Financial Literacy Brochures · Financial Literacy Brochures How to Afford a Long, Happy Retirement Advice from CPAs AThree-Step Approach to Successful Retirement Planning (1) Pinpoint

The GSCPA offers seven financial literacy brochures that you can hand out to your clients. There is space on the back of each brochure for you to affix your contact information. Each available brochure is listed below. There is no charge for the first 10 brochures. Each brochure after that is $.50. To order brochures, contact Jamie Etzbach at [email protected] or 404-504-2933.

Financial Literacy Brochures

How to Afford a Long, Happy Retirement

Advice from CPAs

A Three-Step Approach to Successful Retirement Planning

(1) Pinpoint Your Major Sources of RetirementIncome

(2) Take a Realistic Look at Retirement Costs and Goals

(3) Close the Gap Between Income and Goals

(1) Pinpoint Your Major Sources ofRetirement Income

Assess each of the following major sources of retire-ment income and determine which ones you have,which ones you don’t and which ones you should.

Social Security: The longer you work (up until age70) the greater your monthly benefits. Each yearabout two or three months before your birthday,you receive a statement from the Social SecurityAdministration detailing all the facts and figures surrounding your contributions and anticipated benefits. Review and keep this document. It’s a vitalpiece of information for your retirement planning.You can also obtain a copy by calling the SocialSecurity Administration at 800-772-1213, or requesting it from their Web site, www.ssa.gov.

Employer Pension Plan: Make sure you understandall the provisions and eligibility requirements of yourretirement plan, especially regarding vesting.Retiring even a few months too early (or leaving foranother position in advance of vesting) could costyou tens of thousands of dollars over the course ofyour retirement.

Employer Contribution Plan: The most commonvariety is a 401(K) plan, a retirement savings plan,funded by employee contributions and (often)matching contributions from the employer. You usually have some say in how contributions areinvested. The major attraction is that the contributionsare taken from pre-tax salary, and the funds grow tax-free until withdrawn.

Never Too Early. Never Too Late.There’s no wrong time to plan for your retirement.Sooner is, of course, better — making it possible fora 30-year-old, who saves for retirement consistently, to be a millionaire by retirement age. But even thosewho don’t start saving for retirement until their late50’s, can take the edge off retirement expenses byusing safe, and often overlooked, strategies.

As you begin to create a solid retirement plan, themonies that define your future security will grow andyou will become more confident and optimistic. As aresult, you may find that your present financial andemotional well being also take a turn for the better.

The advice in this brochure and that of an objectivefinancial professional, such as a CPA, may help youenjoy the retirement of your dreams.

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Your Firm’s logo and contact informationshould be placedwithin the yellow box.The yellow box shouldnot print.

©2005, American Institute of Certified Public Accountants

It’s easy to save for your retirement if you“think small” and do it consistently. The num-bers speak for themselves. Take a look at whatjust $100 per month — that’s less than $3.25a day — can mean towards your retirement.

The Power of $100 a Month

Rate of Number of Years Return

5 10 15 20 25 30

5% 6,801 15,528 26,729 41,103 59,551 83,226

6% 6,977 16,388 29,082 46,204 69,299 100,452

7% 7,159 17,308 31,696 52,093 81,007 121,997

8% 7,348 18,295 34,604 58,902 95,103 149,036

9% 7,542 19,351 37,841 66,789 112,112 183,074

10% 7,744 20,484 41,447 75,937 132,683 226,049

Your Money. Your Life. www.360financialliteracy.org

Securing Your Business Financing

Advice from CPAs

Key Sources of Business Funding Banks/Credit Unions — Local financial institutionsare a major source of small business financing. If youneed a short-term loan, a single-purpose loan formachinery or equipment, or a seasonal line of credit,your local bank may prove to be the best source.

Customer/Supplier Financing — Customers canoften be sympathetic about your need to maintaingood cash flow. In some cases they may be willingto pay up front for part or all of the services or products you supply. Or, they may respond to discounts for early cash payments that will free upcash for operating your business.

