Retirement Accounts and Net Worth

Vocabulary flashcards covering retirement accounts (401k, 403b, Traditional & Roth IRAs), contribution limits, tax advantages, and net worth principles based on lecture notes.

Financial Independence

Having enough income/assets to support your lifestyle without depending on regular employment income.

Compound Interest (Early Saving)

The reason starting retirement saving early is powerful, as compound interest has more time to work.

401(k)

An employer-sponsored retirement account typically offered by private-sector employers.

Traditional 401(k)

A retirement plan funded with pre-tax dollars where contributions reduce current taxable income and investment growth is tax-deferred until withdrawal.

Employer Matching

A plan feature where your employer contributes additional retirement money based on your contribution, according to the plan's formula.

403(b)

An employer-sponsored retirement plan commonly available to employees of public schools and certain nonprofit organizations.

Roth 401(k)

An employer-sponsored retirement account funded with after-tax money, with qualified retirement withdrawals generally tax-free.

IRA

Individual Retirement Account/Arrangement; a tax-advantaged retirement account you establish individually.

Traditional IRA

An individual retirement account offering potential tax benefits now (current tax deduction when eligible) and taxes paid later upon withdrawal.

Roth IRA

An individual retirement account funded with after-tax money (taxes now) where qualified withdrawals are tax-free later.

Earned Income

The type of income required to contribute to an IRA; gifts alone cannot be used as the basis for IRA contributions.

401(k)/403(b) Employee Contribution Maximum

$\$24,500$ as shown in the class slides.

401(k)/403(b) Age 50+ Catch-up Limit

$+\$8,000$, bringing the total maximum for eligible 50+ participants to $\$32,500$.

Maximum Combined 401(k)/403(b) Contribution

$\$72,000$ for the maximum combined employer + employee contribution amount shown in class slides.

IRA Annual Maximum Limit

$\$7,500$ as shown in the class slides.

IRA Age 50+ Catch-up Limit

$+\$1,100$, resulting in an $\$8,600$ total limit for participants age 50+.

Net Worth Formula

$$\text{Assets} - \text{Liabilities} = \text{Net Worth}$$

Asset

Something you own that has financial value.

Liability

Money or debt that you owe.

Increasing Net Worth

Achieved generally by increasing assets and/or decreasing liabilities.