Banking, Checking & Savings Review

When planning for retirement, what is it important to have enough of?

• A large house
• Luxury vacations
• Savings and investments
• Expensive cars

Traditional IRA

• Traditional IRA allows unlimited contributions each year.
• Traditional IRA is a type of life insurance.
• Traditional IRA is a tax-advantaged retirement savings account.
• Traditional IRA is only available to self-employed individuals.

Roth IRA

• Roth IRA is a type of life insurance policy.
• Roth IRA is a retirement savings account with tax-free withdrawals.
• Roth IRA contributions are tax-deductible.
• Roth IRA requires minimum withdrawals at age 70.5.

Basic difference between Traditional IRA and Roth IRA

• Traditional IRA allows tax-free withdrawals; Roth IRA offers tax-deductible contributions.
• Both Traditional IRA and Roth IRA have the same tax benefits the difference between them has nothing to do with taxes.

• Roth IRA contributions are tax-deductible; Traditional IRA withdrawals are not taxed at all at any point.

• Traditional IRA offers tax-deductible contributions taxes are paid when earnings are withdrawn; Roth IRA offers tax-free withdrawals from what you build with post-tax income.

What should you consider when choosing a Certificate of Deposit (CD) in order to make the most of your savings?

• Only consider the bank's reputation
• Focus solely on the location of the bank
• Ignore the minimum deposit requirement
• Consider interest rate, term length, early withdrawal penalties, minimum deposit, and insurance.

How do lifestyle choices influence financial planning for retirement?

• Lifestyle choices directly affect savings needs and retirement expenses. Someone who plans to travel may need more than someone who plans for a low-cost quiet retirement.

• Lifestyle choices only affect health, not finances. No need to consider when planning for retirement or the future.

• Lifestyle choices have no impact on retirement planning.
• Retirement planning is solely based on investment returns and savings accounts.

Why would someone choose savings accounts over investment options?

• Savings accounts are primarily for long-term growth.
• Savings accounts offer higher returns than stocks at guaranteed rates.

• Investment options are more liquid than savings accounts and are much less risky.

• People choose savings accounts for safety, liquidity (able to get cash), and guaranteed returns they're safe.

How does interest from a savings account affect an individual's income?

• Interest from a savings account increases an individual's income.
• Interest from a savings account decreases an individual's income.
• Interest from a savings account has no effect on an individual's income.
• Interest from a savings account is taxed and reduces overall income.

What do opportunities for saving that have more risk provide?

• Steady income stream.
• Higher potential returns.
• Lower risk of loss.
• Guaranteed profits.

How is investing in a certificate of deposit (CD) different than in a savings account?

• Investing in a CD allows for unlimited withdrawals without fees unlike savings accounts.
• CDs have no minimum deposit requirements unlike savings accounts.
• Savings accounts typically have higher penalties for early withdrawal than CDs.
• A CD has a maturity date, while a savings account has no time restrictions for withdrawals.