point of choice tm the point of choice tm. point of choice tm the day you have the choice whether or...

Point of Point of ChoiceChoice

TTMM

The Point of Choice TM

Point of Choice Point of Choice TMTM

The day you have the choiceThe day you have the choice

whether or not to work for incomewhether or not to work for income

because your financial assetsbecause your financial assets

will provide more income than you’ll will provide more income than you’ll needneed


Point of Point of Choice Choice ©©

Financial AssetsFinancial Assets

Unearned IncomeUnearned Income

Assets That Increase In Assets That Increase In ValueValueStocksStocksRealizedRealized

Capital Capital GainGain

- - InterInterestest

- - DivideDividendndReal EstateReal Estate

Bonds/CD/Bonds/CD/SavingsSavings

What Are Financial Assets?What Are Financial Assets?

Living Expenses Forever!Living Expenses Forever!(Capital Assets)(Capital Assets)

- - ReRentnt

NotesNotes - Income- IncomeThe Point of Choice TM

AgeAgeYearsYears

to POCto POCRequired Required

AssetsAssetsat POCat POC

BeginniBeginningng

IncomeIncome

$50,000 a Year Income$50,000 a Year Income

Inflation Assumption Inflation Assumption = 4%= 4%

$1,250,00$1,250,0000

6565 00 $50,0$50,00000

Inflation– 4%$ 50,000 $ 2,000

1 $ 52,000 $ 2,0802 $ 54,080 $ 2,1633 $ 56,243 $ 2,2494 $ 58,492 $ 2,3395 $ 60,832

Year

Point of ChoicePoint of Choice©©


$1,500,00$1,500,0000

AgeAge

5500

6060

4040

3030

2020

55

1515

2525

3535

4545

$2,300,$2,300,000000

$3,300,00$3,300,0000

$4,900,00$4,900,0000

$7,300,00$7,300,0000

$60,0$60,00000

$90,0$90,00000

$133,0$133,00000

$197,00$197,0000

$292,000$292,000

YearsYearsto POCto POC

Required Required AssetsAssetsat POCat POC

BeginniBeginningng

IncomeIncome



$1,250,00$1,250,0000

6565 00 $50,0$50,00000



$3,000,00$3,000,0000

AgeAge

5500

6060

4040

3030

2020

55

1515

2525

3535

4545

$4,600,$4,600,000000

$6,600,00$6,600,0000

$9,800,00$9,800,0000

$14,600,0$14,600,00000

$120,0$120,00000

$180,0$180,00000

$266,00$266,0000

$394,00$394,0000

$584,000$584,000

YearsYearsto POCto POC

Required Required AssetsAssetsat POCat POC

BeginniBeginningng

IncomeIncome



$2,500,00$2,500,0000

6565 00 $100,0$100,00000



4 Point Of Choice Steps For 4 Point Of Choice Steps For ANYONEANYONE

Point of Point of Choice ©Choice ©Point of Choice ©Point of Choice ©


$250,0$250,00000

Median Home Median Home PricePrice

$24,30$24,3066

$2,571,$2,571,429429

40 Years From 40 Years From NowNow

40 Years 40 Years AgoAgo

Point of Point of Choice ©Choice ©Option 1 – HomeOption 1 – Home


Home CompoundingHome CompoundingAssumptions: Assumptions: Home Value = $ 250,000 Annual Growth = 6%Home Value = $ 250,000 Annual Growth = 6%


Home Home CompoundingCompounding

Assumptions: Assumptions: Home Value = $ 250,000 Annual Home Value = $ 250,000 Annual Growth = 6%Growth = 6%

