Retirement Accounts Basics

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Show your work for each problem.

1.
What happens to your contributions in a traditional retirement account?
1. a)You pay taxes now, withdraw tax-free later
2. b)No taxes are ever paid
3. c)You pay double taxes
4. d)You contribute pre-tax, pay taxes when you withdraw
2.
Your employer matches 50% of your retirement contributions. If you contribute 100 euros per month, how much is invested monthly in total?
1. a)50 euros
2. b)150 euros
3. c)200 euros
4. d)100 euros
3.
If you want to generate 40,000 euros per year in retirement using the 4% rule, how much do you need saved? (Enter the number only)
4.
What is a key advantage of starting retirement investing at 25 instead of 35?
1. a)10 extra years of compound growth
2. b)Younger people pay less taxes
3. c)Higher interest rates are available to younger people
4. d)Banks give bonuses to young investors
5.
You contribute 300 euros per month to your retirement account. What is your annual contribution?
6.
If you invest 5,000 euros today at 7% annual return, how much will it be worth in 10 years? Round to the nearest whole number.
7.
You are in the 35% tax bracket now and expect to be in the 20% bracket in retirement. Which type of account would likely save you more money?
1. a)Roth / After-tax (pay 35% now)
2. b)They would be exactly the same
3. c)Cannot be determined
4. d)Traditional / Pre-tax (pay 20% later)
8.
Calculate the total value after 20 years if you contribute 2,000 euros annually at 6% interest.
9.
Your retirement account has 500,000 euros. Using the 4% rule, how much can you safely withdraw per year?
10.
Why is compound interest especially powerful for retirement savings?
1. a)Interest rates decrease
2. b)You face tax penalties and lose tax benefits
3. c)Your employer takes back their contribution
4. d)You lose the account permanently
11.
Maria starts saving 200 euros/month at age 25. Paolo starts saving 400 euros/month at age 45. Who likely has more at 65? (Assume 7% return)
12.
If you need 1.2 million euros for retirement and have 30 years to save at 8% return, approximately how much must you save annually?
13.
What is the main tax difference between traditional and Roth retirement accounts?
14.
You invest 10,000 euros at 6% for 25 years. What is the approximate final value? Use the rule of 72 to estimate.
1. a)2,000 euros/year (5%)
2. b)1,000 euros/year (2.5%)
3. c)4,000 euros/year (10%)
4. d)Any amount works
15.
You want to retire with 50,000 euros/year income. Using the 4% rule and employer 50% match, calculate your required monthly contribution from your pocket.
16.
What is the biggest risk of NOT having retirement savings?