Today is Stupid Question Day! We don’t know who created this holiday, but we love the premise behind it: a day to ask a stupid question. Any good teacher would say, “There is no such thing as a stupid question.” Our goal is to educate people so they can pursue financial freedom without consumer debt. Asking questions is a great way to reach that goal. We looked at polls on topics people felt worried about, and came up with questions about retirement. Here are the questions and their answers!
Stupid Questions About Retirement
Stupid Question 1: What is investing?
Investing is the act of putting in money, time or effort into a project that will create profit in return. The idea is that what you invested in will have a return of something that is more valuable than what you put in. Depending on what you invest in, the return could be high, low or somewhere in between. Lets breakdown some types of investment opportunities:
Stock: A piece of a company’s ownership. Owning stocks means that you get paid a dividend of the companies profits. People who own stocks are called shareholders.
Bond: A debt obligation from a government, corporation or municipality. When you own a bond, you get payments on the interest of the debt.
Stupid Question 2: How can I retire?
Retirement is the goal of being able to exit the workforce and enjoy senior citizenship. The simple answer is to save up 10-12 times more than your current income. There are multiple things to consider. First, will your savings support the lifestyle you are trying to live? Second, will your money and lifestyle last as long as you live? If you have enough, then where do you save it? Here are some options:
IRA: Individual Retirement Accounts are accounts that allow you to invest in stocks and bonds. Initially, you don’t pay on investment gains, but you do pay income tax on the money you withdraw once you retire. You can’t withdraw from this account without a penalty until 59 and a half, and you must start withdrawing annually at age 70.
401(k): A 401(k) is a plan that is only provided by your employer. You save money by putting a percentage of your pre-tax income goes towards investments to save on your retirement. Like the IRA, you can start withdrawing (without penalty) at age 59 and a half, and must withdraw annually at age 70. The biggest advantage of 401(k)’s is that your employer will match the amount that you contribute to it. It’s free money!
Stupid Question 3: Is it Too Late to Start?
NEVER! Investing and retirement saving are activities that you can begin right now, even if it’s your first time. We always recommend doing these things earlier in life. The sooner you start, the more you will gain. But if that was not possible for you in the past, there is always hope for the present. Having some investments and savings in your older years is better than not having any.
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