In this reflection you should be explaining what you learned from the experience of doing this project. There is a 750 word limit to this reflection. It should not be a reiteration of how you calculated certain values, but rather insight on both the process of calculating the statistics yourself, thinking about your own retirement, career, earnings, savings, and how that ties together with what we have discussed in the course. Please read the link below about how to address a reflection in an economics course for guidance about what I am looking for here.
- Description – What is the concept, idea or theory you are reflecting on?
- Analysis – Are there aspects you found particularly interesting or challenging? Does it tie in with anything you have learned in the past? Has it changed the way you think, or affirmed something you already knew?
- Outcomes or Action – What else might you need to find out? Do you have any questions? How might you incorporate or apply these ideas in the future, perhaps in your professional life?
Whether reflecting on an experience, on your own learning, or both, you will need to make sure you include description, analysis and outcomes or action.
A reflection should be about 20% description and 80% analysis. Thus a reflection that is mostly retelling what you did in your calculations would be uninteresting and tedious. Tell me what you learned here and how it all ties together. I am *most interested* in how this project has changed your thinking or helped you think critically.
Retirement is a long time in the future, but when planning for it, time is the most crucial aspect. Exponential growth of investments can create big payouts for individuals who have enough time to take full advantage of these opportunities. In the beginning of my example the two investments were not making much money, but once the portfolios grew it sped up the rate of growth as well . Starting my 401k and Roth IRA right out of college will be important when saving for retirement. The reason I chose to do a Roth IRA instead of using the 401k or normal savings account is because all taxes on personal gains will be avoided. Paying tax on income before putting it into the Roth makes it so you don’t have to pay a tax when taking it out. I wouldn’t want to put any over 6% in my 401k because that’s all that is matched and 401k’s are taxed when withdrawn. Other mutual funds also pay dividends annually, so this added income would be good to use on re-investing or paying debt. In my real job I plan to deposit up to my employer’s match into my 401k, then let the rest sit in a Roth IRA aggressive mutual fund over a long period of time. I also think it is important to save a high percentage of your paycheck; money’s future real value always exceeds its present when growth is greater than inflation. Having your money in the stock market instead of just sitting in a bank is key when saving. If the money I were saving was not put into a 401k or Roth IRA it would be sitting in a bank account earning around 2% interest. Even though a few percentage points doesn’t seem like a lot, when investments are compounding it all adds up. Because of this I only plan to have about 10-15k in an emergency savings account once I am 24. I think it is important to have liquid savings, but at the same time maxime investments. I also learned that investing in a mutual fund is good sometimes, because it isn’t risky and has a reliable return rate. But if you could get the same return yourself, it would save you the fee which the mutual fund company takes out every year. At the end of 44 years of saving I had $7,209,598.56 in my Roth, which could have been closer to 10 million if I didn’t have to pay the company fees. When you own stock you are taxed on it only when you sell the stock or get a dividend; instead of in a mutual fund where you are taxed annually. This can help when trying to manage which tax bracket you fall into. In the end time is the most important thing when looking for a flexible retirement plan that suits you, starting earlier will lead to more return no matter what path you choose.
While doing this project, I was very intrigued about the possible outcomes I could control just based on the actions that I could be doing right now. Going through and thinking about my life after graduation, to my career, and then onto retirement was informative in the way that there’s no one right way or path to do something to reach the same goal. I’m sure all of my classmates had the same key foundations when it comes to planning for when we retire but it’s unlikely that we all took the same road to get there. I chose the path that I thought was the best for me, incrementally moving up in my career, saving as much as I could, and making financial decisions that wouldn’t cripple me along the way. My plan was the best possible scenario, I did put in somewhat of a failsafe for out of the blue occurrences with the general savings I implemented, like if something happened to me medically and whatnot. Also, my situation had the stock market continuously growing in value, not taking into account if there was a recession or if one of the companies went bankrupt. So that’s why at the end of my scenario, when I sell all my stocks, it would give me a considerable amount of money back. Overall, the plan wasn’t entirely too difficult, if anything it made me realize how much you have to think about as soon as you get your desired career. A lot of things pop out of nowhere when you become an independent adult-like all the types of insurances and if your job covers certain things and what it doesn’t, how fast or slow you ideally want to move up in your career, and what are your options if you aren’t moving up fast enough as you would like. Also, the amount of money you are putting into your retirement, and the percentage amount is more important than I realized in the long run. Going in at least 7% was the route I chose because of how much of a difference it makes even at 5%. When you start getting at 60 years old, the difference is substantial and worth it since you are still pretty young at 60 but it can continue to grow at a higher rate than anything below 7%. If you would decide to go past that age, then you would more than enough money off of everything that would you saved, you got from retirement and also including stocks, which is why I proclaimed myself as a millionaire.
Overall, making this plan was very educating and I will be taking this knowledge into account as I go through my actual adult years, even though my real life may not be a replica of what I hope it to be, the plan I made still has the core foundation for me to be successful.
