Deck 14: Starting Early: Retirement and Estate Planning

Question 1

Annabelle works at Acme Cleaning Company. When she retires, her employer's health insurance plan and Medicare should cover all of her medical expenses.

Answer 1

False

Question 2

A salary-reduction plan for a nonprofit organization is called a 401(k) plan.

Answer 2

False

Question 3

The best time to begin planning for retirement is at age 27.

Answer 3

False

Question 4

The SEP IRA is the simplest type of retirement plan if a person is self-employed.

Question 5

When Social Security was established, it was never intended to provide 100% of one's retirement income.

Question 6

About one out of every three Americans currently collects some form of Social Security benefit.

Question 7

Cindy's net worth should increase each year as she moves closer to her retirement.

Question 8

Eight years ago, Thomas began investing in his Roth IRA. He is now purchasing his first home. He may withdraw some money from his Roth IRA tax-free and penalty-free for this purchase.

Question 9

If you were born in 1960 or later, you will first become eligible to receive Social Security benefits at age 67.

Question 10

The four primary sources of retirement income are employer pension plans, personal retirement plans, annuities, and public pension plans.

Question 11

Housing and life insurance are so important to your retirement income that other investments can be ignored as you review your assets.

Question 12

Because of the potential effect of inflation, individuals should underestimate the amount of money needed for retirement.

Question 13

When Paul leaves his job at Acme Bending Company, he may choose to move his 401(k) balance to a plan called a rollover IRA.

Question 14

Social Security covers 97% of all workers in America.

Question 15

Bruce and Christopher are both retiring from Best Conditioning Company. They both should have the same amount of money in their retirement funds regardless of the lifestyle they expect during retirement.

Question 16

An example of a defined-contribution plan is a stock bonus plan.

Question 17

Only people who are retired can receive a benefit from Social Security.

Question 18

A benefit of an employer pension plan is that taxes are eliminated.

Question 19

When Don retires, his transportation expenses will likely increase.

Question 20

A defined-benefit plan specifies the benefits that you will receive at retirement age.

Question 21

A statutory will is one that is prepared with the help of an attorney.

Question 22

Your estate consists of everything you own.

Question 23

If a will is found to be invalid, the result is called in-probate.

Question 24

A holographic will is legal in all states.

Question 25

Retirement means that you will never work again.

Question 26

If you die intestate, your property will be distributed according to your wishes.

Question 27

If you are single, you should not have beneficiaries.

Question 28

Only one will may legally be written during a person's lifetime.

Question 29

The longer money accumulates tax-deferred in an IRA, the bigger the benefit.

Question 30

A power of attorney should perform the tasks involved in carrying out the will of a deceased person.

Question 31

If you are married, all of your assets will automatically pass to your spouse.

Question 32

An exemption trust will has all of your assets going to your spouse except for a certain amount of assets, which goes into a trust.

Question 33

A traditional marital share will leaves everything to your spouse.

Question 34

Probate is a short, quick process.

Question 35

People should never dip into their savings during retirement.

Question 36

Estate planning is important for financial planning but not for retirement planning.

Question 37

Every adult should have a written will.

Question 38

Changes to a will should be written in ink on the will and initialed.

Question 39

A holographic will has a holographic seal to prove its authenticity.

Question 40

A stated amount will identifies the amount that will not go to your spouse.

Question 41

An individual can give away up to $14,000 per year before paying an inheritance tax to the IRS.

Question 42

According to the text, which of the following will probably be your most valuable asset at retirement?

A) Automobile.
B) House.
C) Investments.
D) Life insurance.
E) All of these.

Question 43

It is a fact that you will spend less money when you retire.

Question 44

A disclaimer trust is appropriate for couples who do not yet have enough assets to need a credit-shelter trust.

Question 45

What steps should be taken in retirement planning?

A) Avoid life insurance.
B) Estimate preretirement living expenses.
C) Exceed budget amounts for spending.
D) Conduct a financial analysis and estimate retirement living expenses.
E) All of these are correct.

Question 46

An "average" older (65+) household spends most of its money on

A) Entertainment.
B) Food.
C) Housing.
D) Medical care.
E) Transportation.

Question 47

An "average" older (65+) household spends more money on

A) Clothing than on housing.
B) Cash contributions than on medical care.
C) Entertainment than on transportation.
D) Housing than on cash contributions, entertainment, and clothing combined.
E) Personal insurance than on food.

Question 48

Another name for a will is a letter of last instruction.

Question 49

Legal fees for drafting a standard will range between $300 and $400.

Question 50

When thinking about retirement, which of the following is correct?

A) You'll spend less money when you retire.
B) Saving just a little bit won't help.
C) You can depend on Social Security and a company pension plan to pay your basic living expenses.
D) The sooner you start saving, the better.
E) Your pension benefits will increase to keep pace with inflation.

Question 51

An inter vivos trust takes effect while you're alive.

Question 52

A copy of your living will should be distributed to your family doctor to be placed in your medical file.

Question 53

When conducting a financial analysis for retirement planning, you should review

A) Housing.
B) Life insurance.
C) Other Investments.
D) Assets.
E) All of these.

Question 54

When conducting a financial analysis for retirement planning,

A) A large mortgage should not affect your financial planning.
B) Investments should be evaluated to determine whether their income can help cover living expenses.
C) Keeping your current, large house will be cheaper to maintain than a move to a smaller house.
D) Life insurance should be avoided.
E) All of these are true.

