Ann DotyRetirement Information Specialist for Iowa State UniversitynIowa Native.nGraduate of ISU and University of Iowa.nMasters Degree in Social Work.n9 years experience as a Therapist.n4 years experience as a Financial Advisor.n4 cats, 2 - 50 gal. Aquariumsn 1 husbandn Live on 2 acres SW of Ames.There are really only 2 kinds of investments:nLending money.nBecause you lend money at only a little bit above the rate of inflation, you dont make much money. nUsing money to buy ownership in land or businesses/companies.nOnly ownership allows you to growth your money.Retirement Investments n Start with the basics What is a bond? What is a stock?Bonds are making loans to a company.nYou loan your money.nYou get some interest paid to you.nYou get back the money you loaned out sometime in the future.nThe Risk is very low.nThe Money you make is very little.nThis is how CDs work and you are the Bank.Stocks are buying parts of a company.nYou become a silent part owner in a company.nIf the company makes money (a profit) and you sell it then, your share is worth more.nIf the company loses money (a loss) and you sell it then, your share is worth less.nThe Risk is higher.nYou have the opportunity to make more money.Seems like brain surgery?nTry a couple different examplesIowa StyleBonds (lending) are like owning Dairy Cows.nYou always own the cows.nYou make your money selling the milk.nThe more milk (interest) the cow provides, the more money you make.Stocks (Ownership) are like owning Cattle.nWhat matters is how much you pay for them andnHow much you can sell them for.nYou might lose your money, but if the market is right you can make more than you can selling milk.Try another examplenFor in-town folksBonds (Loans) are like renting a house.nThe risk is low, but you dont have much to show for it when you leave.nIf your time frame is short, its the only smart thing to do.For RentStocks (Ownership) are like buying your home.nYou take all the risks- repairs, replacement, possible loss of investment.nYou hope its value will go up so you make a profit when you sell it. nYou need to hold on to for a long time to let it grow in value.Mutual Funds allow us to buy little bits of lots of companies.nIf you own shares of stocks in lots of companies and One or two go out of business, Probably the rest will be ok and you wont lose all your money.nIf you own shares of stock in lots of companies and One or two make incredible profits Probably the rest wont and you will make money -nMutual funds are safer than owning shares (stocks) of individual companies because not all your eggs in one basket.nMutual fund sub-accounts are what you invest in with most Company Retirement Plans.Two other types of investmentsnReal EstatenInflation-linked bonds or bond fundsReal Estate Typically 4-8% returns and 7 10 year cycles Not in cycle with stock market like bonds so those market ups and downs dont affect the returns Returns come from rents and leases paid by those using the properties & from the increase in value of the property when soldInflation-linked BondsnIssued by the U.S. GovernmentnAssure you that the investment will hold its buying power regardless of inflation rates over timenFederal Deficit is $400 Billion and growing by the daynIn previous high Federal Deficit periods (1980s), inflation rates were as high as 10- 12%Building your Portfolio with TIAA-CREF BookletnThis is your booklet, please write in it!TIAA Traditional Annuity & Real Estate Fund & CREF funds are conservatively invested.n all but one are only moderately risky.Growth Fund has moderately high risk.nRisk means “Possibility for the fund to be down at any specific time.”nRisk does NOT mean all your money will be lost (page 3).The More Conservative You Are In Your Investments Choices,The More You Need to Save!What is Market Risk?nMost people think the risk is that they will lose all their money.nThe real risk is that on any given day the market values will be lower that they were the day you put your money in.nThat risk is lowered over time.The HandoutnOVER THE LONG TERM, STOCK RETURNS MAY BE LESS VOLATILE.nSTAYING INVESTED CAN INCREASE STOCK RETURNSTIAA Traditional AnnuitynOne of the highest fixed return investments in the countrynIt will always show an increase on your quarterly statement If seeing account values go up and down makes you nervous, keep some of your dollars herenIf you are putting all or most of your retirement savings here, you will need to save more than your 5% required contribution to live as well in retirementCREF Bond MarketnBonds often do well when stocks were down. nWhen interest rates go down or stay steady, this is a good investment.nNow is probably not a good time to be in bonds because of the $400 Billion Federal Deficit CREF Inflation-Linked BondnThese are very popular in Eu