Chapter 21.1

Ways to Save

Open a savings account Bank Credit union

Savings accounts earn interest Interest is the money that banks pay

depositors for use of their money Usually a percentage of the money you

have

Types of Investments

Savings Bonds When you buy, you are lending money to the

government Each year the bond grows in what it is worth

Money Market High minimum balance You are paid a dividend, or share of the profits

Certificate of deposit (CD) Deposit an amount of money for a fixed period

of time-the longer you do, the higher the interest rate

Retirement Plans

Pension plan Funded in part by employer or union Builds up throughout a worker’s career Amount in pension is based on length of

service and the employee’s salary 401K Plan

You put specific portion of your salary into the plan

Employers match this contribution

Retirement

IRA Retirement account where you can put a

limited amount of money in yearly Money is not taxed until you retire Must wait until age 59 ½ before you take

money out or receive a penalty

For the self employed…

Keogh Plan You can invest up to 25% of your yearly

earnings for retirement Simplified Employee Pensiong

Tax deferred retirement plan Can put up to 15% of salary up to

$30,000 Easier to set up/use than Keogh Account