Factoring or Accounts Receivable Financing —A company with cash flow problems can turn uncollected invoices into immediate funding byassigning its accounts receivable to a factor or agent.Factoring usually involves high interest or a deep discount for which the factor assumes all risksinvolved with collecting payment.

Working Capital Financing — This type of funding works like a line of credit that’s tied to your company’s receivables and/or the dollar valueof your inventory. For example, you might requestthat your lender provide a 70 percent advance onqualified receivables or advance 50 percent of thevalue of your inventory.

Economic Development Programs — Many federal,state, and local governments offer small businessesloan and incentive programs. The funding is typicallyadministered through banks, business developmentdistricts, and the Small Business Administration.Often, special consideration is given to ethnicgroups, women, veterans, and companies located in designated urban and rural locations. Fundingthrough these special programs often requires agreat deal of documentation, and may also requiretangible assets, primarily real estate or equipment, as collateral.

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Choosing the Right Source of FundingWhether you’re starting a business or expandingyour present company, adequate capital is essential.Luckily, in the current economic environment, manysources of funding may be more favorable than turning to the traditional bank. In fact, the rightsources of funding could mark the differencebetween success and failure for your company.

As you make your way through the funding process,keep in mind that your CPA, as your professionalbusiness adviser, can be an important ally in evaluating all the available options and helping youchoose the one that best meets your needs.



Types of Financing No matter what business you’re in — and

whether you need financing for a start-up,

expansion, or new development — there

are two major types of business financing

to consider.

Debt Financing — The most straight-

forward of funding options. It usually

requires periodic interest payments and

repayment of the borrowed principal

within a specified time period.

Equity Financing — Involves raising

capital by selling an interest in your

business to investors. Instead of a

guaranteed return, investors will have

the opportunity to share in your

company’s profits. In many cases, they

will also share in the management and

control of your business.

College Planning: Easing theFinancial Burden

Advice from CPAs89

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College PlanningFor many Americans with children, paying for college may be their greatest financial worry.According to the College Board, tuition and feesaverage almost $20,000 at private colleges and$5,000 at public institutions. Those figures do notinclude books, room and board and other expensesthat make up the college experience.

In recent years, tuition has increased between sixand seven percent annually. When you factor in thenumber of years until your kids will be in college, thefigures can be daunting. But don’t let the numbersoverwhelm you. A college education is within reachfor almost any family willing to plan ahead, tightenits belt and assume at least some debt.

When Time is On Your SideStarting a college savings plan early is the key, CPAsstress. Make deposits regularly and benefit from thepower of compounding. Asset allocation is anothercritical component of your college savings plan. Choosegrowth-oriented investments when your children areyoung. As they reach their teen years, transfer funds tomore conservative investments so they are availablewhen you need them.

College Savings PlansYou’ll find a variety of investment vehicles availablefor your college savings plan, including:

529 Plans. These state-sponsored plans havebecome one of the most popular college-fundingvehicles with good reason:

• Earnings grow tax free and distributions are free from federal tax as long as the funds are used forqualified higher educational expenses.

• There are no income limits, meaning any family can participate.

• Investment minimums are low.



• One child can be the beneficiary of numerousaccounts. If there are grandparents or other generousrelatives who would like to help fund your child’seducation, they can open their own 529 accountswith your child named as the beneficiary.

• If the plan beneficiary chooses not to go to college, plan assets can be transferred to anotherclose relative without penalty.

• Many states do not cap annual contributions.However, to avoid paying gift tax, limit annual contributions to each recipient to $22,000 for married couples, or $11,000 for single taxpayers.

While most states have 529 plans, their specifics varywidely. Some plans allow you to choose investmentvehicles, while others offer age-based portfolios thatbecome more conservative as the child gets closer to college age. Some states offer income tax breaksto state residents or for those who choose in-stateschools. Furthermore, each state has its own lifetimecontribution limit, investment managers, investmentchoices and expenses. Since you are free to invest inany state’s plan, it pays to shop around for the planthat best meets your needs.

