LEVEL 4a: Retirement Planning

​NOTE BEFORE YOU START:

This module is VERY note-taking heavy as it describes really important information

Make sure you take notes as you follow along

Try to SUMMARIZE, not just copy everything down, as you won't have enough room on the note guide

Open Ended

Explain your reaction to the fact that to retire comfortable you should have 8-10x your annual salary 

This means that if you make $100,000 per year, you should have at least $800,000 - $1,000,000 in savings

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A lot of people don’t know what they are doing when it comes to retirement accounts. Why could that get in the way of people having enough money for retirement? 

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What types of things will you need to pay for in retirement after you’ve stopped working? (you’re not making anymore money from a job)

Open Ended

What kinds of stuff do you think you’ll want to do once you retire to enjoy your life? 

Open Ended

Explain how you would want to help either your kids or your grandkids once you are retired? 

Multiple Choice

What is compound interest?

• When you earn interests on interest, making your investment grow faster over time

• When you get a compound loan and have to pay interest

• When a compound investment loses money

Open Ended

Explain why starting early is important when it comes to retirement planning (connect it to compound interest)

Multiple Choice

Compound Interest Calculator

Use the compound interest calculator to answer the questions. 

Both start with $5,000

For Early Emma who starts at age 20, put 45 years of growth, 7% estimated return, and $300 Monthly Contributions. How much will she have? 

• $772,565

• $912,326

• $1,143,954

• $1,253,305

Multiple Choice

Compound Interest Calculator

Use the compound interest calculator to answer the questions. 

Both start with $5,000

For Catch-up Chris who starts at age 35, put 30 years of growth, 7% estimated return, and $600 monthly contributions

• $772,565

• $912,326

• $1,143,954

• $1,253,305

Multiple Choice

Compound Interest Calculator

Let’s figure out how much Catch-up Chris would have to contribute per month to have the same amount of money Early Emma has at retirement 

• Still 30 years of growth, 7% estimated return, and Change the monthly contributions until Catch-Up Chris has $1.25 million

• $700

• $800

• $900

• $1,000

Open Ended

What do you think people have to do if they get to age 65 and don’t have enough money to retire? 

Open Ended

Explain your initial reaction to seeing 80+ year old people having to work at their age

Open Ended

Why would you not want to work when you’re 80 like the people in the video? 

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Because people are living longer, why is there a worry that the Social Security System won’t be able to fully support people once they retire? 

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Why do you think its important for people your age to plan for retirement now instead of relying on the government later to support you? 

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Pre-tax contributions are taken out ​

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you pay​

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. You pay taxes on the money when you ​

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it in ​

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before

income taxes

withdraw

retirement

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Post-tax contributions are made ​

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you pay ​

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When you retire, you can withdraw the money and all the gains over time ​

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because you ​

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paid taxes.

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after

income taxes.

tax-free

already

Multiple Choice

Why is the employer match for a 401(k) a great feature of this type of retirement account? 

• It is basically free money you get towards retirement

• It’s actually a trick to get you to pay more taxes

• The employer will match your account and open up a second account for you

Open Ended

Explain why employer match means getting free money added to your 401k account

Draw

Use a calculator and record the dollar amounts of contributions you and your employer put in your 40(k) each year

Note: to find the amounts, you can google search “6% of $50,000” or on a calculator you can do 0.06 x 50,000

Open Ended

For retirement accounts, you typically can invest only in “safer” types of investments. For example, you can’t really invest in individual stocks or things like cryptocurrencies. 

Why do you think they make rules about retirement accounts in this way?

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Many young people choose portfolios that are ​

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compared to the portfolios of ​

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people. This is because they have a long time to invest their money, so even if their investments ​

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money, they have plenty of time to ​

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.  

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risky

older

lose

recover

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Older adults choose portfolios that are ​

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and steady. This is because they cannot ​

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to lose money ​

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to retirement. As you get older, you should make your portfolio more safe and less ​

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to protect yourself. 

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safe

afford

close

risky

Match

Match the following

• Pre-Tax Dollars

  Employer Sponsored

  Employer Match (free money)

  Deferred Income (pay taxes at retirement)

• Post-Tax Dollars

  Not connected to a job

  No taxes on gains once you retire

• Pre-Tax Dollars

  For teachers, government employees, some trade unions

  Fixed income based on years of service and income

  No control over the account

401(k)

Roth IRA

Pension

• 401(k)

• Roth IRA

• Pension

Categorize

Options (10)

Pre Tax Dollars

Employer sponsored

Employer match (free money)

Deferred income (pay taxes at retirement)

Post Tax Dollars

Not connected to a job

No taxes on gains once you retire

For teachers, government employees, some trade unions

Fixed income based on years of service and income

No control over the account

Organize these options into the right categories

401(k)

Roth IRA

Pension

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It is important to know how much money you can contribute to retirement because you cannot ​

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that money until you ​

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. If you try to take the money out early, you will have to pay a stiff fine of ​

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% and pay ​

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on the income

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touch

retire

10

taxes

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To figure out how much you can contribute per ​

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, see how much money you need to cover your ​

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and save for things you’ll want before retirement, like a ​

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or a car. If you have ​

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money, put that money in a retirement account!

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month

expenses

house

leftover

Open Ended

Explain why you shouldn’t contribute too much money into retirement accounts (in other words, why is it important to understand how much you can afford to contribute?)

Drag and Drop

Let’s say you make $100,000 per year and do not contribute ​

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money to your 401k. You will pay about ​

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in taxes and your net income will be about ​

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. So you have a lot of post-tax money available to spend/save but you don’t have any ​

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any

$15,000

$85,000

retirement savings

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Let’s say you make $100,000 per year and contribute ​

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to your 401(k). Because it is pre-tax dollars, your taxable income will ​

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. This means that instead of paying $15,000 in taxes, you are only going to pay ​

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in taxes. Your net income will be smaller at ​

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, but you will have the benefit of contributing $25,000 into retirement savings. 

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$25,000

decrease

$8,000

$67,000

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Putting money into a 401k will mean paying less taxes in the ​

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, which is called “​

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”. This will decrease the amount of money going into your bank account post-tax but that will ​

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later because you are paying a lot less in taxes now and can build your ​

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through retirement savings

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present

deferred income

pay off

wealth

Open Ended

Explain how you can use your 401(k) to pay less taxes now

Multiple Choice

Why does starting to save for retirement at a young age make it easier to retire comfortably?

• Young people earn more money

• You can rely more on Social Security

• Your money has more time to grow through compound interest

• Retirement accounts earn guaranteed money

Multiple Choice

According to the lesson, about how much money does someone need today to retire comfortably? 

• $500,000

• $800,000

• $1,000,000

• $1,250,000

Multiple Choice

What best describes a pre-tax contribution? 

• Money that is taxed now and withdrawn tax-free later

• Money taken from income before taxes are paid 

• Money that can be withdrawn anytime without penalty

• Money only available through a Roth IRA

Multiple Choice

Which retirement account is NOT connected to an employer and uses post-tax dollars

• 401(k)

• Pension

• Roth IRA

Multiple Choice

Why is an employer match in a 401(k) considered free money? 

• It lowers your taxes permanently

• Your employer adds money to your account when you contribute your own money

• It guarantees a high return on investment