General Info about Retirement
What does retirement mean?
the time of life when you no longer need to work to live comfortably, and can rely on savings or passive forms of income to fund your lifestyle
What is Social Security?
benefit is a monthly check that replaces part of your income when you reduce your hours or stop working altogether.
In a ROTH account, when is the money taxed?
As soon as you put the money into the account
True or False
All employers offer a 401K
FALSE
What is the full retirement age in the U.S. if you are born later than 1960?
67
Who pays for Social Security?
The Government / Taxpayers
Is a ROTH IRA sponsored by an employer?
NO
What is a 401K?
benefit that helps workers invest for retirement; connected to employer
For these two accounts, you make contributions from your bank account
Who decides the retirement age?
Government
Social Security is designed for people who are have disabilities or __________
Retired/Elderly
When you "cash in" your ROTH IRA do you have to pay a tax during withdrawal?
NO
The following is true for_____ (which retirement account)?
"Eligibility may be affected by how long you work with a given company"
HINT: there are 2
Pension and 401K
Why is retirement an investment?
It builds wealth for your future so that you can live comfortably when you no longer work.
The youngest age you can retire and receive benefits from the government (Social Security)
62
What is the difference between a ROTH IRA and a regular IRA?
ROTH taxes the money as you put it in, and regular taxes the money when you take it out
What is a traditional IRA?
you contribute pre- or after-tax dollars, your money grows tax-deferred, and withdrawals are taxed as current income after age 59½.
With this retirement option, you’re promised a fixed benefit each month, which may increase with inflation
Pension
If your friend Raheem asks you, “What type of account should I use to save for retirement,” what would you tell him?
Answers vary
Why is there a debate regarding the elimination of social security in the future?
there won't be enough money coming into the system to cover the current level of benefits
Your friend Jenny says a Roth IRA has the best tax advantages, because you pay taxes now and won’t have to pay them when you take the money out in retirement. Why might she be right?
You know what today’s tax rates are; you can’t completely predict what they’ll be at retirement. If they increase, you’re better off having already paid them
Your friend Jomaine says a Traditional IRA or 401(k) has the best tax advantages because you don’t pay any taxes now, and you can wait until you retire to pay taxes. Why might he be right?
By not paying taxes on your contributions now, you may be able to invest MORE money than you could if it was post-tax
For these 3 accounts, Your total retirement benefit will depend on the risk level of the investments you chose
Traditional IRA, 401K, and Roth IRA