invest? .................................................................................... 2
Where Can You Invest Your Money? ................................................................ 2
Stocks ........................................................................................................... 2
Bonds ............................................................................................................ 2
Cash Equivalents .......................................................................................... 3
Investing in Mutual Funds ........................................................................... 3
Does It Cost Money to Invest in Mutual Funds? ...................................... 4
What Kinds of Risks Are You Taking When You Invest? ................................... 5
Market Risk ................................................................................................... 5
Inflation Risk ................................................................................................ 5
How Do You Balance Risk and Return? ........................................................... 5
Spread Your Investments Around Wisely – That’s “Asset Allocation” ....... 5
Build a “Portfolio” ........................................................................................ 6
Take a “Long-Term View” of Investing ......................................................... 6
Don’t Time the Markets ................................................................................ 7
Should You Invest in Stocks, Bonds, or Cash Equivalents? ............................. 7
Understanding How Market Risk and Time Work Together ....................... 7
Knowing Your Risk Tolerance (Your “Sleep Factor”) .................................. 8
What Type of Investor Are You? ............................................................... 8
How Do You Create an Investment Portfolio? ................................................ 10
So Now What? ................................................................................................ 10
Get Started Right Away .............................................................................. 10
The South Carolina Deferred Compensation Program .......................... 10
The State Optional Retirement Program (State ORP) ............................ 11
Where Can You Go to Keep Learning? ................................................... 12
Web Sites .............................................................................................. 12
Publications ......................................................................................... 12
Glossary .......................................................................................................... 13

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