Vocab
Retirement
What is when someone stops working full-time?
What is the number one rule of investing?
What is buy low sell high?
Julia contributes $500 to her 401k each month. Which of the following could be true?
a. Julia is in charge of remembering to put that $500 into the 401k each month.
b. Julia's 401k is considered tax never. She is paying taxes upfront so when she retires there will be no tax on her money.
c. If Julia is contributing $500 her employer matches and is contributing $500.
d. If Julia decided to quit her job, her employer will continue to match the $500 contribution.
What is C?
Katrina works for Penny's Pickles, which offers a 401(k) match for up to 3% of her salary, which is $65,000 per year. In her budget, she only has $150 per month available to save for retirement. What should she do?
a. Opt out of the 401(k) plan since she doesn’t have much to contribute; use the money elsewhere in her budget
b. Contribute $75/mo to her 401(k) and $75/mo to an IRA, so that she's diversified
c. Save the $150/mo in a bank account until she has enough to max out her 401(k), and then invest
d. Contribute the full $150/mo to the 401(k) because her company will match that full amount, "doubling" her investment every month
What is d?
Stock
What is part ownership in a company?
How do you make money with stocks?
What are dividends and selling your shares for more than you purchased them for?
What retirement plans are tax deferred?
What are 401k, 403b, and pensions, IRA
You bought 25 shares of stock in a tech company for $25 per share. Three months later you sold the 25 shares of stock for $85 per share. What was your profit or loss on the tech company stock (Assume that the company didn't pay a dividend and that you didn't incur any trading fees during that period.)
a. Loss of $250
b. Profit of $2,125
c. Loss of $625
d. Profit of $1500
What is D?
What is a way to make money from stocks. When a company pays earnings back to share holders?
What is the difference in savings and investing?
Savings-short-term goals, money insured at bank, less risk
Investing-long term goals, money not insured, you could lose money, but also make more because rates are higher
Daily Double: What is the main difference in traditional IRA and Roth IRA?
What is when you pay taxes on your money?
You buy a bond with a fixed coupon rate of 5%. A year later, similar bonds that are issued have a coupon rate of 3%. Which of the following is TRUE?
a. The price of your bond will increase
b. The demand for your bond will decrease
c. The price of your bond will stay the same
d. The interest rate for your bond will fall to 3%
What is A?
Bond
Loaning money to the government or a corporation with the expectation you get the full amount back along with interest
What is the difference in a bear and bull market?
Bear market is a negative/pessimistic outlook for the stock market. Things are looking down.
Bull markets are optimistic/positive. Stocks are rising and on the upward trend.
What is social security?
monthly income from the government after you stop working, funded by taxes from current workers,prior to retirement you were paying out of your paycheck
What has the biggest impact on investing?
Time
Diversification
What is a mix of stocks, bonds, savings, and different investments for a portfolio?
DAILY DOUBLE How do you make money off of a bond?
From the interest.
-the government or corporation borrowed money and because they cannot pay it back all at once, interest builds so you get your money you loaned and then some.
Currently, what is a major issue with social security?
Social security is expected to end by 2034.
-people living longer and not having kids, there will be a smaller workforce in the coming years and not enough $ to cover all retirees.
What would you tell someone who was trying to decided if they should start a traditional IRA or Roth IRA? What are similarities, differences, is one "better"?
Both accounts are retirement accounts ANYONE can set up. Nothing about the account changes, even if you switch jobs. You’re responsible for making contributions from your bank account. You choose how money is invested. Benefit will depend on the risk level of the investments YOU chose annual contribution limits -$7,000 (under 50) $8,000 (50+). Withdrawals before age 59½ are typically subject to a 10% penalty.
Differences-IRA is tax deferred-pay taxes when you use the money in retirement. Roth is tax never, you pay tax up front so you get all the money when you use it in retirement.