Vocabulary

Section 9.1 Vocabulary

Pre-tax dollars: Deposit into a retirement account before taxes have been taken out of your paycheck. This lowers your taxable income (you pay less income tax) Example: 401(k)

After tax investments: Money deposited into an account after taxes have been taken out of your paycheck. Example: IRA

Tax exempt: free from paying tax Example: Roth IRA

Vocabulary 9.1

IRA (Individual Retirement Account) = An account that is opened to save for retirementTypes of IRAs:

Traditional IRAs grow tax deferred (pay taxes later)

Money is invested in stocks, bonds, mutual funds, and cash

9.1 Vocabulary

401K Retirement plan where employers match your contributions or a part of your contribution.

Uses pre-tax dollars (reduces your taxable income) – money is contributed from your paycheck before income taxes are calculated

Money is invested in stocks, bonds, mutual funds, and cash.

9.1 Vocabulary

Stocks = ownership of a companyStocks are sold in shares

Make money by buying at a low price & selling at a high price or by getting dividends

Use a broker or financial advisor to help invest

9.1 Vocabulary

Mutual FundsYour money is pooled with other investors’ money

A fund includes a group of stocks, bonds, or cash investments and this is where your money is invested

9.1 Vocabulary

Pension = retirement plan provided by the employer.Can be a fixed amount of money you get at retirement or profit sharing