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Savings Fundamentals

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Correct.

By taking care of your own future first, you help ensure that your kids won't be saddled with the responsibility of caring for you in later years. And while there are lots of ways to get loans for college, nobody's going to lend you money for retirement. See Fundamental #4.

Actually...

While there are lots of ways to get loans for college, nobody's going to lend you money for retirement. And if you're not prepared to fund your later years, your kids may have to chip in. You might not be doing them any favors by sacrificing your retirement for their education. See Fundamental #4.

Correct.

Setting money aside for unexpected expenses actually helps protect your retirement savings. If you have an unexpected expense, you won't have to rob your plan—and pay a hefty expense for doing so. Build an emergency reserve before you contribute aggressively to a retirement plan. See Fundamental #3.

Actually...

If you put all your savings into a retirement plan before you have an emergency reserve, an unexpected expense could force you to take money out of your plan—and pay a hefty penalty for doing so. Your good intentions to save for retirement first could actually end up costing you more. See Fundamental #3.

Correct.

Start with the cards because they’re probably costing you way more interest than any retirement account can pay—with one exception. If your employer offers to match your contributions to your retirement plan, get the match first before you start on the cards. See Fundamental #1.

Actually...

While saving for retirement is very important, you’ll likely come out ahead by paying off credit cards first. Chances are, they’re costing you far more interest than any retirement account could pay—with one exception. If your employer offers to match your contributions to your retirement plan, get the match first before you start on the cards. See Fundamental #1.

Correct.

True. Without a reserve of emergency money, an unexpected expense could cost you dearly if you have to raid your retirement accounts. In 2011, 34% of workers had to withdraw money from their 401(k) or IRA just to cover basic living expenses. See Fundamental #3.

Source: Employee Benefit Research Institute 2011 Retirement Confidence Survey.

Actually...

True. Without a reserve of emergency money, an unexpected expense could cost you dearly if you have to raid your retirement accounts. In 2011, 34% of workers had to withdraw money from their 401(k) or IRA just to cover basic living expenses. See Fundamental #3.

Source: Employee Benefit Research Institute 2011 Retirement Confidence Survey.

Correct.

False. A Schwab study comparing ending wealth for investors who invested $2,000 a year for 20-year periods indicates that investing on the same day each year, regardless of market conditions, leads to far better outcomes than sitting on cash and is, on average, just 7% less effective than accomplishing the almost impossible: investing on the perfect day each year. See Fundamental #8.

Source: Schwab Center for Financial Research, 2011.

Actually...

False. A Schwab study comparing ending wealth for investors who invested $2,000 a year for 20-year periods indicates that investing on the same day each year, regardless of market conditions, leads to far better outcomes than sitting on cash and is, on average, just 7% less effective than accomplishing the almost impossible: investing on the perfect day each year. See Fundamental #8.

Source: Schwab Center for Financial Research, 2011.

Correct.

True—if you're over 50. While the 2013 maximum 401(k) contribution is $17,500, when you reach age 50 you're eligible to make an additional catch-up contribution of $5,500. See Fundamental #4.

Actually...

True—if you're over 50. While the 2013 maximum 401(k) contribution is $17,500, when you reach age 50 you're eligible to make an additional catch-up contribution of $5,500. See Fundamental #4.

Correct

False. Workers who have done a retirement needs calculation tend to be considerably more confident about their ability to reach their goal—even though their estimate of what they'll need is generally higher. Just knowing where you stand can help. See Fundamental #4.

Source: Employee Benefit Research Institute 2011 Retirement Confidence Survey.

Actually...

False. Workers who have done a retirement needs calculation tend to be considerably more confident about their ability to reach their goal—even though their estimate of what they'll need is generally higher. Just knowing where you stand can help. See Fundamental #4.

Source: Employee Benefit Research Institute 2011 Retirement Confidence Survey.

1. Which should you do first?

  • Save for college
  • Save for retirement

2. Which should you do first?

  • Build an emergency reserve
  • Max your retirement savings

3. Which should you do first?

  • Put money in an IRA
  • Pay off credit cards

4. True or False?

In 2011, one out of three workers had to tap their retirement savings to pay basic expenses.

  • True
  • False

5. True or False?

You’ll have much better results if you wait for the best time to invest.

  • True
  • False

6. True or False?

You can contribute a maximum of $23,000 to a 401(k) this year.

  • True
  • False

7. True or False?

People who calculate the cost of retirement are less confident about being able to retire.

  • True
  • False