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20 Cards in this Set
- Front
- Back
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Name three differences between a Roth IRA and a 401K.
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401K is funded through an employer, Roth IRA grows tax FREE, 401K grows tax deferred, Roth IRA is more flexible, Roth IRA-non-working spouse can contribute, 401K is best to rollover when you leave a company
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Name three similarities between a Roth IRA and a 401K.
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Both are retirement plans
Both use mutual funds Both have maximum contribution amounts Both depend on you contributing money to the plan |
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Explain the Rule of 72
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It is a quick way to figure how many years it will take money earning compounded interest to double in value or to figure what interest rate your money is earning when you know how long it takes to double.
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True or False
Social Security will give you a decent retirement so there's no reason to save any extra money. |
False
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True or False
The 401K retirement plan grows tax free. |
False
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True or False
The Roth IRA retirement plan grows tax free. |
True
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What are two advantages of a Roth IRA?
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It forces you to invest more because it is after-tax money.
It has more choices and more flexibility. It grows tax FREE - no taxes are due when you take it out. |
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Name two way to invest for college.
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ESA (educational savings account) - preferred way
529 - if you don't qualify for an ESA. UTMA (Uniform Transfer to Minors Act) UGMA (Uniform Gift to Minors Act) |
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What is the maximum annual contribution to IRA as of 2008?
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$5000
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What does IRA stand for?
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Individual Retirement Arrangement
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Name the Baby Steps, in order.
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1 - $1000 in an emergency fund.
2 - Debt Snowball 3 - Fully funded emergency fund - 3-6 months of expenses - $10,000-$15,000 4 - 15% of income into retirement plans 5 - College funding 6 - Pay off home mortgage 7 - Giving & Wealth building |
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What does qualified plan mean?
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An investment that has been designated tax-favored by the government or has special tax treatment.
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What are some of the flexible features of the Roth IRA plan?
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Tax-free and penalty-free withdrawals at any time EQUAL TO your contributions.
After 5 years you can make tax-free, penalty-free withdrawals for up to 100% if: You're over 59 1/2 Because of disability or death First-time home purchase up to $10,000 |
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What condition must be met in order to have an IRA?
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You must have earned income.
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Name a difference between a 401K and a company pension plan.
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The 401K is your money, the pension plan belongs to the company.
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What is the investment called that non-profit organizations use for their employees?
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403B
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When you leave a company what should you do with your 401K?
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Use direct rollover (transfer) and transfer the investment to an IRA that you control.
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What is the best way to save for college if you have more than 5 years?
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ERA - Educational Savings Account
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What is the best way to save for college if you have less than 5 years?
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Money Market Mutual Fund
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What is a SEPP?
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A SEPP is a retirement arrangement for self-employed people. (Simplified Employee Pension Plan)
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