I think planning for retirement early gives me a huge advantage in the future. It gives me time to put away crucial amounts of money to help me live comfortably in my years of retirement. I think the IRA is better for me personally opposed to a 401K because the money is taxed when I put it in opposed to when I withdraw the money in retirement. This will leave me with more money because my compounding money won’t be taxed only the money I input at the beginning. I still want a 401K because of my employer match contributions will double the amount of my I put it in without me having to invest it all myself. In my personal opinion an employer match 401K is one of the best benefits an employer can offer. I think buying real estate is a smart investment because over time properties appreciate in value. I plan on obtaining these properties using a 30-year mortgage. The more interest you pay off of a house the smaller the monthly mortgage payment gets. After the 30 year mortgage is payed off I can receive all of the profits from the properties as well as sell the properties and acquire all of money without paying off a mortgage from a bank.
This project helped me express my ideas that are all trapped up in my head. With all the videos, lessons, and lectures my brain has watched and listened to, it helps to write down these thoughts. Not only did the planning for retirement practice help formulate my plans, but the investment part was something I actually already had taken up and created plans for. The investment app I started using, probably about a month ago, is Acorns. It is a sort of retirement/investing account growth promoting app that lets you insert money at given times in the year into an account that invests it and helps it grow. Now, one aspect that intrigues many into using the app, is its ability to “Round-Up” your everyday purchases. For most banks, this service works smoothly, however, for Capital One, the bank I use, it does not sadly. Still, I find its refreshing app helpful in planning the outlook on your account’s potential growth. I currently have it set to only take out $10 every month, but I plan to up it in the coming year year to $10 every week. That way, through college I can start building my account and then when I get a steady income, I can greatly increase the amount I put in and help the account grow to its fullest potential. I find apps and services like these increase one’s financial literacy and help people plan their future and I encourage others to try it out.
I’ve never actually thought about my retirement plan until this exercise, so this project really put everything into perspective. Being able to see what my life could potentially be immediately after graduation, planning my career and where I want to live, and seeing how my future family could live is eye opening. This project allows me to see how much money needs to be saved, invested, and spent in order to live the life and to retire at a good time. I found it the most interesting that we had to choose a specific kind of retirement plan, especially considering what you were mentioning in class about how once people get their “starter job jacket” they pick their retirement plan and never look at it again, when they probably will need to look back and adjust their retirement strategy. Theoretically, I put in 6% of my checks into my retirement savings, so by the time I reached my retirement age, the money accumulated would suffice. I had prior knowledge using Robinhood, not a lot, but it’s very informative. It was helpful using Robinhood because apps that are easy to use for beginners helped with this exercise. I would start my 401k right after graduation, into starting my new job. I made sure to invest and manage my low risks stocks well because I wanted to make sure my money was growing at a good rate.
Although, this plan may not come to life exactly as I wanted, it was still a great opportunity for me to gain more knowledge about my own future endeavors.
Invest reflection
This investment experience has been quite interesting to me. At the beginning of this assignment I only had a slight understanding of this topic, but I have now been able to broaden my understanding of how I should be planning my future. At the beginning of the assessment I did not fully realize what all you must consider when planning for retirement and choosing what to do with your money and where to put it. My broad understanding was that you just make money, pay for what you need, then save the rest but found it not to be that simple at all. I started out with looking at the website provided to make a retirement plan and then had to calculate how much I wanted to save per month in order to have saved $260,000 by the age of 40 and be on track for my retirement goal. I continued this process when planning a college funds account for my children by taking the total goal then dividing it by 18 years assuming they go onto college when they are around that age, and from there finding a monthly amount that should be set aside to achieve that goal. I did however have a bit of a challenging time with investments and home mortgages. When working through this part of the plan, there were a lot of different factors and numbers I had to incorporate such as interest rates, down payments, and annual returns. Of course, the easy step is just plugging it in a calculator, but where I ran into some challenges was understanding exactly what those concepts meant in full and what they actually do. This ties directly into this econ class I am taking and we have talked about and learned these concepts but there is a whole other side to them when actually using them in a real life situation like we had to do for this investment and retirement plan. I have always been someone who has had an interest in business, economics, stocks, and things of that nature but this whole process has given me a much better understanding of what all comes along with those. I have downloaded robin hood to start really trying to understand this process more deeply. With that being said, there is much more I have yet to learn specifically in the stock and investment arena because throughout this process I found there are way more parts then initially thought that go into thoroughly understanding the stock market and how to get the most out of your investments. I will continue to learn more about this process and apply what I have learned not only in my years here in college, but throughout the rest of my life.
Citations
https://www.prudential.com/logoff?SSOERROR=LOGOFF
https://www.fool.com/investing/how-to-invest/stocks/
https://www.schwab.com/retirement-planning/how-to-create-a-plan
https://www.moneyunder30.com/how-much-do-you-need-to-have-saved-for-retirement
https://www.investopedia.com/articles/personal-finance/022216/i-make-50k-year-how-much-should-i-invest.asp
https://thechicagofinancialplanner.com/a-100000-a-year-retirement/
https://michaelbluejay.com/house/figurepayment.html
https://howmuch.net/articles/take-home-salary-100k-in-every-state