Question 55

If you subtract your liabilities from your assets, you get your net worth.

Question 56

If you save on a regular basis, you not have money to pay your bills, make major purchases, meet your living expenses during your retirement, and cope with emergencies.

Question 57

Kiplinger.com's retiree tax map, Kiplinger.com/tools/retiree_map, is a state-by-state guide that can help determine the most tax-friendly states for you and your assets in retirement.

Question 58

A testamentary trust takes effect while you're alive.

Question 59

When you retire, you will probably spend less money on

A) Clothing.
B) Health insurance.
C) Medical care.
D) Recreation.
E) All of these.

Question 60

A revocable trust cannot be changed or ended.

Question 61

Social Security

A) Covers 97% of all American workers.
B) Offers full retirement benefits beginning at age 62.
C) Provides benefits only for retirees.
D) Provides 100% of retirement income for recipients.
E) Was established in 1947.

Question 62

An employer may choose to match the contribution made by employees in a

A) 401(k) plan or a salary-reduction plan.
B) Money-purchase plan.
C) Stock bonus plan.
D) Profit-sharing plan.
E) Individual retirement account.

Question 63

An employer's contribution will vary according to the company's profits in a

A) 401(k) plan.
B) Money-purchase plan.
C) Stock bonus plan.
D) Profit-sharing plan.
E) Salary-reduction plan.

Question 64

Robert's wife Fiona does not work, and they file a joint tax return. Robert can contribute on behalf of Fiona into a

A) 401(k) plan.
B) Regular IRA.
C) Roth IRA.
D) SEP plan.
E) Spousal IRA.

Question 65

All of the following are examples of defined contribution plans except

A) Defined-benefit plan.
B) Money-purchase plan.
C) Profit-sharing plan.
D) Salary-reduction plan.
E) Stock bonus plan.

Question 66

Jill is 45 years old and thinks that her future tax rate will be lower than what she currently pays, so she wants to defer her taxes on her contributions of up to $5,500 in 2014. Which plan would allow her to meet her goals?

A) 401(k) plan
B) Regular IRA
C) Roth IRA
D) SEP plan
E) Spousal IRA

Question 67

How is eligibility determined for receiving Social Security retirement benefits?

A) Marital status.
B) Credits.
C) Family size.
D) Tax bracket.
E) All of these.

Question 68

Julian's annual contributions to his retirement are not tax-deductible, but his earnings accumulate tax-free. He is investing in a

A) 401(k) plan.
B) Regular IRA.
C) Roth IRA.
D) SEP plan.
E) Spousal IRA.

Question 69

Lawrence is self-employed and wants to establish the simplest type of retirement plan. He should set up a

A) 401(k) plan.
B) Regular IRA.
C) Roth IRA.
D) SEP plan.
E) Spousal IRA.

Question 70

What percentage of American workers are covered by Social Security?

A) 15%
B) 50%
C) 78%
D) 97%
E) 100%

Question 71

Which of the following is not a major source of retirement income?

A) Annuity.
B) Employer pension plan.
C) Personal retirement plan.
D) Public pension plan.
E) All of these are major sources of retirement income.

Question 72

When planning for retirement, inflation

A) Decreases through retirement.
B) Should be ignored since it will have no effect on retirement funding.
C) Should be considered since income received earlier in retirement will buy more than the same amount received later in retirement due to the rising prices of goods and services.
D) Is unimportant since pension income does not change in retirement.
E) Should be recognized since it will increase the value of income received in retirement.

Question 73

Which retirement plan specifies the benefits you'll receive at retirement age based on your total earning and years on the job?

A) Defined-benefit plan.
B) Money-purchase plan.
C) Defined-contribution plan.
D) Profit-sharing plan.
E) 401(k) plan.

Question 74

Vesting is the right to receive the

A) Employer's contributions to a pension plan even if the employee leaves the company before retiring.
B) 401(k) contributions made by the employee.
C) Employee's contributions each pay period.
D) Portable employee benefits from a defined-benefit plan.
E) Employee of the month award at a company that makes life jackets.

Question 75

When an employer promises to set aside a certain amount of money for each employee each year, it has set up a

A) Defined-benefit plan.
B) Money-purchase plan.
C) Profit-sharing plan.
D) Salary-reduction plan.
E) Stock bonus plan.

Question 76

A salary-reduction plan is also known as a

A) 401(k) plan.
B) Money-purchase plan.
C) Profit-sharing plan.
D) Defined-benefit plan.
E) Stock bonus plan.

Question 77

In 1974 ERISA was passed. What does ERISA stand for?

A) Employee Retirement Income Security Act
B) Employer Retirement Income Security Act
C) Employee Retirement Investment Security Act
D) Employer Retiring Investment Stock Act
E) Entity Retirement Investment Security Act

Question 78

When an employer's contribution is used to buy stock in the company for its employees, it has a

A) 401(k) plan.
B) Money-purchase plan.
C) Profit-sharing plan.
D) Salary-reduction plan.
E) Stock bonus plan.

Question 79

Employees who were born in 1960 or later can receive full Social Security benefits beginning at age

A) 59½.
B) 62.
C) 65.
D) 67.
E) 70.

Question 80

When you retire, you will probably spend more money on

A) Clothing.
B) Transportation.
C) Taxes.
D) Health insurance.
E) All of these.