Prepaid Tuition Plans. State-sponsored prepaidtuition plans allow you to pay future tuition at a statecollege at today’s lower rates. Some plans may evenpay expenses at an out-of-state school or private university, though you may forfeit some of theaccount’s value by opting for such a school. Recently,a group of private institutions joined together to formtheir own prepaid plan known as the Independent529. Prepaid tuition in this plan can be used at morethan 200 colleges across the country.

Since returns are not tied to the ups and downs of the stock market, prepaid plans may be attractive tothose who are especially risk averse. On the downside,prepaid tuition plans lack flexibility and in most cases,if a child decides not to go to a covered college, or notto go to college at all, plan contributions will berefunded without any interest that has accrued overthe years. A cancellation fee may also apply.

Childhood — College

Career

Marriage &Parenthood

Home Ownership

Life Crises

Retirement & Estate Planning

Financial PlanningTips for a Lifetime

360 DEGREES OF FINANCIAL LITERACY

Advice from CPAs

Know when you need advice and how to get it.Get help when you need it: a banker for a mortgage,a lawyer for your will, a CPA (Certified PublicAccountant) Financial Planner for more complexfinancial planning needs.

Financial Planning Tips for Specific Life Stages Find the life stages that are currently most importantto you or your family and begin to implement thetips. It won’t take long to see results, bolstering both your financial picture and confidence in yourfinancial future.

Childhood Through CollegeGetting on a sound financial footing is rated “G” —good for any age.

• 6–8: This is the right time to start withallowances. Monthly is often better than weeklyso kids learn a bit about planning ahead. Also,teach youngsters to comparison shop.

Lifelong Financial TipsWherever you are in life, these tips may help you geton solid financial ground and help you stay there.

Get specific with your goals. There’s an oldexpression: “If you don’t know where you’re going,any road will lead you there.” When it comes to yourmoney, you need to have specific goals. They can beas simple as: “Put aside $500 a month for a down payment on a new home until we have $20,000,” or“Pay back credit card debt in one year with $300 amonth minimum.”

Focus on needs, not wants. Wish lists can be wonderful things to have — as long as you don’t useyour credit card to turn every wish into immediatereality. Understand the difference between nicetiesand necessities, and be willing to forego what youdon’t really need to stay on plan.

Keep it simple. Often we get too complex in our planning. Result? Plans turn into burdens and are quicklyabandoned. So don’t try to become an investmentbanker overnight. Just focus on what’s most importantto you. Is it having enough money for retirement, financial security for loved ones, college? You decide and then take simple, straightforward action.

Know your weak points. Understand your ownpersonal psychology and avoid the triggers that willmake you spend more or save less. For example, ifyou know you’re undisciplined, try to have moneytaken out automatically for saving or investing.

Be realistic. If you’ve never saved a penny in your life,you’re not going to magically put aside thousands ofdollars a month. So start small. It’s all about consistency.Far better to build up, than give up!

Be prepared. Life is all about change. Good things or bad can affect your financial planning. Be ready.Planning for the unexpected can make seeminglydisastrous events like a job layoff, a house fire, or along-term illness far less devastating than they mightotherwise be.

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American Institute of Certified Public Accountants

Consult a Financial Adviser When . . .

• Getting married

• Purchasing or selling a home

• Getting divorced

• Having a baby or adopting a child

• Buying or selling a family business

• Developing an estate plan

• Coping with the death of a spouse

• Receiving an inheritance/financial windfall

CPAs across the country are participating in the AICPA's 360Degrees of Financial Literacy program to educate the Americanpublic, from school children to retirees, on financial topics thatapply to their particular life stage. For more information, visit

www.aicpa.org/financialliteracy


©2004, AICPA

Selecting the Right Structure for Your Business

Advice from CPAs

Limited Liability Company (LLC) — Createdthrough articles of organization and an operatingagreement; owners are called members and are notpersonally liable for the entity’s debts and liabilities.

