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Special Savings Plans and Goals
Pension plans: company plans that provide retirement income for their workers.◦ A portion is withheld from your paycheck◦ Company matches contribution◦ No Federal tax until you withdraw funds (tax
deferred)◦ Maximum Contribution limit
Investing for Retirement
Keogh (pronounced Key-oh) plan-retirement plan for self-employed individuals.◦ Can save up to 15%◦ Can deduct that amount from taxable income◦ Maximum contribution limit
Individual Pension Plans
Private retirement plan for individuals or married couples
Tax-deferred contributions Tax-deferred interest income
• Maximum contribution limit ($4,000 for people making less than $30,000)
Individual Retirement Account
retirement plan for individuals or married couples
Contributions taxed (disadv.) Interest income never taxed (adv.)
• Maximum contribution limit ($4,000)
Roth IRA
Land & Buildings Income Property House (Usually safe) Undeveloped property (usually riskier) Not very liquid – what did liquid mean?
◦ Can’t turn it into cash quickly
Real Estate
Involves a trade-off! Consider:
◦ Risk Tolerance◦ Rate of Return (how much will you get back?)◦ How Liquid is the investment◦ How much income do you make?◦ What are your values?
How much to save and invest?
Diversification-spreading of investments among several different types to lower overall risk
Too much risk and poor decisions can lead to bankruptcy for people at high income levels
Spreading out your Investments