- 🏛️ Many people save money in a bank account.
- 📉 While that's a great habit, inflation gradually reduces the purchasing power of cash over time.
- 📈 Investing gives your money the opportunity to grow through compound interest, helping you build wealth for retirement and future goals.
- ⏰ Start early if you can—but it's never too late to begin.
Every payday:
The S&P 500 tracks 500 of the largest U.S. companies and is a common benchmark for long-term investing.
- Average annual return: ~10%–11%
- After inflation: ~7%–8% real return
- Includes both price growth + dividends
Returns vary significantly year to year:
- Strong years: +20% to +30%
- Weak years: -10% to -40%
- Major downturns happen (dot-com crash, 2008, COVID crash)
👉 But historically, the market has recovered and grown over time.
If you invested $10,000 in the S&P 500:
| Time | Value (approx.) |
|---|---|
| 10 years | $25,900 |
| 20 years | $67,300 |
| 30 years | $174,500 |
| 40 years | $452,000 |
403(b) / 401(k)
Employer-sponsored retirement account.
- Tax deduction today
- Taxes paid in retirement
- Tax-deferred growth
- After-tax contributions
- Tax-free growth
- Tax-free withdrawals (qualified)
Age 59 ½: Eligible to withdraw without penalty.
Early Penalty: 10% penalty + regular income tax on withdrawals before 59 ½.
(Note: Roth IRA *contributions* can be withdrawn penalty-free anytime.)
Example:
• You contribute 4%
• Employer matches 2%
• If salary = $75,000:
You invest: $3,000/year
Employer adds:
$1,500/year
Available with a high-deductible health plan.
Medical Use: Tax-free & penalty-free at any age.
Age 65: Non-medical withdrawals become penalty-free (but are taxed as income).
Early Penalty: 20% penalty + income tax on non-medical use before age 65.
Option 1: Use it immediately
- $200 doctor visit
- $100 prescriptions
- Paid tax-free from HSA
Option 2: Invest it (advanced strategy)
You:
- Pay medical costs out-of-pocket
- Leave HSA invested
- Invest in index funds (VOO / VTI)
- Save receipts for future reimbursement
ETFs (Exchange-Traded Funds)
A basket of many companies.
Examples:
- VOO → S&P 500
- VTI → Entire U.S. market
- VXUS → International stocks
Mutual Funds
Similar to ETFs, but structured differently.
Examples:
- FXAIX
- VFIAX
| ETF vs MUTUAL FUND | |
|---|---|
| ETF | Mutual Fund |
| Trades like stock | Trades once daily |
| Often tax-efficient | Great for auto-investing |
| Bought via brokerage | Bought via fund company |
The expense ratio is the annual fee charged by a fund to manage your investment. You don't get a bill—the fee is automatically deducted from the fund's assets, so it's reflected in the fund's performance.
If an ETF lists:
Expense Ratio: 0.03%
That means:
- For every $1,000 invested → $0.30 / year
- For every $10,000 invested → $3 / year
- For every $100,000 invested → $30 / year
The fee is deducted every year. A fund charging 1.00% costs over 30 times more than one charging 0.03%. Over 30–40 years, higher fees can reduce your balance by tens or hundreds of thousands of dollars.
| Expense Ratio | Annual Cost |
|---|---|
| 0.03% | $3 |
| 0.10% | $10 |
| 0.50% | $50 |
| 1.00% | $100 |
(Examples)
| VOO | 0.03% |
| VTI | 0.05% |
| VXUS | 0.05% |
| FXAIX | 0.02% |
| VFIAX | 0.04% |
(Expense ratios can change over time.)
- 🟢 Excellent: Under 0.10%
- 🟡 Reasonable: 0.10% – 0.30%
- 🔴 High: Above 0.50%
- 🔴 Very High: 1.00% or more
EXAMPLE
Imagine two investors each invest $100,000.
Fund A: 0.03% expense ratio
Annual fee: about $30
Fund B: 1.00% expense ratio
Annual fee: about $1,000
Lower costs = more of your money stays invested and compounds over time.