1.1. 265,00265,0000

2.2. 280,90280,9000

3.3. 297,75297,7500

4.4. 315,62315,6200

5.5. 334,56334,5600

6.6. 354,63354,6300

7.7. 375,91375,9100

8.8. 398,46398,4600

9.9. 422,37422,3700

10.10. 447,71447,7100

11.11. 474,57474,5700

12.12. 503,05503,0500

13.13. 533,23533,2300

14.14. 565,23565,2300

15.15. 599,14599,1400

16.16. 635,09635,0900

17.17. 673,19673,1900

18.18. 713,58713,5800

19.19. 756,40756,4000

20.20. 801,78801,7800

21.21. 849,89849,8900

22.22. 900,88900,8800

23.23. 954,94954,9400

24.24. 1,012,1,012,230230

25.25. 1,072,1,072,960960

26.26. 1,137,1,137,340340

27.27. 1,205,1,205,580580

28.28. 1,277,1,277,920920

29.29. 1,354,1,354,590590

30.30. 1,435,1,435,870870

31.31. 1,522,1,522,020020

32.32. 1,613,1,613,340340

33.33. 1,710,1,710,140140

34.34. 1,812,1,812,750750

35.35. 1,921,1,921,520520

36.36. 2,036,2,036,810810

37.37. 2,159,2,159,022022

38.38. 2,288,2,288,560560

39.39. 2,425,2,425,870870

40.40. 2,571,2,571,430430

41.41. 2,725,2,725,715715

42.42. 2,889,2,889,258258

43.43. 3,062,3,062,614614

44.44. 3,246,3,246,370370

45.45. 3,441,3,441,153153


Simple vs. Compound Simple vs. Compound InterestInterest

SimplSimpleeYeaYea

rr 11

CompouCompoundnd

22

33

44

55

BalanBalancece

BalanBalancece

InterInterestest

InterInterestest$1,0$1,0

0000$1,0$1,00000$1,1$1,1

0000

$100$100

10%10%

$100$100

$100$100

$100$100

$100$100

$100$100

$1,2$1,20000$1,3$1,30000$1,4$1,40000

$1,1$1,10000$1,2$1,21010

$110$110

$121$121

$133$133

$146$146$1,3$1,33131$1,4$1,46464


$5,4$5,40000

$66,26$66,2644

After 45 YearsAfter 45 Years

Simple vs. Compound Simple vs. Compound InterestInterest


Compound Compound InterestInterest

ALBERT EINSTEINALBERT EINSTEIN "There is no greater power known to man "There is no greater power known to man

than compounding interest." than compounding interest." ““Compound interest is the greatest Compound interest is the greatest

mathematical discovery of all time.”mathematical discovery of all time.” ““Compounding is the 8th Wonder of The Compounding is the 8th Wonder of The

World!”World!” ““Compounding is mankind’s greatest Compounding is mankind’s greatest

invention because it allows for the reliable, invention because it allows for the reliable, systematic accumulation of wealth.”systematic accumulation of wealth.”


Option 1 – HomeOption 1 – Home 1. 1. HomHomee

AgeAge AmountAmount

2020 $3,500,000$3,500,000

3030 $2,000,000$2,000,000

4040 $1,500,000$1,500,000

5050 $600,000$600,000

6060 $350,000$350,000

AssumptionsAssumptionsBeginning Home Beginning Home

ValueValue$250,0$250,0

0000Growth AssumptionGrowth Assumption 6%6%

Point of Point of Choice ©Choice ©


$0 $0 $0 $0$0


3.5 M

2 M 600 K

350 K

1.1 M


What is a 401K?

1. 1. HomHomee

Point of Point of Choice Choice

TTMM

Set up by employer Investment contribution withheld

from paycheck Contribution often matched by

employer Several investment options No tax paid on contributions No tax paid annually on income Taxes paid on distributions

Option 2 – 401(K)Option 2 – 401(K)


How does a 401K work?1. 1.

