of 72” 72 divided by rate of return = years until your money doubles “Rule – ex. $100 earning 4% annually will become $200 in 18 years. Use Retirement plans to save for retirement : 401k Plan You direct money to be deducted from your pay to an account that is invested – ( usually in stocks and bonds ). Tax deferred pay no taxes on the investment and earnings until you withdraw it – Limited to the investment offered by your employer Roth 401k Plan Like a traditional 401k but not tax deferred ( You pay on the – amount you invest but it is tax free when you withdraw it at retirement age. ) Individual Retirement Account ( I.R.A ) You invest money which is tax deferred ( You – can deduct it from your income when you figure your which save you on taxes but you will pay when you withdraw it at retirement age. You are not allowed to invest as much per year as you can with a 401k Plan. You have more choices of companies/funds you can invest with. Roth I.R.A. Like a traditional I.R.A. but is not tax deferred. However, all you – invested and earnings are tax free when you withdraw it at retirement age. P.F.L. 1.6 How do various investing strategies compare for potential to build wealth? Investments that generally have a greater potential to wealth over the long term also have greater risk over the short term and vice versa. Diversification Spreading out your money in different types of investments to balance returns – versus risk. When you are young it may make more sense to invest more in stocks for greater returns. If the stock market falls, you have time for it to recover. As you get older, it makes sense to shift your investments into less risky ones so that if the stock market falls, you will have preserved your money for when you need in the near future. Levels of Risk : Most ( top ) to Least ( bottom ) Stocks Invest in publicly traded shares of companies. Share value may go up or down. – Dividends Some stocks pay a percentage of profits to the stockholder on a regular basis – ( usually quarterly ). Bull Market Confidence is high. Stocks tend to rise in – Bear Market Confidence is low. Stocks tend to fall in – Notes from local, state, and federal governments or from companies. You lend them money – and they promise to pay a certain rate of interest. Like stocks, they can also be traded.
“Rule of 72” – 72 divided by rate of return = years until your money doubles ex. $100 earning 4% annually will become $200 in 18 years. Use Retirement plans to save for retirement : 401k Plan – You direct money to be deducted from your pay to an account that is invested ( usually in stocks and bonds ). Tax deferred – pay no taxes on the investment and earnings until you withdraw it Limited to the investment offered by your employer Roth 401k Plan – Like a traditional 401k but not tax deferred ( You pay on the amount you invest but it is tax free when you withdraw it at retirement age. ) Individual Retirement Account ( I.R.A ) – You invest money which is tax deferred ( You can deduct it from your income when you figure your which save you on taxes but you will pay when you withdraw it at retirement age. You are not allowed to invest as much per year as you can with a 401k Plan. You have more choices of companies/funds you can invest with. Roth I.R.A. – Like a traditional I.R.A. but is not tax deferred. However, all you invested and earnings are tax free when you withdraw it at retirement age. P.F.L. 1.6 How do various investing strategies compare for potential to build wealth? Investments that generally have a greater potential to wealth over the long term also have greater risk over the short term and vice versa. Diversification – Spreading out your money in different types of investments to balance returns versus risk. When you are young it may make more sense to invest more in stocks for greater returns. If the stock market falls, you have time for it to recover. As you get older, it makes sense to shift your investments into less risky ones so that if the stock market falls, you will have preserved your money for when you need in the near future. Levels of Risk : Most ( top ) to Least ( bottom ) Stocks – Invest in publicly traded shares of companies. Share value may go up or down. Dividends – Some stocks pay a percentage of profits to the stockholder on a regular basis ( usually quarterly ). Bull Market – Confidence is high. Stocks tend to rise in Bear Market – Confidence is low. Stocks tend to fall in – Notes from local, state, and federal governments or from companies. You lend them money and they promise to pay a certain rate of interest. Like stocks, they can also be traded.
Civics%20Complete%20Notes%202013-8.docx