Deck 19: Retirement Planning

Question 1

The quality and timing of your retirement depend mainly on the quality of your employer's retirement plan.

Answer 1

False

Question 2

Assuming Social Security income is not absolutely necessary at age 62, the decision whether to begin receiving reduced payments at age 62 versus waiting for full retirement age is

A) a financial analysis decision based on present value and life expectancy.
B) a moot point since the government tells you when you are eligible.
C) a decision based on expected inflation rates.
D) a moot point since you should take the money as soon as possible.

Answer 2

a financial analysis decision based on present value and life expectancy.

Question 3

Your Social Security retirement benefits are determined primarily by the amount

A) of current contributions by other employees.
B) of savings you have.
C) you contributed to Social Security over the years.
D) of the prime interest rate.

Answer 3

you contributed to Social Security over the years.

Question 4

You can elect to receive Social Security retirement benefits

A) at the full retirement age, which is being raised from 65 to 69.
B) at age 62 and take a reduced amount.
C) and limit your ability to keep on working and earning income.
D) and not be taxed on them, no matter how much other income you have.

Question 5

Social Security provides sufficient income to support the lifestyles of most individuals.

Question 6

To be eligible for Social Security full retirement benefits, a person must be retired and be at least 65 years old.

Question 7

Social Security benefits vary among states, as the system is administered by the individual states.

Question 8

The amount of income that you receive from Social Security when you retire is dependent on the number of years you earned income and your average level of income.

Question 9

The Social Security system allows people to receive reduced benefits before their full retirement age.

Question 10

In retirement, you can earn income and still receive Social Security benefits.

Question 11

Social Security is all of the following, except

A) a good starting point when planning for your retirement funding.
B) financed through working individuals and employers.
C) a government program that provides benefits to the elderly and the disabled.
D) a program that provides benefits that replace about 60% of a worker's annual income.

Question 12

As you plan for retirement, you should consider Social Security benefits as a supplement to

A) your 401(k) savings.
B) your company pension if one exists.
C) your investment portfolio.
D) All of the above are correct.

Question 13

Social Security replaces approximately ________% of a worker's average annual income from his or her working years.

A) 100
B) 40
C) 75
D) 85

Question 14

If a person who qualified for Social Security dies, which of the following are provided to the survivors?

A) A one-time payment to the spouse
B) Monthly income payments if the spouse is over age 60
C) Monthly income payments to children under age 18
D) All of the above

Question 15

To qualify for Social Security benefits, your income has to be at least ________ per quarter (in 2018) for the equivalent of 10 years.

A) $730
B) $874
C) $1,320
D) $1,123

Question 16

If a person who qualified for Social Security benefits dies, all of the following are benefits provided to the survivors, except

A) a one-time payment to the spouse.
B) monthly income payments to the spouse with eligible children or if the spouse is at least age 60.
C) monthly income payments to children.
D) tuition reimbursement for a child attending college.

Question 17

Social Security benefits are ________, as are Social Security ________ on your income.

A) uncapped; withholding taxes
B) capped; withholding taxes
C) unlimited; fees
D) capped; fees

Question 18

Full Social Security retirement benefits begin at age 65 to 67 depending on what year you were born.

Question 19

To be eligible for Social Security retirement benefits on your own, you will need to have worked for the equivalent of at least 10 years (amassed 40 credits), earned the minimum required income each quarter, and contributed to Social Security through payroll taxes.

Question 20

In retirement planning, which of the following is false?

A) Social Security benefits are enough for retirement for most people.
B) IRAs can be a good way to provide for retirement.
C) You can continue to work and receive Social Security benefits at the same time.
D) There is some concern about whether full Social Security benefits will be available in the future.

Question 21

If you have worked for a company long enough to claim a portion of your employer-sponsored retirement plan, you are ________ in the plan.

Question 22

Most defined-contribution plans allow some investment flexibility and allow you to choose all of the following, except

A) money market funds.
B) stock mutual funds.
C) bond mutual funds.
D) put and call options.