HomHomee


TTMM

EndinEndingg

BalanBalancece

YourYourContributiContributi

onon

CompanyCompanyContributContribut

ionion

10% 10% IncomeIncome

$2,000$2,000 $2,000$2,000

BalanBalancece

$4,000$4,000 $400$400.... $4,400$4,400 2,1002,100 2,1002,100

8,608,6000

860860 9,4609,460


2,2052,205 2,2052,205 13,87013,870 1,3871,387 15,25715,257 2,3152,315 2,3152,315 19,88819,888 1,9881,988 21,87621,876 2,4312,431 2,4312,431 26,73826,738 2,6742,674 29,41229,412 2,5532,553 2,5532,553 34,51734,517 3,4523,452 37,96837,968 2,6802,680 2,6802,680 43,32943,329 4,3334,333 47,66247,662 2,8142,814 2,8142,814 53,29153,291 5,3295,329 58,62058,620

2,9552,955 2,9552,955 64,53064,530 6,4536,453 70,98370,9833,1033,103 3,1033,103 77,18877,188 7,7197,719 87,90787,907

3,2583,258 3,2583,258 91,42291,422 9,1429,142 100,564100,564

3,4213,421 3,4213,421 107,406107,406 10,74110,741 118,146118,146

1122

445566778899

1010

1111

33

1212



Behavioral Behavioral IntelligenceIntelligence1. If you don’t see it, you won’t 1. If you don’t see it, you won’t

miss itmiss it2. Substantial penalty for early 2. Substantial penalty for early withdrawalwithdrawal3. Someone else does all the work.3. Someone else does all the work.

The largest liquid The largest liquid investment you will have investment you will have

in your retirementin your retirementNothing Else Will Even Nothing Else Will Even Come Close!Come Close!

1. 1. HomHomee

CONTRIBUTE 10%CONTRIBUTE 10% OF INCOME TO 401KOF INCOME TO 401K



1. 1. HomHomee

AgeAge AmountAmount

2020 $17,000,000$17,000,000

3030 $5,500,000$5,500,000

4040 $1,700,000$1,700,000

5050 $450,000$450,000

6060 $70,000$70,000

AssumptionsAssumptionsIncome IndexIncome Index 5%5%

Beginning IncomeBeginning Income $50,00$50,0000

Percent ContributionPercent Contribution 10%10%Employer MatchEmployer Match 4%4%Investment YieldInvestment Yield 11%11%

2. 2. 401401KK

Option 2 – 401(K) Point of Point of

Choice ©Choice ©


3.5 M

2 M 600 K

350 K

1.1 M


20 M

7.5 M

1 M 420 K

2.8 M


2. 2. 401401KK

1. 1. HomHomeeAmerican Debt American Debt

PaymentsPaymentsAmerican Debt American Debt

PaymentsPaymentsAverage American Household - Average American Household -

$2,300 per month$2,300 per monthAverage American Household - Average American Household -

$2,300 per month$2,300 per month800% increase in per capita debt -- 800% increase in per capita debt -- past 30 yearspast 30 years

800% increase in per capita debt -- 800% increase in per capita debt -- past 30 yearspast 30 years % more than 30 days behind on % more than 30 days behind on

any paymentany payment % more than 30 days behind on % more than 30 days behind on

any paymentany payment4.4.

22

THE THE GOALGOALChange Who Gets The Change Who Gets The

PaymentPaymentTO TO YOURSELF!YOURSELF!

??

96% Make Payments 96% Make Payments on Time!on Time!

96% Make Payments 96% Make Payments on Time!on Time!



2. 2. 401401KK

1. 1. HomHomee

Accelerated Debt Reduction Accelerated Debt Reduction InvestmentsInvestments

Average American Out of Average American Out of debtdebt

Double the smallest Double the smallest paymentpayment

Roll payment Roll payment upup

Option #3 ADROption #3 ADR

Including Home Including Home MortgageMortgage

IN 6 TO 8 IN 6 TO 8 YEARS!YEARS!



2. 2. 401401KK

1. 1. HomHomee


TTMM



Option #3 ADROption #3 ADR2. 2.

