Retirement Basics — slides
Financial Literacy Club
Money After High School · Lesson 11
Retirement Basics
401(k)s, employer matches, and IRAs — and why starting early matters.
12-minute lesson · learnwithflc.org
Retirement Basics · 1 / 21
Financial Literacy Club
Money After High School · Lesson 11
Retirement Basics
401(k)s, employer matches, and IRAs — and why starting early matters.
12-minute lesson · learnwithflc.org
Today's goals
By the end of class, you'll be able to…
- Explain 401(k)s, IRAs, and employer matches
- Compare Traditional and Roth accounts
- Show why starting early matters for retirement
Warm-up
Your employer offers to add 50 cents for every dollar you save, up to a limit. How good a deal is that?
Think, then write your answer.
The big idea
Retirement Basics
401(k)s, employer matches, and IRAs — and why starting early matters.
Money After High School · Lesson 11
Retirement might feel impossibly far away — which is exactly why it's the goal that benefits most from starting early.
Money After High School · Lesson 11
- 401(k) / 403(b): retirement plans offered by employers. Contributions come straight out of your paycheck.
- IRA (Individual Retirement Account): one you open yourself at a brokerage, as long as you have earned income.
Vocabulary
Employer match
Money your employer adds when you contribute — for example, 100% of what you put in, up to 4% of your pay. Not contributing enough to get the full match leaves free money on the table.
Money After High School · Lesson 11
- Traditional accounts: usually a tax break now; you pay income tax when you withdraw in retirement.
- Roth accounts: you pay tax now; qualified withdrawals in retirement are tax-free. Many young people with lower incomes favor Roth accounts, since their tax rate now may be lower than later.
Money After High School · Lesson 11
The IRS sets yearly limits on how much you can contribute; check irs.gov for current amounts. Vesting rules may require you to work somewhere for a while before employer match money is fully yours.
Money After High School · Lesson 11
Don't cash out when you change jobs
Withdrawing retirement money early usually means paying income tax plus, in many cases, a 10% penalty if you're under 59½. Roll it into your new plan or an IRA instead.
See it
Starting at 22: about $758,519 from $108,000 contributed. Starting at 32: about $360,211 from $84,000 contributed.
Start at 22 ($108,000 put in)
Start at 32 ($84,000 put in)
Real example
The free money
Ray earns $40,000 a year. His employer matches 100% of his 401(k) contributions, up to 4% of his pay.
- If Ray contributes 4% ($1,600 a year), his employer adds another $1,600.
- That's an instant 100% return on those dollars, before any investment growth.
- If he contributes nothing, he gives up $1,600 a year in pay he could have had.
Try it together
Try it: start at 22 vs. 32
$200 a month for 45 years, then for 35 years. Returns are hypothetical and steady.
Your numbers
Real returns vary year to year and can be negative.