Question 23

When you contribute to an employer-sponsored retirement account, it is usually with ________ dollars.

A) after-tax
B) pre-tax
C) optional
D) discretionary

Question 24

All defined-benefit plans have the same qualifications for determining when employees are vested.

Question 25

Since many employers have eliminated defined-benefit retirement plans, it is important that the employee

A) contributes to any 401(k) opportunity especially if there is company matching.
B) makes extra money to compensate for the loss of benefit.
C) saves money throughout their career to prepare for retirement.
D) Both A and C are correct.

Question 26

With which of the following plans will you be able to most accurately predict your retirement income?

A) 401(k)
B) 403(b)
C) Traditional IRA
D) Defined-benefit plan

Question 27

Which of the following investments is least likely to be allowed with most defined-contribution plans?

A) Stock mutual funds
B) Bond mutual funds
C) Money market funds
D) Individual corporate bonds

Question 28

You get a job with the Allred Corporation. Its retirement plan will pay you $250 a month for each year you work for the company; payments begin on your 65th birthday. You must work for the company for 10 years in order to qualify for the pension. This plan is a

A) defined-benefit plan.
B) defined-contribution plan.
C) traditional IRA.
D) Keogh plan.

Question 29

If you are allowed to change investments in your retirement plan over time, you have a(n) ________ plan.

Question 30

Vesting means that employees have a claim to a portion of the retirement money that has been reserved for them upon retirement.

Question 31

In the last 20 years, many employers have shifted from

A) defined-contribution to defined-benefit plans.
B) defined-benefit to defined-contribution plans.
C) 401(k) plans to 403(b) plans.
D) SEP plans to SIMPLE plans.

Question 32

Which of the following is not a characteristic of employer-sponsored retirement plans?

A) They help you save for retirement.
B) There are generally two types of employer-sponsored retirement plans.
C) They are part of a good benefits package.
D) Employer-sponsored retirement plans are a good place from which to borrow.

Question 33

Defined-contribution employer-sponsored retirement plans provide you with a specific amount of income when you retire, based on factors such as your salary and years of employment.

Question 34

In the past 20 years or so, many employers have shifted from defined-benefit to defined-contribution retirement plans.

Question 35

If you have a claim to a portion of the money in an employer-sponsored retirement account, you are considered to be ________ the plan.

A) committed to
B) permanent in
C) vested in
D) endowed in

Question 36

If your retirement plan has no vesting requirement then it is not a

A) defined-benefit plan.
B) Roth IRA.
C) traditional IRA.
D) Keogh plan.

Question 37

The best way to save for retirement is to

A) wait to contribute until after all your bills are paid.
B) have your contribution deducted directly from your pay.
C) borrow money for your contribution so you will pay it back fast.
D) wait until you have accumulated the amount in your checking account.

Question 38

Retirement fund withdrawals are usually taxed as ________ income.

A) short-term capital gains
B) long-term capital gains
C) ordinary
D) tax-free

Question 39

When you contribute to a defined-contribution retirement plan, your employer often puts in money too, and you are able to defer taxes on these contributions.

Question 40

Under a defined-contribution plan, there are specific guidelines for all of the following, except

A) how much you can contribute to your retirement fund.
B) how much your employer can contribute to your retirement fund.
C) early withdrawal penalties.
D) estimating how much you will receive monthly at retirement.

Question 41

Your riskiest choice as an investment option for your 401(k) would be

A) 100% investment in the stock of the company for which you work.
B) mutual funds investing in high growth stocks.
C) mutual funds investing in blue chip stocks.
D) mutual funds investing in bonds.

Question 42

If your employer offers a retirement plan, that should be the first plan that you consider because your employer will likely contribute to it.

Question 43

How much to contribute to a retirement plan should not depend on your

A) liquidity.
B) age.
C) other investments.
D) mood at the time.

Question 44

Which of the following is false about a 401(k) plan?

