Economics and Personal Finance/Retirement and Stock Market

Social Security
Some retirements may come from the government (social security):
 * Designed as a safety net to provide income for older people when they can no longer work
 * It's automatically deducted from your paycheck
 * Determined by the amount you've contributed and your age when claiming benefits
 * Include disability and survivor benefits
 * Payments are likely to be less than what your income was, so you must supplement through savings, investments and continued employment.
 * Retirement age is 67. You may start collecting benefits if you retire early at 62, but your checks will be smaller.

You contribute 6.2% of your income with your employer matching that contribution to 12.4% total. If you're self-employed, you contribute all of that 12.4%.

Retirement Options provided by you/your employer

 * IRA (Individual Retirement Account): Contributions are tax-deferred (meaning you don't pay taxes until you withdraw).
 * TSA (Tax-Sheltered Annuity): For employees of public schools and non-profits (ex. 403b).
 * Keoh Plan: For self-employed small business owners.
 * Employee retirement plan: Contributions deducted from your paycheck (ex. 401K).
 * Pension: Paid for entirely by the employer.

Considerations for choosing investment options

 * 1) Consider the RISK (investment risk, inflation risk, industry risk, political risk)
 * 2) Consider REWARD (benefit/return gained)
 * 3) Consider CONVENIENCE (sense of relative ease and accessibility)
 * 4) Consider LIQUIDITY (how quickly a financial instrument can be converted to cash)
 * Savings Account
 * HIGH liquidity
 * LOW risk
 * LOW return
 * Stocks
 * HIGH liquidity
 * HIGH risk
 * HIGH return
 * Real Estate
 * LOW liquidity
 * HIGH risk
 * HIGH return

Stock Market
When you buy a stock, you buy partial ownership in a corporation. If a company is expected to do well, demand for its shares rises and prices rise. If a company's future looks bad, demand decreases and prices fall. Licensed to buy/sell stocks, brokers provide investment advice and they collect a commission on each purchase/sale. Profiting from stocks go two ways: [SELLING PRICE - PURCHASE PRICE = CAPITAL GAIN/LOSS]
 * 1) Dividends: Payments made by corporations to stockholders.
 * 2) Capital Gains: Selling a stock for more than its original purchase price.

You can determine whether the stock market is performing or not based on a few tools: DOW (Dow Jones Industrial Average) lists the 30 leading industrial stocks, S and P 500 (Standard and Poor's 500 composite indexes) covers market activity for 500 companies and is more accurate than DOW because it evaluates a greater variety of stock and NASDAQ (National Association of Security Dealers Automated Quotations) monitors fast-moving tech companies; speculative stocks, show dramatic ups and downs.
 * "Ups and Downs" of a stock market
 * Bull Market - The market is doing well and investors are optimistic and people are purchasing stocks.
 * Bear Market - The market is doing poorly and people aren't purchasing stocks.

Stock Exchanges
The NYSE is the oldest and nationally-recognized "blue chip" of companies (began in 1792). The average stock price is $23. Although the benefits, the NYSE has strict requirements. The NASDAQ mostly never handle tech stocks; trades occur electronically; more volatile because companies are young and new; stock price: $1.
 * New York Stock Exchange
 * NASDAQ

Stock Market Risks

 * Interest rate risk: If interest rates rise, stock raise will fall.
 * Inflation risk: Inflation = stock value will fall.
 * Business risk: Problems with the business (scandal, poor management, etc.) = stock value will fall.
 * Liquidity risk: You're unable to find a buyer when you're ready to sell.
 * Supply and demand risk: If fewer people demand the product = stock market will fall.