Diversifed Investments and Interest

Avg. retirement age

• Men: 65

• Women: 63

IRS

• Internal Revenue Service

• Section of US treasury that enforces federal tax lawa

Tax bracket

Range of income taxes at given rates

Federal tax code

Rules enacted by US Congress determining taxable income

IRA

• Individual Retirement Account

• Retirement plan offered by many financial institutions providing tax advantages for retirement savings

• Open individually w/ financial brokerage like Vanguard, Fidelity and Charles Schwab

• $7000/ yr max contribution

• No matching from employer

• Withdraw before 59.5→ 10% penalty

Roth IRA

Retirement plan similar to IRA, but taxed upon deposit, so tax free when withdrawn

• Named after Delaware Senator William Roth (1997)

• Must make under 140k/yr

• $7000/ yr max contribution after tax

• Good in younger years b/c low tax bracket

• Ex.

Why should teens think abt retirement early?

• Time

• Save early to grow

• Develop good habits

• Get headstart

• Can open Roth IRA

401K

Retirement savings plan provided and often matched by employer letting workers invest in pre-tax

• Employer sponsored retirement plan

• Named after section 401 paragraph K of federal tax code

• $7.4T manages across 70M people/ 70% of Americans

• Employer match free money as thanks for working there

• Some allow you to take out loans (Use 401K as collateral for loan for downpayment)

• Invests in long term

  • Penalty free after 59.5

  • 21+

  • Taxed upon withdrawl

  • Not available for self-employed/ contractor

• Ex.

Multiple Employer Plans (MEPs)

Small businesses work together to provide 401K plans to gig workers

CDs

• Certificate of Deposits

• Bank product (give $ to bank), consumer buy for set time in exchange for interest

• Common terms: 3,6,12 and 18 moths

• Higher interest rates than savings account

• Diff bank have diff rates

529

• Tax advantaged state run savings plan that can help pay for education

• Section 529 of federal tax code. Tax code

• Two Types: Savings plan (growth tax free, withdraw tax free) and prepaid tuition (pay in advanced locking in todays rate)

• Run by state and differ

• Anyone can open

• Use for K-12, college, apprenticeship, trade school and grad school

Investment Sim

My role: IRA/ Roth

• Tax advantage

• Don’t need employer

• Safe

• Roth good when young

Interest good or bad?

Depends if borrower or lender

• Borrower → prioritize and pulvulrize

  • Line up debt and pay down highinterest

  • Want to avoid interest

Players in savings account to create loans

Depositors, banks and borrowers

• Often borrowers have higher interest rates than depositors (5% v. 2%)

Compound interest

Earn interest on both principal and interest

• Most important factor: Time

• 8th wonder of world - Einstein

• Start early

  • Ex. Age 20-65: $200/ month → 117k vs. 30-65: $400/ month → 108k

  • Ex. Ben Invest $2k/ yr 19-26 → $2,288,996 at 65 vs. Arthur invest $2k/ yr 27-65 → $1,532,166

    • Real nice chart of 19 again (best if start to invest before 25)

• Snowball using $ to make $

Debt snowball v. Avalanche

• Snowball balance focused → pay off small debt 1st and make min. Payment on other debt

• Avalanche interest focused → pay high interest rates 1st

Bobby Bonilla Day

As part of deffered payment w/ interest every July 1st from 2011-2035 NY Mets pay Bonilla $1.19M

Keep the Change

Every time spend w/ Bank of America debit card, amt rounded up and deposited into savings

• Get into savings routine

What learned in Retirement Will be Thing of Past vid

• In 2019 1/11 people were 65 and older, while in 2050 it will be 1/6, showing that people are living longer and increasing the possibility of more generationally diverse workforce and therefore diverse perspectives.

• Potential of a greater burden on working adults due to more people being of retirement age

• Agism in workforce, leading people to not hire older people, despite research showing that when older people stop working they often their loose contacts and their health gets worse.

Example of Smart investing individual

Income 50k → $5k Roth, $1k 529, $1k 401k, 43k income Contributions→ taxable $2k Roth, $500 CD