Why to Invest
Saving vs Investing
Which is meant for short term goals
The more you earn, the _____ you may need to save in dollars, even if this percentage stays the same.
More
This employer-sponsored retirement account often includes a company match.
401(K)
Good investing should be ______.
Boring
This is the biggest advantage of starting to invest for retirement in your 20s.
Compound Interest/ More Time
Saving vs Investing
Which involves risk of loss?
Investing
Assuming the same income and savings rate, a person with a 40-year time horizon will generally need to save ______ per month compared to someone with a 20-year time horizon.
This type of retirement account is set up by an individual and offers tax advantages on either the front or back end.
IRA (Individual Retirement Account)
How can too little risk effect your investing outcomes?
Might not be able to reach your financial goals in time.
Investments like stocks have higher potential returns but also come with this.
Risk
Trading vs Investing
Which of these is meant for long term goals?
Investing
The earlier you start saving, the more you benefit from this powerful financial principle.
Compound Interest
This type of retirement account is usually fully managed and funded by your employer, leaving you with little control over investment choices.
Pension
This type of account is good to open at a young age to start building financial habits, but will not grow your money by a significant amount by retirement.
Saving
What is the relationship between risk and reward when it comes to investing?
More risk, more reward.
Trading vs Investing
Which of these requires high levels of activity?
Trading
If you wait to start saving/investing for retirement, this is one thing you’ll likely have to increase to catch up.
Saving Rate or Working Years
This type of retirement plan provides guaranteed benefit in retirement depending on the number of years worked but is becoming less common in the private sector.
Pension
This type of account is designed specifically to help you save for long term goals and includes tax advantages, contribution limits, and age restrictions on withdrawals.
Retirement Account
True or False
Bonds are typically less risky than stocks.
True
What is one of the main financial goals for investing?
Retirement
This number is often estimated as 10 to 12 times your final salary to maintain your lifestyle in retirement.
Retirement Savings Goal
This type of account gives you a tax deduction now but requires taxes on withdrawals later.
Traditional IRA or Traditional 401(k)
Which type of account will grow your money but you may have to pay income tax or capital gains tax when you sell assets.
True or False
Employer contributions to your retirement plan are basically free money.
True