BUS 112 RSCC INTRO TO WEALTH

1
BUS 112 RSCCINTRO TO WEALTH

• Social Security, the TN Lottery, and Becoming a
  Millionaire - 101.
• Ramsey 1, Orman Intro.
• Lecture Notes Quiz One

2
So, how does SS work?

• Need 40 quarters credits (10 years of work)
• 1,050 min. per quarter
• Working all year earns four credits
• Benefits amounts based work history income
• Benefit ages vary from age 62-70
• Death benefit pays 255
• Source www.socialsecurity.org/congressional/keypo
  ints/ss-trouble.html

3
Why have I heard that SS is in trouble..

• Supplemental assistance not retirement plan
• What was started as a 43 to 1 system is now a 3
  to 1 ratio system (payers to receivers)
• SS is trillions in debt
• SS has become a pay as you go system

Source www.socialsecurity.org/congressional/keypo
ints/ss-trouble.html
4
What SS was intended for

• Supplemental assistance not a catch all
• 50 years ago 85 of the permanent workforce had a
  pensions plan
• This number dropped to below 50 in the early
  1990s and is today less than 15
• What was once set up as a supplement is now being
  used as a retirement plan
• US Dept. of Health and Human Services Poverty
  Level
• 2008 is 13,690, avg. SS recipient is about
  12,000

5
Is SS a certainty for us

• A financial crisis Social Security is
  trillions in debt
• The rate of return for todays recipients is
  barely 2
• Some pay SS there entire working life and never
  live long enough to receive benefits
• Death benefit pays 255

Source www.socialsecurity.org/congressional/keypo
ints/ss-trouble.html
6
Average Social Security check to increase by
24Wednesday, October 17, 2007 Associated
Press

• AP, WASHINGTON -- Come January,
• Social Security benefits for nearly
• 50 million Americans are going up on average an
  extra 24 per month. The cost of living
  adjustment means that the monthly benefit for the
  typical retired worker in 2008 will go from
  1,055 currently to 1,079 next year.

7
Dave Ramsey on lotteries

• a tax on the math impaired
• stupid tax

8
Which do you choose?

• If you put 1 into the TN lottery,
• everyday for 50 years.
• OR
• If you put 1 into a Growth Stock Mutual Fund
  everyday for 50 years.
• What would be the odds of becoming a millionaire
  in each case?
• ICA is a Growth and Income Fund From American
  Funds Investments, established 1934

Investment Company of America
9
Here are the facts.. Source Jim Lindsey, UT
Department of Mathematics

• Odds of becoming a millionaire
• in the TN Lottery Powerball
• with a dollar a day are? Less than .01
• It is a mathematical fact that a dollar a day for
  50 years invested in any fund that averages a
  11.52 return a million dollars
  100 of the time

10
Lottery 1,000,000 winners

• Divorce rate among Lottery (1,000,000) winners
  is four-times the national average?
• Also, 65 of Lotto winners are bankrupt within 15
  years.
• Source smartspending.com

11
Fund DetailsThe Investment Company of America
(growth-and-income fund)

• Rate of Return
• Average Annual Compound Return Lifetime
• Since 1934
• W/sales charges
• 12
• Source www.americanfunds.com

12
Back to our question.

• Answer Far less than 1 for
• the TN Lottery and nearly 100 for a many
  Growth Stock Mutual Fund ie. ICA
• So, why is this such a surprise? State Lotteries
  spend significantly more money advertising their
  method of getting rich

13
Marv Eker Author and financial expert

• Research has shown again and again most lottery
  winners eventually return to their original
  financial state, regardless of winnings.
• Self made millionaires that lose it all usually
  have it back in a short period of time.
• Rich people believe you create your own life,
  poor people believe life is what happens to you
  
• Poor people believe wealth must come from
  outside sources Lottery, Govt., Employer Rich
  people believe they and only they must create
  their own wealth

14
Advice from HR Block

• There is NO reason anyone can not manage their
  money well to enjoy a prosperous life and
  retirement
• HRB's 4 step process to financial success is
  Confidence, Information, Process, and
  Accountability
• People need to take more control
  over their personal finances
• Make informed financial decisions