Chapter 7: Part 1-Retirement and College Planning: Investment Strategies for Young Adults

What is the annual income of the 30-year-old couple in the example?

$48,000

How much does the couple save monthly in their 401(k)?

$600

What is the projected amount in the couple's 401(k) by age 70?

$7,058,863

How much do the couple contribute annually to a Roth IRA?

$10,000

What is the projected amount in the couple's Roth IRA by age 70?

$9,803,937

What is the total projected amount in both accounts by age 70?

$16,862,800

What percentage of household income should be invested according to the guidelines?

15%

What does the KISS rule of investing stand for?

Keep it Simple Stupid

What is the purpose of diversification in investing?

To spread risk

What type of investment is a mutual fund?

A pool of money from investors managed by professional portfolio managers

What is the standard diversification plan allocation for aggressive growth funds?

25%

What is the definition of tax-favored plans?

Investments that have special tax treatment

What is the minimum investment period for long-term investing?

More than five years

What should you do with retirement plans when leaving a company?

Roll them over to an IRA

What is a major risk of borrowing from your retirement plan?

You may leave the company before the loan is repaid

What is an Individual Retirement Arrangement (IRA)?

A tax treatment plan for investments

What is the Roth IRA?

An after-tax IRA that grows tax-free

Who is the Roth IRA named after?

Senator William Roth

What should you do if your company offers a matching contribution for a 401(k)?

Fund an amount equal to the match

What type of plan is recommended for saving for children's college education?

Education Savings Account (ESA) or a 529 plan

What is a key feature to look for in a 529 plan?

Control of the mutual fund at all times

What should you avoid when choosing a 529 plan?

Plans that freeze your options or automatically change investments based on the child's age

What is the common financial challenge faced by college students?

Student loans

What is the biblical reference that emphasizes wise financial management?

Proverbs 21:20

What does the quote by Thomas Jefferson imply about achieving goals?

You must be willing to change your actions to achieve different results