Deck 19: Retirement Planning

Question 1

To be eligible for Social Security retirement benefits on your own,you will need to have worked for at least 10 years,earned the minimum required income each year,and contributed to Social Security through payroll taxes.

Answer 1

True

Question 2

The Social Security system allows withdrawal of reduced benefits at an early retirement age.

Answer 2

True

Question 3

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

Answer 3

False

Question 4

Payments to Social Security are based on salary and made monthly by

A)employees only.
B)employers only.
C)both employees and employers.
D)everyone except self-employed people.

Question 5

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.

Question 6

The FICA taxes you pay include Social Security and

A)are intended to provide a comfortable lifestyle to retired individuals.
B)are matched two to one by your employer.
C)Medicare taxes shared by employees and employers.
D)are all capped at certain income levels.

Question 7

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

Question 8

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

Question 9

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

Question 10

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 11

The Social Security taxes you and your employer pay are put in your specific account for distribution to you at retirement.

Question 12

You can elect to receive Social Security retirement benefits

A)at the normal 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 money you make.

Question 13

Social Security is all but

A)a good starting point to plan for your retirement funding.
B)financed through working individuals and employers.
C)a government benefit paid to the elderly and disabled.
D)a specific savings plan to which individuals contribute and from which they benefit.

Question 14

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

Question 15

In the year 2005,the average monthly Social Security payment received by retired individuals was approximately

A)$730.
B)$874.
C)$959.
D)$1,123.

Question 16

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

Question 17

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

Question 18

Starting in 2003,you will need to be 67 to qualify for full retirement benefits.

Question 19

Social Security taxes are paid by both employees and employers,but Medicare taxes are paid by employers only.

Question 20

In retirement planning,which of the following is false?

A)Social Security is enough for retirement
B)IRAs are a good investment
C)Additional tax deferred investments are needed
D)You should have several pension investments

Question 21

The best way to save for retirement is to

A)wait until after the bills are paid.
B)have it deducted directly from your check.
C)take a loan so you will pay it back fast.
D)wait until you have accumulated the amount in your checking account.

Question 22

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

Question 23

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

Question 24

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

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

Question 25

Key retirement planning decisions are 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 26

In determining the amount of money 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 will live while retired.
D)inheritance from your children.

Question 27

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

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

Question 28

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 29

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 30

Retirement fund withdrawals are usually taxed as ________ income.

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

Question 31

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 32

When you contribute to a retirement account,it is usually with ________ dollars.

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

Question 33

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 34

Under a defined-contribution plan,there are specific guidelines for all but

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 35

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 36

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

A)Help you save
B)Generally of two types
C)Part of a good benefits package
D)A good place from which to borrow

Question 37

You get a job with the Allred Corporation.Their retirement plan will pay you $250 a month for each year you work for the company commencing 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 38

In the last 10 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 39

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 40

In the past 10 years or so,many employers have shifted from defined-benefit to defined-contribution retirement plans.

Question 41

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

A)Withdrawals before age 59-1/2 result in a 10 percent 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 paycheck before taxes are assessed

Question 42

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 43

What is the difference between a SEP and a Keogh retirement plan?

A)A Keogh plan does not allow early withdrawals without a penalty
B)Under a SEP,there is a maximum contribution of up to $42,000 allowed
C)Under a Keogh plan,a contribution of up to 25 percent of net income is allowed
D)A Keogh plan is always individually funded

Question 44

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

Question 45

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 46

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 high growth stocks
D)corporate bonds

Question 47

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

A)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 48

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

Question 49

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 50

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 51

Both the Keogh Plan and the Simplified Employee Plan (SEP)are available to self-employed individuals for retirement savings.

Question 52

New rules which apply to 401(k)s are

A)covered by the Tax Relief Act of 2001.
B)that contribution limits are decreasing yearly until 2006.
C)that individuals over age 40 are able to make additional yearly make-up contributions.
D)contributions will no longer be pre-tax dollars.

Question 53

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

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

Question 54

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

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

Question 55

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

Question 56

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

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

Question 57

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 58

An ESOP (Employee Stock Ownership Plan)is generally more risky than retirement plans invested in diversified mutual funds.

Question 59

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 60

The Keogh Plan is another retirement savings option,which can supplement Individual Retirement Accounts (IRAs)for employed persons.

Question 61

The tax characteristics are quite different between a Roth IRA and a traditional IRA in terms of initial contributions and withdrawals after retirement.

Question 62

A(n)________ annuity provides a specific return on your investment so you know how much money you will receive at a future point.

A)guaranteed
B)fixed
C)variable
D)insured

Question 63

IRA contribution limits and eligibility requirements are increasing over the next few years to encourage more retirement savings by individuals.

Question 64

Which of the following statements is not true of annuities?

A)They can provide annual payments for life
B)They provide no tax advantages
C)They have high fees
D)You can withdraw your investment as a lump sum

Question 65

Contributing to which of the following will give you an immediate tax benefit?

A)Traditional IRA
B)Roth IRA
C)Rollover IRA
D)Regular brokerage account

Question 66

The traditional IRA allows tax-deductible contributions of up to $4,000 for individuals who are not covered by employer-sponsored retirement plans or meet income qualifications if they have an employer plan.

Question 67

When deciding whether to invest in a Traditional IRA or a Roth IRA one would consider all except

A)the amount of income you expect to make at retirement.
B)whether you are covered by an employer-sponsored retirement plan and,if so,how much income you earn.
C)if you want to start drawing out the money at 70-1/2 or not.
D)whether you want the money to accumulate tax-free or not.

Question 68

An individual retirement account in which capital gains and earnings on your investments will not be taxed upon withdrawal at age 59-1/2 is a(n)________.

Question 69

Which of the following is not a characteristic of a traditional IRA?

A)For a married couple,the contribution limit doubles
B)Individuals over 50 are allowed to make additional catch-up contributions
C)Everyone is eligible regardless of income.
D)10 percent penalty normally applies if funds are withdrawn before age 59-1/2.

Question 70

Individuals normally incur a tax penalty if funds are drawn from an IRA before the age of 59-1/2.

Question 71

Generally,there are tax penalties for ________ withdrawals from a traditional IRA.

A)both early and late
B)only early
C)only late
D)all

Question 72

Which of the following is not a result of the Tax Relief Act of 2001 regarding IRAs?

A)Annual contribution limit will increase gradually
B)The level will be adjusted periodically for inflation
C)Individuals over age 50 will be able to make larger contributions
D)Penalties for early withdrawal are being phased out

Question 73

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

Question 74

A(n)________ is a financial contract that provides annual payments until a specified year or until one's death.

A)savings account
B)annuity
C)mortgage
D)trust

Question 75

An annuity is similar to an IRA in that money accumulates tax-free during the build-up period.

Question 76

A traditional IRA requires an individual to make withdrawals after age 70-1/2,whereas a Roth IRA does not.

Question 77

With which of the following retirement plans will your withdrawals not be subject to taxes if you are over 59-1/2 and have had the account for at least five years?

A)Rollover IRA
B)Roth IRA
C)Traditional IRA
D)Keogh plan

Question 78

Contributions to a Roth IRA are not tax deductible initially and,therefore,very few people are interested in using a Roth IRA.

Question 79

If you are about to invest in a stock that has excellent growth potential over the next few years and the investment is to be part of your retirement,the best place to do this would be in a

A)bank trust account.
B)Roth IRA.
C)rollover IRA.
D)regular brokerage account.

Question 80

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

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