Retirement 101
What government program provides retirement benefits funded by current workers?
Social Security
What does it mean to invest?
Put money into assets with the goal of growing it over time.
Buying a stock means you own a small piece of what?
A company
What is interest earned on both your original money AND previously earned interest called?
Compound interest/growth
True or False: You should wait until you're close to retirement to begin investing.
False
DAILY DOUBLE: What is the full Social Security retirement age for people born in 1960 or later? (within 5 years of actual age)
67
Which generally has greater long-term growth potential: stocks or a savings account?
Stocks
When you buy a bond, are you primarily an owner or a lender?
A lender
You invest $1,000 and it grows to $1,100. How much did you gain?
$100
DAILY DOUBLE: What happens to the amount you need for retirement if you plan to spend more years retired? Do you need more or less than what you saved?
You generally need more money saved.
Name one source of retirement income besides Social Security.
Investments or pension
DAILY DOUBLE: What is the money you earn on an investment called?
Return
What type of investment combines money from many investors to buy many securities?
Mutual Fund
What happens to purchasing power when inflation rises?
It decreases.
When estimating investment returns for retirement planning, should you use an extremely optimistic or conservative estimate?
Conservative
Why will you likely need more money each year during retirement?
Inflation
Why is starting to invest at age 20 generally better than waiting until age 40?
Your money has more time to grow/compound.
What investment tracks a market index such as the S&P 500?
Index Fund
Which has more time to compound: money invested at 18 or money invested at 35?
Money invested at 18
Name TWO factors that affect how much you'll need for retirement.
Retirement age, lifespan/years retired, lifestyle, inflation, Social Security, investment returns, etc.
Why is relying only on Social Security risky for retirement planning?
It may not provide enough income to cover retirement expenses.
What is the relationship between investment risk and potential return?
Higher potential returns generally come with higher risk.
Which is generally less risky: one individual stock or a diversified fund containing hundreds of stocks?
The diversified fund
What three things can dramatically affect how much your investments grow?
Amount invested, rate of return, and time (accept reasonable equivalents)
Why might someone need $2 million decades from now even if $1.5 million seems sufficient in today's dollars?
Inflation reduces purchasing power over time.