1 Chart Your Progress Learning to be financially literate is fun. This text provides you with tools to help you in your quest for a bright financial future. Setting a path to financial security now can lead to success in the future. • Each chapter opens with Your Financial IQ questions so you can review what you already know about the subject matter. • The Essential Question at the beginning of each chapter will engage you to uncover the important points presented in the content. Assess what you learned. Multiple opportunities are provided to confirm learning as you explore the content. Formative assessment includes the following. • Review Your Knowledge questions cover basic concepts presented in the chapter so you can evaluate your understanding of the chapter material. • Build Your Vocabulary reviews key terms presented in the chapter and challenges you to demonstrate your understanding of financial literacy terms. • Apply Your Math Skills problems reinforce the math concepts and formulas covered in the chapter so you can practice applying math skills to financial situations. Get ready for life as a financially capable individual. You will need good literacy skills as you plan for your future. • Each chapter opens with a Reading Prep activity so you can improve your literacy skills. • Learning Objectives provide goals to help you read and understand the content in each chapter. Chapter 2 Earning: Understand g Your Financial IQ Before reading this chapter, answer the following questions to see how much you already know about paychecks. 1. Why should a person check to see if his or her paycheck is calculated correctly? ______________________________________________________________________________ ______________________________________________________________________________ 2. What is the difference between a wage and a salary? ______________________________________________________________________________ ______________________________________________________________________________ 3. How many hours must a person work per week before he or she can earn overtime wages? ______________________________________________________________________________ ______________________________________________________________________________ 4. Why are federal, state, and local income taxes deducted from a person’s paycheck? ______________________________________________________________________________ ______________________________________________________________________________ 5. Why are Social Security and Medicare taxes deducted from a person’s ______________________________________________________________________________ ______________________________________________________________________________ 6. What is the difference between gross pay and net pay? ______________________________________________________________________________ _____________________________________________________________________________ nt collect income taxes from wages? m p ____________ __ _ _ _ _ __ _____ __ _____ _ ____ ____ _________________ __ _ _ _ _ _ __ __ ersons rs so so o on on n’ n’ paycheck? __________paycheck? _ _ _ _ _ _ __ __ _________ __________________it __ _ _ _ _ _ __ __ __ ____________________ _ _ _ _ __ __ __ Why is important to understand how a paycheck is calculated? LO 2-1 Ca LO 2-2 C LO 2-3 Id LO 2-4 L Key T wage gross pay time car overtim salary d ducti Copyright Goodheart-Willcox Co., Inc. May not be reproduced or posted to a publicly accessible website. will is a l g when that person dies. A trust is a legal d trustee to manage a person’s estate on their behalf. Review Your Knowledge Choose the correct answer for each of the following.Social _______ 1. Which of the following is true of Security? A. It is a social insurance program. B. It is run by the US government. C. It is designed to provide benefits for retired workers and the disabled. D. All the above. _______ 2. What is an amount of money paid into a retirement account? A. supplement B. distribution C. D. rolloverramount _______ 3. What is an of money withdrawn from a retirement account? A. supplement B. distribution C. contribution D. rollover Copyy A. s pp B. distribution C. contributioncontribution D. ro llove __ _ Chapter 11 Retirement and Estate Planning: Build Your Vocabulary For each word or term, write the correct definition using your own words. 11. retirement account ______________________________________________________________________________ ______________________________________________________________________________ 12. tax-deferred ______________________________________________________________________________ ______________________________________________________________________________ 13. individual retirement account (IRA) ______________________________________________________________________________ ______________________________________________________________________________ 14. earned income ______________________________________________________________________________ ______________________________________________________________________________ 15. 401(k) plan ______________________________________________________________________________ ______________________________________________________________________________ 16. 403(b) plan ______________________________________________________________________________ ______________________________________________________________________________ 17. estate ______________________________________________________________________________ ______________________________________________________________________________ 18. estate planning _________________________________________ ____________________ 13. individual retirement account (IRA) __ ____ ___ ____ _____ __________________________________________________________ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ __ __ __ __ __ __ _________ _______________________________________________________________________________ __ __ __ __ __ __ __ 14. earned income _______________________________________________________________________________ __ __ __ __ __ __ __ ____ ______________________________________________________________ __ __ __ __ __ __ __ ________ 15. 401(k) plan _______________________________________________________________________________ __ __ __ __ __ __ __ ____ ______________________________________________________________ __ __ __ __ __ __ __ _______ 16. 403(b ) plan ______________________________________________________________________________ __ __ __ _ __ __ __ __ ______ _________________________________________________________________ __ __ _ __ __ _ __ 17. estat e _____________________________as ______________________________________________ __ _ __ __ __ __ __ __ _ ____________ __ __ __ _ __ __ __ _____ inancial Literacy Apply Your Math Skills Calculate the answers to the following problems. Show your calculations. 21. You need $3,500 for an emergency. You decided to withdraw it from your traditional IRA but you are younger than 59 1/2. You are in a 17 percent tax bracket. How much will you actually receive as a net amount? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ 22. You have a Roth IRA and want to contribute as much possible. You earned $1,570 working part-time during the school year. You also earned $1,200 babysitting. How much will you contribute to your Roth IRA? If you cannot contribute the maximum amount, how much more money would you need to earn to reach the maximum? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ 23. You contributed 6.5 percent of your $41,200 salary to a 401(k) account last year. How much did you contribute? Your employer matched 50 percent of your contributions up to $5,000. What was the total contribution to your f d? _____ for Learning Objectives When you complete Chapter 8, you will be able to: LO 8-1 Summarize the importance of researching a career. LO 8-2 Name options for postsecondary education. LO 8-3 List ways to fund postsecondary education. LO 8-4 Define lifelong learning. Key Terms er plan Reserve Officers’ i i Corps need-based award student loanreadingPrep proprietary school trade school gra work-study program seminar Reading Before this chapter, examine the visuals in the chapter. Write down any questions you have about them. Try to answer the questions as you read. College and Career Readiness