Retirement Basics: 401(k), IRA, and the Employer Match
Aligned to JS:IN-1 — Jump$tart National Standards in K-12 Personal Finance Education & Advance CTE Career Clusters.
What this lesson teaches
Retirement accounts are ordinary investments with a tax advantage and a rule against early withdrawal. A 401(k) comes through an employer and often includes a match — money added when you contribute. An IRA you open yourself. Time in the account matters more than the amount you start with.
Worked examples
Example 1
Your employer matches 50% of the first 6% you contribute. On $40,000, contributing $2,400 earns you $1,200 extra. Not contributing leaves $1,200 of pay unclaimed.
Example 2
$200 a month from age 22 to 65 at 7% comes to roughly $600,000. The same $200 started at 42 comes to roughly $130,000.
Example 3
Withdrawing early usually costs income tax plus a 10% penalty. The restriction is the price of the tax advantage, and it is also what keeps the money there.
Practice questions
- Calculate the match on a $50,000 salary with a 50%-of-6% match, fully contributed.
- Explain why time matters more than starting amount.
- Why does early withdrawal carry a penalty?
Watch the lesson
Every lesson comes with a video taught in English and Spanish — the same video the QR code in the printed workbook opens.
▶ Watch this lessonEn español
Básicos del retiro: 401(k), IRA y la aportación del empleador
Las cuentas de retiro son inversiones comunes con una ventaja fiscal y una regla contra retirar temprano. Un 401(k) llega a través del empleador y muchas veces incluye una aportación igualada — dinero que se agrega cuando tú aportas. Una IRA la abres tú. El tiempo en la cuenta importa más que la cantidad con la que empiezas.
Ejemplo 1: Tu empleador iguala el 50% del primer 6% que aportes. Sobre $40,000, aportar $2,400 te gana $1,200 extra. No aportar deja $1,200 de pago sin reclamar.
Ejemplo 2: $200 al mes de los 22 a los 65 años al 7% llegan a unos $600,000. Los mismos $200 empezados a los 42 llegan a unos $130,000.
Ejemplo 3: Retirar temprano normalmente cuesta impuesto sobre la renta más una multa del 10%. La restricción es el precio de la ventaja fiscal, y también es lo que mantiene ahí el dinero.
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