Investing IRA and Company sponsored investments study guide

What is the difference between a 401k and a 403b?

A 401b works for non-profit organizations

A 401k works for businesses whose purpose is to generate sales to make a profit

They both are founding different sections of the tax code

What is the major benefit of a 401k and 403b?

The employer can match your contribution

What age can you access your 401k/403b without any penalties?

59 1/2

When do you pay the tax on the 401k/403b money?

on withdrawals

What does IRA stand for?

Individual retirement account

How much can you contribute to a Traditional or Roth IRA each year?

You can contribute up to $7,000 per year if you are eligible but if you are 50 or older you can contribute $8,000 per year

What is the primary benefit of the Roth IRA?

Tax free growth

What is the primary benefit of the Traditional IRA?

Let earnings grow tax deferred until withdrawn and it lowers your taxable income

At what age can you access this IRA money without any potential consequences?

59 1/2

When do you pay taxes on the traditional IRA?

when you withdraw it

What is the purpose of a 529 plan?

To invest money to use for educational purposes

What are the various company sponsored investments and how do they work?

Pension: Employee is paid a guaranteed fixed monthly amount at retirement

Annuities: Receive a fixed amount each month at a future date

Profit sharing/ ESOP: Paid based upon company achieving financial goals, they often limit how much and how often you can take it out though

1. Cash  2. company stock 

401 k/ 403 b: provided by employer and they can match your contribution