NLA update - FALL 1996


How You Can Become A Millionaire
/stripe.jpg" HSPACE=5 VSPACE=5 ALIGN=bottom WIDTH=640 HEIGHT=5>

Article provided by Great Plains Trust Company - the designated National Lawyers Association Retirement Benefits Provider

By saving $2,000 a year for 41 years and earning a 10% tax deferred investment return, an individual can accumulate a retirement savings of $1,000,000. Think about it-the total savings required is $82,000 (41 years multiplied by $2,000 per year) and the investment earnings is $918,000. If a person delays their savings or wishes to reach the $1,000,000 mark more quickly, the hurdle on required savings get progressively more difficult as illustrated below:
Years to Accumulate $1,000,000
30 Years
25 Years
20 Years
15 Years
Required Annual Savings
$5,527
$9,244
$15,872
$28,613

The above hypothetical information illustrates that becoming a millionaire is not out of the reach for almost any individual, but a disciplined savings program is a requirement. It is much easier task the earlier an individual gets started due to the magnificent compounding of interest impact on savings. Additionally, by utilizing tax deferral vehicles such as IRAs and qualified retirement plans, overall investment returns are greatly enhanced. If an analysis is done of what amount of savings is needed at retirement and a plan of action is implemented to accumulate the ultimate value required, you will find yourself one step ahead of most Americans today.

Don't Expect Anyone Else To Do It For You

Most estimates for Social Security continue to project a surplus for the next 15 years. However, large deficits are expected to return when the baby boomer generation starts to retire beginning in the year 2010. What many Americans will receive from Social Security will be meager by most standards. A worker that retires at age 62 receives as little as 80% of the full Social Security benefits payable at age 65. For reference, by the year 2003 the maximum annual Social Security benefit is expected to be near $24,000, with the average annual benefit in the vicinity of $16,000. These amounts are near poverty level incomes by today's standards; imagine what the purchasing power of these incomes will be fifteen years from now. Clearly, you will need to go well beyond Social Security to attain a comfortable retirement and maintain your standard of living.

Increase Your Returns By 33%

By making tax deferred contributions into a qualified retirement plan, you increase the amount you have to invest as well as the growth of your investment. Contributions to your retirement plan result in Uncle Sam and the State helping you to save because taxes are not imposed until the money is withdrawn at some future date. As an example of the significant tax savings consider a person wanting to save $100 a month, with a combined federal and state tax bracket of 33% (28% federal & 5% state) and the annual investment return to be achieved is 10%. What is the most effective way for this person to save money and how much does it really cost? To save $100 each month it actually costs $133 on a pre-tax basis. Federal taxes of $28 (28%) and state taxes of $5 (5%) must be paid before the $100 can be placed in savings. On the other hand, $133 could be saved in a qualified retirement plan resulting in 33% more money earning a return. Also, the earnings on the money in the retirement plan will not be subject to federal and state taxes each year as it would outside of a qualified plan.

Solutions To Your Savings Dilemma

Fortunately, there are many vehicles for achieving financial independence. Determining which approach best solves the retirement needs of a firm's owner and employees is not easy. Specific factors such as the number of employees, their ages, compensation distribution, etc., all play an important role in deciding which plan or plans will meet your retirement goals. Plans that are currently available for qualified retirement savings are as follows:

Defined Benefit Pension Plan
Money Purchase Pension Plan
Profit Sharing Plan
401(k) Plan
Target Benefit Pension Plan
Simplified Employee Pension
Salary Reduction Simplified Employee Pension (SAR-SEP)
Individual Retirement Account (IRA)

Finally, in choosing a plan that is right for you and your firm, always consult an experienced financial advisor that can guide you through the maze of options currently available. A plan to help you save for your financial future will not only allow you to retire comfortably, it will also provide the benefit of allowing you to focus on the day-to-day aspects of your growing business.

For more information regarding the types of retirement plans that are available contact the National Lawyers Association Retirement Program toll-free at 1-888-LAW-ASSN (1-888-529-2776)

/prev.jpg" WIDTH=125 HEIGHT=30 ALT="Previous Page"> /nlaupdt.jpg" WIDTH=175 HEIGHT=30 ALT="Return to NLA Update Home Page"> /next.jpg" WIDTH=125 HEIGHT=30 ALT="Next Page">
/nlahome.jpg" WIDTH=125 HEIGHT=30 ALT="Return to NLA Home Page">

National Lawyers Association
Voice: (816) 471-2994 · (800) 471-2994 · Fax: (816) 471-2995
Email: National Lawyers Association
17201 E. 40 Highway, Suite 207
Independence, Missouri 64055

NLA is a registered trademark of the National Lawyers Association
The NLA logo is a trademark of the National Lawyers Association

Some Image(s) Copyright © 1995 PhotoDisc, Inc.