401401KK

1. 1. HomHomee


TTMM



2. 2. 401401KK

1. 1. HomHomee


3. ADR3. ADRTTMM

2. 2. 401401KK

1. 1. HomHomee

www.powerpaywww.powerpay.org.orgUtah State Utah State

UniversityUniversityFreFreeePrints out a debt reduction Prints out a debt reduction calendarcalendar





2. 2. 401401KK

1. 1. HomHomee

Option #3 ADR


2. 2. 401401KK

1. 1. HomHomee

AgeAge AmountAmount

2020 $12,600,000$12,600,000

3030 $4,300,000$4,300,000

4040 $1,300,000$1,300,000

5050 $300,000$300,000

6060 $0$0

3. ADR3. ADR

AssumptionsAssumptionsMonthly PaymentsMonthly Payments $2,500$2,500

Years to PayoffYears to Payoff 88Investment YieldInvestment Yield 11%11%




20 M

7.5 M

1 M 420 K

2.8 M


33 M

12 M

1.4 M

420 K

4.1 M

$50,000 Income $7,300,000 Financial Assets

$33,000,000 Financial Assets$226,000 Income


POINT OF CHOICE GOALPOINT OF CHOICE GOAL

TODAY’S TODAY’S DOLLARSDOLLARS$ $

50,0050,0000

POINT OF CHOICE DOLLARSPOINT OF CHOICE DOLLARS

$ $ 292,0292,00000

$ $ 226,0226,00000

$ $ 1,025,01,025,00000


2. 2. 401401KK

1. 1. HomHomee

Pension Plans and Social SecurityPension Plans and Social Security

3. ADR3. ADRBeneBenefitfit$ $ 35,035,00000

11$ $ 35,835,87575

22 $ $ 33,233,21818

$ $ 35,035,00000$ $

37,637,69191

33 $ $ 29,929,92020

$ $ 38,638,63333

44 $ $ 28,928,93737

$ $ 39,539,59999

55 $ $ 26,926,95151

$ $ 40,540,58989

66 $ $ 25,525,57878

$ $ 41,641,60404

77 $ $ 24,224,27676

$ $ 42,642,64444

88 $ $ 23,023,03939

$ $ 43,743,71010

99 $ $ 21,821,86666

$ $ 44,844,80303

1100

$ $ 20,720,75252

$ $ 45,945,92323

1111

$ $ 19,619,69595

$ $ 47,047,07171

1122

$ $ 18,618,69393

$ $ 48,248,24848

1133

$ $ 17,717,74141

$ $ 49,449,45454

1144

$ $ 16,816,83737

$ $ 50,650,69090

1155

$ $ 15,915,98080

$ $ 51,951,95858

1166

$ $ 15,115,16666

$ $ 53,253,25757

1177

$ $ 14,314,39494

$ $ 54,554,58888

1188

$ $ 13,613,66161

$ $ 55,955,95353

1199

$ $ 12,912,96565

$ $ 57,357,35252

2200

$ $ 12,312,30505

$ $ 58,758,78585

2211

$ $ 11,611,67878

$ $ 60,260,25555

2222

$ $ 11,011,08383

$ $ 61,761,76161

2233

$ $ 10,510,51919

$ $ 63,363,30505

2244

$ $ 9,989,98

33$ $ 64,864,88888

2255

$ $ 9,479,47

55$ $ 66,566,51010

2266

$ $ 8,998,99

22$ $ 68,168,17373

2277

$ $ 8,538,53

44

$ $ 69,869,87777

2288

$ $ 8,108,10

00$ $ 71,671,62424

2299

$ $ 7,687,68

77$ $ 73,473,41515

3300

$ $ 7,297,29

66$ $ 75,475,45050

3311

$ $ 6,926,92

44$ $ 77,177,13131

3322

$ $ 6,576,57

22$ $ 79,079,06060

3333

$ $ 6,236,23

77$ $ 81,081,03636

3344

$ $ 5,915,91

99$ $ 83,083,06262

3355

$ $ 5,615,61

88$ $ 85,185,13838

3366

$ $ 5,335,33

22$ $ 87,287,26767

3377

$ $ 5,065,06

00$ $ 89,489,44949

3388

$ $ 4,804,80

33$ $ 91,691,68585

3399

$ $ 4,554,55