Operation and ControlSole Proprietorship — Ultimate control rests with asingle owner; and can operate under name of owneror another name.

Partnership — Requires at least two partners whoown the business and share in the profits and losses.The partnership agreement explains who will controland manage the business of the partnership. With ageneral partnership where there is no agreement, all general partners have equal control and equalmanagement rights. In a limited partnership, themanagement and control of the business is handledby the general partner or partners.

Corporation — Bylaws (operating rules) are createdto explain shareholder and director meetings and theresponsibilities of each officer. The shareholders havesole authority to approve articles of incorporation,mergers and dissolution of the company, and theyelect the directors. Directors are responsible for majordecisions, including selection of company officers.

LLC — One owner LLCs operate like sole proprietor-ships; multiple member LLCs operate and are taxedlike partnerships, although the members may elect totreat and tax an LLC like a corporation if they wish.

InvestmentSole Proprietorship — Limited to the assets and borrowings of the owner.

Partnership — Based on the number of partnersand the written agreement, which should alsoexplain how a departing partner will be paid for partownership when he or she leaves, dies or retires.

Corporation — S Corporations can issue one classof stock to up to 75 shareholders (increased to 100for years beginning after December 31, 2004). CCorporations can issue different classes of stocks andbonds and can increase borrowing capacity.

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Structuring for SuccessThere’s a lot to consider in starting your own business: developing a business plan, obtaining sufficient funding, marketing the business and a hostof other concerns. Also critical is determining theform of organization that best suits the businessbecause this will impact operating efficiency, the wayyou report business income, the taxes you pay, andthe extent of your personal liability. There are fourtypes to choose from:

• Sole Proprietorship• Partnership — General and Limited• Corporation — S Corporation and C Corporation• Limited Liability Company

To make an informed decision, you must be aware ofthe income tax law and tax rates, as well as the non-taxissues, such as transferability, control and the potentiallegal liability. These are likely to be complicated issuesand misunderstandings can be costly. That’s why it’simportant to do some research and seek out the adviceof a Certified Public Accountant (CPA) who can helpyou understand how different forms of entity impactyour organization’s bottom line.

Management Issues

FormationSole Proprietorship — As simple as opening a bankaccount under the business name; some states andmunicipalities may require obtaining license or permit.

Partnership — Started through an oral agreement,though a written agreement is advisable (and isrequired in some states) to agree on such points asprofit/loss percentages; business decisions; additionand withdrawal of a partner; and term of operation.Some partnership allocation structures may subjectyou and your business to more IRS scrutiny.

Corporation — Corporate documents are filed with the state and an annual fee is paid. Separatecorporate bank accounts and records are created andassets and money generated by the corporation areowned by the corporation and not the shareholders.



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Setting YourFinancial RecordsStraight

Advice from CPAsAmerican Institute of Certified Public Accountants


©2004, AICPA

*As a result of the Check 21 Act, many banks and credit unions may no longer return cancelledchecks to consumers, but instead will send imagesor descriptions of the original checks with monthlystatements. The new Act authorizes a "substitutecheck" (a printed, electronic image of the original)as the legal equivalent of the original for all purposes. Banks may charge a fee for printingsubstitute checks, so request these only whennecessary. Be sure to check with your bank orother institution to find out what their policiesare in light of the Act.

Organized Financial Records Pay OffIf looking for an important document sends yousearching through shoeboxes and overstuffed drawers, your financial records are in need of amakeover. Time spent gaining control of your financial records will pay off in the long run. Good recordkeeping can —

• Make tax preparation easier and remind you ofdeductions you might otherwise overlook. Back-updocumentation may save you taxes, interestcharges and penalties if the Internal RevenueService (IRS) ever questions your return.

• Give you a better handle on your overall financialposition and help your CPA (Certified PublicAccountant) identify financial and tax-planningopportunities.

