CHHS Student Success Center

Financial Readiness


Start as soon as possible! The longer you wait, you will have to spend a lot more overall to reach the same goal. You can calculate how much you will need here. Investing doesn't have to be complicated (Get Rich Slowly, 2014). Take it from Warren Buffett, who suggests investing in only two types of funds (Stock Trader, 2017). You can expect an average return on investments around 6% (, 2013). 

You should typically invest 10-15% of your income. However, you may need more if you started late, invest more conservatively, or will have higher healthcare or other expenses. Even a million dollars may not last, as it will only provide $40,000 before taxes for 25 years. 

Pension Plan: Employers pay you a guaranteed lifetime income when you retire. Amount of payout depends on various factors. These plans are becoming less common.

401(k), 403(b), and 457 Plans: 401(k) plans (for private organizations), 403(b) plans (for non-profit, tax exempt organizations), and 457 plans (for government agencies and some non-profit organizations) allow you to make tax-free contributions (up to a specified amount) and go untaxed until you retire or take the money out.

  • Some employers match your contributions up to a certain percentage of your salary. If so, take full advantage of employer matching.

Individual Retirement Account (IRA): This is a plan that you set up. You can only contribute $5,500 per year ( Most brokers/banks/financial institutions can open an account for you. There are two types:

  • Traditional IRA: Contributions are tax deductible; withdraws must begin between age 59.5 and 70.5 (withdrawals before age 59.5 subject to penalty); and taxes are paid on contributions and earnings when withdrawn.
  • Roth IRA: Contributions are not tax deductible; contributions can be withdrawn at any time; earnings can be withdrawn tax free after age 59.5 depending on certain factors (no required withdrawal period).

Withdrawing Funds Early: This will result in a 10% penalty (exception: Roth accounts) in addition to the funds being taxable income. Because of this significant loss, it's rare that people withdraw funds before age 59.5.