Chp 7 Retirement & Estate Planning

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Retirement is...

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the period of life after ending a working or professional career

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Why is it important to start saving and investing for retirement as soon as possible?

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You have more time for your money to compound interest and grow

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Ben is 24 and wants to start saving for retirement. What can he do to set himself up for success? Options: Wait until his 30s to start investing, Delay his expected retirement age by 20 years, Invest primarily in low-risk investments like bonds.

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Invest 10-15% of his monthly salary

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In retirement plans, what does vesting refer to?

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How long you have to work before employer contributions become yours

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A person born in 1960 or later is eligible for full Social Security benefits at what age?

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67

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In retirement, it’s common to rely on income from all of the following sources EXCEPT... Social Security, Retirement plan income, Investment income

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Government loan

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How can you invest for retirement if your employer does not offer a retirement plan?

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Open an Individual Retirement Account (IRA)

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All of the following are advantages of a 401(k), EXCEPT.. Tax advantages such as not paying taxes on investment growth, Your employer may match some of your 401(k) contributions, You can contribute more per year than in an IRA

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Not everyone is offered a 401k plan by their employer

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What is the difference between a Traditional and a Roth IRA account in terms of taxes?

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In a Roth IRA, you pay taxes when you put money in. In a traditional IRA, you don't pay taxes when you deposit but you do pay when you withdraw.

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What is a disadvantage of an IRA compared to a 401k?

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There are no employer matched contributions