Final answer:
The right to retain after-tax earnings is the right of individuals to keep income after taxes. This is crucial for athletes with short careers and high incomes, and it relates to personal wealth strategies through investment options with various levels of risk and return.
Step-by-step explanation:
The right of the risk taker to retain his or her after-tax earnings refers to the concept that individuals should be able to keep the income they have earned after paying necessary taxes. Athletes, for instance, often have short careers yet earn high incomes, and therefore, they might save a significant portion of their after-tax income, such as one-third of it, for future stability or investment. Moreover, when people invest in the stock market, they encounter a tradeoff between potential high returns and high risk. Investing in stocks often comes with the expectation of a higher average return over several years compared to safer investments like bonds or bank accounts. These high returns can compensate for the higher level of risk associated with stock market volatility.
Another investment option is through workplace retirement accounts, like 401(k)s, which have special tax statuses and allow for tax-deferred growth. Knowing when and how to invest, taking into account personal wealth accumulation strategies and life stage, is crucial for managing risk while aiming for adequate returns.