88$ $ 93,993,97777

4400

$ $ 4,324,32

66$ $ 96,396,32727

4411

$ $ 4,104,10

66$ $ 98,798,73535

4422

$ $ 3,893,89

66$ $ 101,101,203203

4433

$ $ 3,693,69

88$ $ 103,103,733733

4444

$ $ 3,513,51

00$ $ 106,106,327327

4455

$ $ 3,333,33

11

$ $ 582,5582,5

7676

COLA COLA 2.5%2.5%

Yield 8%Yield 8%

InvestmInvestmentent InvestmInvestm

entent


2. 2. 401401KK

1. 1. HomHomee

Pension Plans and Social SecurityPension Plans and Social Security

3. ADR3. ADR

AgeAge AmountAmount * *

2020 $4,000,000$4,000,000

3030 $2,500,000$2,500,000

4040 $1,600,000$1,600,000

5050 $1,000,000$1,000,000

6060 $650,000$650,000

* Assumes full benefit + * Assumes full benefit + one halfone half



33 M

12 M

1.4 M

420 K

4.1 M


37 M

14.5 M

2.4 M

1.1 M

5.7 M


2. 2. 401401KK

1. 1. HomHomee


3. ADR3. ADR

TTMM

Option #4 Million Dollar Option #4 Million Dollar Choices ™Choices ™

What if you made a choice that What if you made a choice that would would

save you $100 a month save you $100 a month

what would that mean to you? what would that mean to you?


2. 2. 401401KK

1. 1. HomHomee


3. ADR3. ADR

TTMM

RR = = RecurrinRecurringg

E E = = ExpensesExpenses

RR = = RightRight

SS = = SaveSave

VV = = VehicleVehicle

II = = InvestInvest

weweandandin thein the

Life R.E.S.I.R.V.Life R.E.S.I.R.V.



2. 2. 401401KK

1. 1. HomHomee


AgeAge AmountAmount

2020 $5,600,000$5,600,000

3030 $1,900,000$1,900,000

4040 $600,000$600,000

5050 $170,000$170,000

6060 $30,000$30,000

3. ADR3. ADR

4. Million 4. Million Dollar Dollar Choices ™Choices ™

TTMM

Assumptions

Income Index 5%

Annual Contributions $1,200

Total Tax Rate 22%

Employer Match 4%

Investment Yield 11%



37 M

14.5 M

2.4 M

1.1 M

5.7 M


43.6 M

16.4 M

2.6 M

1.2 M

6.3 M

$ 50,000 Income$ 7,300,000 Financial Assets

$ 43,600,000 Financial Assets$ 300,000 Income


2. 2. 401401KK

1. 1. HomHomee

3. ADR3. ADR


Point of Point of Choice Choice 2 Choices That Are Not For 2 Choices That Are Not For

Everyone!Everyone!

TTMM


2. 2. 401401KK

1. 1. HomHomee

3. ADR3. ADR


Point of Point of Choice Choice Option #5 Income Producing Real EstateOption #5 Income Producing Real Estate

5. Income 5. Income RealRealEstateEstate

TTMM


2. 2. 401401KK

1. 1. HomHomee

Option #6 Own Your Own BusinessOption #6 Own Your Own Business

3. ADR3. ADR


5. Income 5. Income Real EstateReal Estate


6. Business 6. Business OwnershipOwnership

TTMM


point of choice tm the point of choice tm. point of choice tm the day you have the choice whether or...

Documents

choice point of choice

point of choice tm slide

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home value

home compounding assumptions

home ageamount20

income taxes