A) Withdrawals before age 59 1/2 result in a 10% tax penalty.
B) Less than 50% of all employers offering these plans match a portion of employee's contributions.
C) Your contributions are limited to a set dollar amount each year.
D) The money you contribute is deducted from your pay before income taxes are assessed.

Question 45

If you are far away from retirement, you should consider investing in ________ for your retirement account.

A) Ginnie Mae or Treasury bond funds
B) certificates of deposit (CDs)
C) mutual funds with growth stocks
D) corporate bonds

Question 46

Under federal guidelines, the 2018 maximum contribution to a 401(k) is

A) $18,500.
B) 80% of gross income.
C) $400 per month.
D) There is no limit.

Question 47

More than 80% of all employers offering 401(k) plans match a portion or all of an employee's contributions.

Question 48

Many employers have eliminated defined-benefit retirement plans for employees because

A) the employees did not appreciate the benefit.
B) the employees were reluctant to contribute to the plans.
C) the cost to the employer and long-term liability became overwhelming.
D) All of the above are correct.

Question 49

If you are close to retirement, you should consider investing in ________ for your retirement account.

A) Treasury bond funds
B) high yield bond funds
C) mutual funds with growth stocks
D) index funds

Question 50

Key retirement planning decisions include all of the following, except

A) how much to contribute.
B) whether or not you should contribute.
C) when to contribute.
D) how to invest your contributions.

Question 51

In determining the amount of income you will need for retirement, you should consider all of the following, except

A) your personal needs and who else you will be supporting.
B) the expected cost of living due to inflation.
C) the number of years you expect to live while retired.
D) inheritance from your children.

Question 52

An ESOP (employee stock ownership plan) is generally more risky than retirement plans invested in diversified mutual funds.

Question 53

It is often a good idea to invest most or all of your retirement savings in the stock of your employer so that you will demonstrate your loyalty.

Question 54

The main difference between a defined-benefit plan and defined-contribution plan is

A) a defined-contribution plan pays more at retirement.
B) defined-benefit plan payments are not taxable.
C) defined-contribution plan payments are not taxable.
D) the company is the only contributor to a defined-benefit plan while you and the company may both contribute to a defined-contribution plan.

Question 55

Once you leave a job with an employer, you will probably forfeit your retirement account unless you have been with the company for 15 or more years.

Question 56

If you are age 60, which of the following investments would you most likely not consider?

A) Money market funds
B) Junk bond funds
C) Treasury bonds
D) CDs

Question 57

Both the SEP (Simplified Employee Pension) and the SIMPLE (Savings Incentive Match Plan for Employees) retirement plans are intended for use by smaller firms.

Question 58

Which of the following is true about a 401(k) plan?

A) There is no penalty for early withdrawal of these funds.
B) There is no limit on the dollar amount you can contribute.
C) Your contributions are automatically vested and are yours, regardless of when you leave the firm.
D) 401(k) contributions are made after taxes are paid on your salary.

Question 59

As you near retirement, you should

A) reduce risk in your portfolio and move funds from risky investments to income generating investments.
B) move all of your invested funds to risk-free corporate bonds.
C) move all of your invested funds to tax-free municipal bonds.
D) move a major portion of your invested funds to growth stocks since you will have to replace your income when you retire.

Question 60

In an employer-sponsored retirement plan, you should contribute at least

A) the amount the employer will match.
B) 3% of your gross income in middle age.
C) 1% of your net income in your early working years.
D) 15% of your income in the last few working years.

Question 61

The Keogh plan is another retirement savings option, which can supplement individual retirement accounts (IRAs) for employed persons.

Question 62

Which of the following employers might offer you a SEP?

A) Al's Gas Station
B) Ford Motor Company
C) U.S. Army
D) General Electric

Question 63

When you leave an employer, your options with your 401(k) are all of the following, except

A) leave it with your former employer.
B) transfer it to your new employer.
C) transfer it to a rollover IRA.
D) withdraw it with no tax penalty if done in 90 days.

Question 64

Name two types of retirement plans available to the self-employed.

Question 65

Educational institutions and charitable organizations offer a defined-contribution plan called a(n) ________ plan.