Annual salary: $75,000
Paid biweekly (26 paychecks)
Biweekly gross pay: $2,884.62
👤 Your contribution (4%)
Per paycheck: 4% x $2,884.62 = $115.38
Per year: 4% x $75,000 = $3,000
👤 Employer match (2%)
Per paycheck: 2% x $2,884.62 = $57.69
Per year: 2% x $75,000 = $1,500
🌟 Total going into your retirement account
Your contributions: $3,000/yr ($115.38 per paycheck)
Employer contributions: $1,500/yr ($57.69 per paycheck)
Total annual contributions: $4,500/yr ($173.08 per paycheck)
⭐ By contributing 4%, you're effectively receiving an immediate 50% return on your contribution through your employer's match (before any investment gains).
$4,300/year invested
$7,000/year (IRS limit varies by year)
| Your Rate (You) |
Match (Employer) |
Total/Year | 10-Year Value (approx.) |
15-Year Value (approx.) |
|---|---|---|---|---|
| 4% ($3K) |
$1.5K | $4.5K | ~$71,700 | ~$143,000 |
| 8% ($6K) |
$1.5K | $7.5K | ~$119,500 | ~$238,300 |
| 10% ($7.5K) |
$1.5K | $9K | ~$143,400 | ~$286,000 |
| 403(b) (You) |
Match (Emp) |
HSA+Roth (Max) |
Total/Year | 10-Year Value (approx.) |
15-Year Value (approx.) |
|---|---|---|---|---|---|
| 4% ($3K) | $1.5K | $11.3K | $15.8K | ~$251,800 | ~$502,000 |
| 8% ($6K) | $1.5K | $11.3K | $18.8K | ~$299,600 | ~$597,300 |
| 10% ($7.5K) | $1.5K | $11.3K | $20.3K | ~$323,500 | ~$645,000 |
💡 The Power of Maxing Out
By utilizing the HSA and Roth IRA alongside your 403(b), you can potentially more than double your net wealth over 15 years!
Without
~$286,000
With HSA/Roth
~$645,000
(Assumes ~10% average annual return)
In general
- Needs: 50%
- Wants: 30%
- Saving and investing: 20%
Ideal financial position
- Housing: 25%
- Living expenses: 25%
- Fun/lifestyle: 20%
- Investing: 20%
- Car/transportation: 10%
For example:
Assuming someone makes $75,000/year gross income:
- Gross monthly income: ~$6,250
- Estimated take-home pay: roughly $4,500 to $5,000/month depending on taxes, insurance, retirement contributions, and state taxes
Using a balanced 50/30/20 budget based on take-home pay (~$4,800/month example):
| Needs - 50% | ~$2,400 | Housing, utilities, groceries, insurance, transportation |
| Wants - 30% | ~$1,440 | Dining, hobbies, shopping, travel |
| Savings & Investing - 20% | ~$960 | 403(b), Roth IRA, HSA, emergency fund |
🚗 OPTION 1: PAY A CAR PAYMENT
You pay $500 per month for 5 years toward a car loan.
- • Monthly payment: $500
- • Loan term: 60 months (5 years)
- • Total paid over 5 years: $30,000
- • Interest rate (example): 6% APR
THE RESULT:
- You own a car
- Total interest paid (approx.): $3,956
- Total cost of car: $33,956
- Asset value after 5 years (est.): $20,000
(depreciation varies by car)
(You spent more than the car is worth.)
📈 OPTION 2: INVEST IN THE S&P 500
You invest $500 per month in the S&P 500.
- • Monthly investment: $500
- • Investment term: 60 months (5 years)
- • Total invested: $30,000
- • Assumed average annual return: 10%
THE RESULT:
- Account value after 5 years (approx.): $39,612
- Total growth: $9,612
- You still own your invested assets
(And your money keeps growing.)
THE DIFFERENCE
After 5 years:
- • Car route: -$13,956
- • Investing route: +$9,612
POTENTIAL DIFFERENCE:
~$23,568
That's the power of owning assets vs. losing money on depreciation and interest.