• Provide loved ones with a roadmap to your financialaffairs if you die or become incapacitated.

Start a Filing SystemThe best way to ensure your financial records are inorder is simple: start a filing system. Begin by findinga convenient place for “current” files, those you willbe adding to regularly. A filing cabinet works bestfor most people, but a plastic box or accordion files will do.

Next, designate an area in your home for old or“dead” files — those you need to keep but aren’tlikely to access on a regular basis.

The third component of a well organized record-keeping system is a safe deposit box. Use it to storeany documents that are costly or difficult to replace.

What to Keep and for How Long While your recordkeeping system will be unique toyour personal circumstances, certain subjects are universal. For most Americans, the six categories thatfollow make up much of their financial paperwork.Since incomplete or sloppy records in these areascan cause you major trouble and expense, gettingthem under control is a good place to begin.

List of Basic Records

Income

• Form(s) W-2, 1099, K-1

• Bank statements

• Brokerage statements

Expenses

• Sales slips, invoices and receipts

• Cancelled checks or other proof of payment*

Home

• Closing statements

• Purchase and sales invoices

• Proof of payment

• Insurance records

• Form 2119 (if you sold a home before 1998)

• Home improvement records and their costs

Investments

• Brokerage statements

• Mutual fund statements

• Form(s) 1099 and 2439

8004-311C_Set Record Bro9 12/30/04 3:12 PM Page 1

2. Financial PlanningNot only do you need to have funds available to growthe business, you must also efficiently manage thosefunds. Your business proposal should clearly outlineyour plans for growth or expansion. It’s important to beprepared to articulate your objectives in running yourbusiness and be able to answer these questions.

• What type of loan should I get?

• What is the repayment plan best suited to my situation?

• What is the cash flow necessary for me to repay the loan?

• How will I use the loan proceeds?

• What type of collateral might I need to get the loan?

At the same time, you must consider cash flow management. This involves —

• Forecasting, budgeting, receiving, controlling, disbursing and investing funds generated by yourbusiness’s operations.

• Improving liquidity and increasing profits by increasingcash inflow; reducing cash outflow; and investing idlefunds in higher yielding vehicles.

3. Marketing Your BusinessHere are some ideas for promotional efforts to raise thevisibility of your business.

• Look for new niche markets you can serve and customize your advertising to appeal to the specialneeds of prospects in each niche.

• Identify and respond to emerging trends.

• Raise your visibility in the geographical market inwhich your business operates by giving speeches at local business associations like the Chamber ofCommerce or the Rotary Club.

• Create brochures or flyers to distribute in the town or city in which your business operates.

Planning for SuccessThere are no certainties when it comes to businesscycles, and no amount of guesswork will protect thesmall business owner from the ups and downs of achanging economy. There are, however, fundamentalsteps you can take to minimize disruptions fromincreasing prices, changing consumer habits, growingoperating risks, competition and fraud.

Ten Critical AreasThese ten critical areas are important for the growth andcontinuity of your business and apply to most phases ofthe business life cycle. Although ten issues are identified,the list is not all inclusive, nor is it in priority order.

1. Business PlanningA business begins with a clear definition or statement of amission. The following are some important considerationswhen developing your plan.

• Gauge your market’s potential size

• Recognize customer needs

• Analyze industry statistics and competitive market data

• Identify potential promotion and advertising strategies

• Define your offerings

• Determine the economic climate within your market(e.g., rising interest rates, increasing unemployment)

• Confer with professional advisers, such as a CPA(Certified Public Accountant), attorney, insurancebroker or lender

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Growing Your BusinessA major concern for any business is to bepositioned to expand with new products

or to open up in another location. Timingis critical to take advantage of the

opportunities.

Ten Ways to Protect YourBusiness

Advice from CPAs


©2004, AICPA

Documents

Financial Literacy Brochures · Financial Literacy Brochures How to Afford a Long, Happy Retirement Advice from CPAs AThree-Step Approach to Successful Retirement Planning (1) Pinpoint