Wealth Building and College Savings – Flashcards
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ONce the emergency fund is in place, you should begin _____ and ____ _____, which falls within long term investing for wealth building
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retirement; college funding
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Baby step 1 is?
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$1,000 in the bank
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Baby step 2 is?
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Debt snowball
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Baby step 3 is?
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3-6 months of expenses in an emergency fund
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Baby step for is?
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investing 15% of your household income into Roth IRAs and pre tax retirement plans
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Tax-favored means that the investment is a _____ _____ or has a special tax treatment
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qualified plan
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Four main duties of the Federal Reserve?
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1) carries out nation's monetary policies by managing the supply of money 2) supervises and regulates banking institutions 3) maintains the stability of the financial system 4) provides financial services to banks
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What is the Federal Deposit Insurance Corporation responsible for?
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insuring or guaranteeing deposits in banks and savings institutions up to $100,000
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What does IRA stand for?
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Individual Retirement Arrangement
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What does SEPP stand for?
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Simplified Employee Pension Plan
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What are the "Qualified Plans"?
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IRA, SEPP, 401(k), 403(b), and 457
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What it comes to IRAs, everyone with an _____ income is eligible
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earned
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the maximum annual contribution for income earners for IRA is _____
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$5,000
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The Roth IRA is an _____ tax
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after
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The Roth IRA has more _____
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choices
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The Roth IRA has a higher _____ at retirement
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bracket
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The Roth IRA has no taxes when you cash it out so it forces you to _____ more
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invest
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The Roth IRA has tons of _____
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flexibility
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Who is eligible for the Roth IRA?
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singles with income less than $95,000; married couples with income less than $150,000
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tax-free and penalty-free withdrawals at any time equal to _____. After the emergency fund is depleted, you have a _____ _____
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contributions; fall back
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After _____ years, you can make tax-free, penalty-free withdrawals for 100%
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5
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You can make tax-free, penalty-free withdrawals for the Roth IRA based on what conditions?
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over 59.5, death/disability, first time home purchase ($10,000 max)
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a _____ _____ person may deduct up to _____ of their net profit on the business by investing in a SEPP
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self employed; 15%
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The maximum deductible amount is _____; all employees who have bene with the firm more than _____ of the last _____ years must receive the same percentage of their pay into a retirement plan
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$45,000; 3; 5
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most companies have completely done away with traditional _____ plans
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pension
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pensions have been replaced by _____ _____ and _____ plans, like the 401(k)
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self funded; matching
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_____ is found in non-profit organizations such as churches, hospitals, and schools
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403(b)
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the _____ is deferring compensation
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457
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Do not use a _____ Investment Contract or bond funds to fund your plan
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Guaranteed
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You should _____ over retirement plans to a _____ when you leave the company
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roll; IRA
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Don't bring the money home, instead, move it straight into an IRA by a _____ _____
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direct transfer
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Roll over to Roth IRA only if:
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you have over $700,000 by age 65, you can afford to pay taxes separately, not from the IRA,
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Never _____ on your retirement plan
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borrow
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_____ in the Common stock fund, _____ in the Small Company Agressive fund, and _____ in the International fund
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60%; 20%; 20%
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Complete 15% of income by going back to your _____ or other company plans
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401(k)
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Save for college by using _____ _____ _____, nicknamed "Education _____"
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Educational Savings Accounts; IRA
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If you want to save more or if you don't meet the income limits for an ESA, use a certain type of _____ plan
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529
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Never buy a plan that ____ your options and automatically changes your investments based on the _____ of the child
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freezes; age
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What does UTMA/UGMA stand for?
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Uniform Transfer/Gift to Minor Act
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The account is listed in the _____ name and a _____ is named
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child's; custodian
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3 "Nevers" of College Savings
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never use insurance, never use savings bonds, never use pre-paid tuition
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If you need money within five years, use a _____ _____ _____ _____
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money market mutual fund
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Retirement for self-employed people
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SEPP
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grows tax free
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Roth IRA
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typical retirement plan found in most corporations
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401(k)
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Used for college savings
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ESA
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the typical retirement plan found in non-profit groups
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403(b)
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true or false: pre tax means the gov't is letting you invest money before taxes have been taken out
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true
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true or false: savings bonds are a good way to save for college
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false
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true or false: never borrow money form your retirement plan unless you are trying to avoid bankruptcy
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true
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what are retirement plans?
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401(k), 403(b), 457
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Which is not a benefit of the Roth IRA?
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unlimited contributions