Question 66

Use the following two columns of items to answer the matching questions below:
profit sharing

A)a defined contribution plan for small firms (1-10 employees)
B)a defined contribution plan in which the employer contributes to employee retirement accounts based on a specified profit formula
C)a defined contribution plan that allows employees to contribute up to $18,500 per year in 2018 on a pre-tax basis
D)a retirement plan in which the employer contributes its own stock to the employee's retirement account

Question 67

A ________ is established to transfer assets tax-free from a company retirement plan.

A) SEP
B) traditional IRA
C) rollover IRA
D) Keogh

Question 68

Bill is self-employed and has established a SEP retirement plan. Bill's net income for 2015 2018 is $74,500. How much can Bill contribute to the SEP?

A) $40,000
B) $17,000
C) $18,625
D) $11,500

Question 69

Under a SEP, an employee

A) is not allowed to make contributions.
B) can contribute up to $6,000 per year.
C) is not taxed until his or her contributions are withdrawn.
D) can defer taxes with contributions.

Question 70

Which of the following is not true of retirement plans for the self-employed?

A) A Keogh plan is usually used by high income individuals.
B) Under a SEP, a maximum contribution of $55,000 is allowed for 2018.
C) Self-employed individuals can choose from several plans including SEP plans and one-participant 401(k) plans.
D) A one-participant 401(k) plan is similar to 401(k) plans for employees except that it allows larger contributions.

Question 71

Both the one-participant 401(k) plan and the Simplified Employee Pension (SEP) plan are available to self-employed individuals for retirement savings.

Question 72

Which of the following statements with regard to SEP plans is not true?

A) Self-employed individuals can contribute up to 25% of annual net income.
B) They are also called Keogh plans.
C) The maximum contribution in 2018 is $55,000.
D) A SEP is a defined-contribution plan.

Question 73

Which of the following is a defined-contribution plan intended for firms with 100 or fewer employees?

A) 401(k) plan
B) SEP plan
C) SIMPLE plan
D) 403(b) plan

Question 74

Use the following two columns of items to answer the matching questions below:
ESOP

A)a defined contribution plan for small firms (1-10 employees)
B)a defined contribution plan in which the employer contributes to employee retirement accounts based on a specified profit formula
C)a defined contribution plan that allows employees to contribute up to $18,500 per year in 2018 on a pre-tax basis
D)a retirement plan in which the employer contributes its own stock to the employee's retirement account

Question 75

Which of the following plans is available to both firms with 10 or fewer employees and self-employed individuals?

A) SEP plan
B) ESOP
C) Keogh plan
D) 403(b) plan

Question 76

Use the following two columns of items to answer the matching questions below:
401(k) plan

A)a defined contribution plan for small firms (1-10 employees)
B)a defined contribution plan in which the employer contributes to employee retirement accounts based on a specified profit formula
C)a defined contribution plan that allows employees to contribute up to $18,500 per year in 2018 on a pre-tax basis
D)a retirement plan in which the employer contributes its own stock to the employee's retirement account

Question 77

If you are contributing to a 401(k) plan at work, you can still contribute to

A) a traditional IRA.
B) a Roth IRA.
C) a SEP.
D) a Keogh plan.

Question 78

Use the following two columns of items to answer the matching questions below:
SEP

A)a defined contribution plan for small firms (1-10 employees)
B)a defined contribution plan in which the employer contributes to employee retirement accounts based on a specified profit formula
C)a defined contribution plan that allows employees to contribute up to $18,500 per year in 2018 on a pre-tax basis
D)a retirement plan in which the employer contributes its own stock to the employee's retirement account

Question 79

Which of the following is not a defined-contribution retirement plan offered by employers?

A) 401(k) plan, 403(b) plan
B) SEP
C) 403(b) plan
D) Keogh plan

Question 80

Which of the following employers would be most likely to offer a 403(b) plan?

A) General Motors
B) Wright State University
C) Duke Electric Power Company
D) SBC Corporation