Results
Hypothetical balance after 45 years
$758,519
Compounded monthly at a constant 7% a year
You contributed
$108,000
Hypothetical growth
$650,519
Growth share
86%
of the final balance
- Your contributions
- Hypothetical growth
Show year-by-year tableHide table
| Year | Contributed | Growth | Balance |
|---|---|---|---|
| 1 | $2,400 | $79 | $2,479 |
| 2 | $4,800 | $336 | $5,136 |
| 3 | $7,200 | $786 | $7,986 |
| 4 | $9,600 | $1,442 | $11,042 |
| 5 | $12,000 | $2,319 | $14,319 |
| 6 | $14,400 | $3,432 | $17,832 |
| 7 | $16,800 | $4,800 | $21,600 |
| 8 | $19,200 | $6,440 | $25,640 |
| 9 | $21,600 | $8,372 | $29,972 |
| 10 | $24,000 | $10,617 | $34,617 |
| 11 | $26,400 | $13,198 | $39,598 |
| 12 | $28,800 | $16,139 | $44,939 |
| 13 | $31,200 | $19,466 | $50,666 |
| 14 | $33,600 | $23,207 | $56,807 |
| 15 | $36,000 | $27,392 | $63,392 |
| 16 | $38,400 | $32,054 | $70,454 |
| 17 | $40,800 | $37,225 | $78,025 |
| 18 | $43,200 | $42,944 | $86,144 |
| 19 | $45,600 | $49,250 | $94,850 |
| 20 | $48,000 | $56,185 | $104,185 |
| 21 | $50,400 | $63,795 | $114,195 |
| 22 | $52,800 | $72,129 | $124,929 |
| 23 | $55,200 | $81,239 | $136,439 |
| 24 | $57,600 | $91,180 | $148,780 |
| 25 | $60,000 | $102,014 | $162,014 |
| 26 | $62,400 | $113,805 | $176,205 |
| 27 | $64,800 | $126,621 | $191,421 |
| 28 | $67,200 | $140,538 | $207,738 |
| 29 | $69,600 | $155,634 | $225,234 |
| 30 | $72,000 | $171,994 | $243,994 |
| 31 | $74,400 | $189,711 | $264,111 |
| 32 | $76,800 | $208,882 | $285,682 |
| 33 | $79,200 | $229,613 | $308,813 |
| 34 | $81,600 | $252,015 | $333,615 |
| 35 | $84,000 | $276,211 | $360,211 |
| 36 | $86,400 | $302,329 | $388,729 |
| 37 | $88,800 | $330,509 | $419,309 |
| 38 | $91,200 | $360,899 | $452,099 |
| 39 | $93,600 | $393,660 | $487,260 |
| 40 | $96,000 | $428,963 | $524,963 |
| 41 | $98,400 | $466,991 | $565,391 |
| 42 | $100,800 | $507,941 | $608,741 |
| 43 | $103,200 | $552,026 | $655,226 |
| 44 | $105,600 | $599,471 | $705,071 |
| 45 | $108,000 | $650,519 | $758,519 |
Educational calculator, not financial advice. Results are hypothetical estimates based on the numbers you enter.
Activity · pairs · 10 min
Free Money
- Salary: $40,000. The employer matches 100% of contributions up to 4% of salary.
- Pairs calculate the employee's contribution and the match for contributing 2%, 4%, and 6%.
- Pairs use the compound growth calculator: $200 a month from 22 to 67 vs. from 32 to 67 at a hypothetical 7%.
- Pairs write one sentence of advice for a 22-year-old starting a first job.
Check for understanding · 1 of 3
Your employer matches 100% of contributions up to 5% of your pay. You earn $50,000.
How much should you contribute to get the full match?
- A$500
- B$5,000
- C$2,500
- DNothing — the employer contributes anyway
C. $2,500
5% of $50,000 = $2,500. Your employer then adds $2,500 too.
Check for understanding · 2 of 3
What's the main difference between Roth and traditional retirement accounts?
- ARoth: pay tax now, tax-free qualified withdrawals later. Traditional: tax break now, taxed later.
- BRoth accounts don't allow investing.
- CTraditional accounts are only for people over 50.
- DThere's no difference.
A. Roth: pay tax now, tax-free qualified withdrawals later. Traditional: tax break now, taxed later.
It's about when you pay taxes: now (Roth) or later (traditional).
Check for understanding · 3 of 3
Cashing out your 401(k) when you change jobs is usually a good idea because you get the money right away.
- True
- False
False
Early withdrawals usually trigger income tax and often a 10% penalty, and you lose the growth. Roll it over instead.
Remember
Key takeaways
- Get the full employer match — it's free money.
- Traditional = tax break now. Roth = tax-free later.
- Check irs.gov for yearly limits.
- Don't cash out when you change jobs — roll over.
- Start early; time does the heavy lifting.
Discuss
Talk it over
- Why is it so hard to think about retirement when you're young?
- Would you choose a Roth or traditional account for your first job? Why?
Exit ticket
What should you do with a 401(k) when you change jobs?
Answer on your exit ticket before you leave.
Nice work today.
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