True or False
If we used a race analogy to describe building wealth, it would be most like a sprint.
False - marathon
What is a SEPP?
A retirement plan for self-employed people
If you contribute $2,100 to your 401(k) and your company matches up to 3%, how much is in the account (assume you have not gone over the 3% match)?
$4,200
What is the best option for your retirement plan when you leave a company?
Do a direct transfer into an IRA
What is baby step 1?
$500 / $1000 in the bank as an emergency fund
Pre-tax means the government allows you to invest money before taxes are taken out.
True
What is a 457?
a deferred compensation plan
If your company provides a 100% match up to 5%, how much should you personally contribute to your 401(k) if you earn $40,000 (not including the money the company contributed)?
$2,000
What is a good type of account to use for college savings?
ESA
What is baby step 2?
Debt snowball, pay off all debt except mortgage
457 plans are designed for employees of non-profit organizations such as hospitals and schools.
False - 403(b)
What is a 401(k)?
a typical retirement plan found in most companies
If Sam and Tina are debt free and have a fully funded emergency fund, how much should they be investing in retirement plans yearly, if their combined income is $175,000?
$26,250
If you have $6,000 invested in a Roth IRA, what is the tax situation on this money?
Taxes have already been paid, and the money will grow tax free.
What is baby step 3?
Fully funded emergency fund (3-6 month expenses)
ESAs are a good way to save for retirement.
False - They are a good way to save for college.
What is a 403(b)?
Retirement plan found in non-profit groups like schools and hospitals
Using the rule of 72, how long will it take your money to double at 8% interest?
9 years
Explain the difference between a traditional IRA and a Roth IRA.
What is baby step 4?
Invest 15% of household income into Roth IRAs and pre-tax retirement plans.
Once you have a fully funded emergency fund, put 10% of your income into retirement plans.
False - 15%
What is an Educational Savings Account (ESA)?
The company you work for matches your 401(k) contribution up to 5%. You take advantage of this by maximizing your contribution amount to $200 per month. At the end of one year, how much money will be in your account?
$4,800
List three reasons where you are able to make tax-free withdrawals from your Roth IRA.
You are over 59 1/2 years old
First time home purchase - up to $10,000
Death or Disability
What is baby step 5?
College funding using a tax favored plan