Deck 17: Retirement Planning

Question 1

To receive Social Security benefits,a person must have earned a specified number of credits.

Answer 1

True

Question 2

Social Security is funded via the federal income tax.

Answer 2

False

Question 3

All of your employment income is subject to the Medicare tax.

Answer 3

True

Question 4

Through the Social Security system,current workers support current retirees.

Question 5

Women are less likely to get retirement benefits from their employers.

Question 6

The number of credits you have earned determines your eligibility for Social Security benefits.

Question 7

Experts estimate that retirees need approximately 50 percent of their preretirement income to live comfortably.

Question 8

Most workers pay a 7.65 percent FICA Social Security tax matched by an equal tax paid by their employer.

Question 9

The number of credits you earn determines the dollar amount of your Social Security benefits.

Question 10

Social Security taxes withheld from an employee's paycheck are commonly called FICA taxes.

Question 11

The more you save for your own retirement,the lower the proportion of your overall retirement income that will need to come from Social Security retirement benefits.

Question 12

Retirement is defined as the time period when you stop all work for pay.

Question 13

The dollar amount of Social Security benefits received depends on the level of earnings during the working years.

Question 14

If you save well for your retirement,Social Security will only contribute about 40 percent of your retirement income.

Question 15

For Social Security purposes,the full-benefit retirement age is 67 for those born in 1960 or later.

Question 16

You must work forty years to be fully insured under Social Security.

Question 17

Self-employed workers pay a Social Security tax rate that is twice that paid by employees because contributions of self-employed workers are not matched by an employer.

Question 18

Wage earners pay Social Security FICA taxes on wage income up to the maximum amount to which the full Social Security tax rate is applied.

Question 19

All of your employment income is subject to the FICA tax.

Question 20

Retirement is the time in life when the major sources of income change from earned income to employer-based retirement benefits,private savings and investments,income from Social Security,and perhaps part-time employment.

Question 21

You can choose to start receiving retirement benefits as early as age 62,regardless of your full-benefit retirement age.If you do so,however,your basic retirement benefit will be permanently reduced by as much as thirty percent.

Question 22

Electing to receive Social Security retirement benefits prior to age 67 can result in reduced benefits if your earmed income from other sources exceeds $15,120.

Question 23

Persons who are either fully insured or currently insured are eligible to receive Social Security retirement benefits.

Question 24

One can collect Social Security retirement benefits based on an ex-spouse's earnings if the marriage lasted at least ten years and both ex-spouses are at least 60 years old.

Question 25

For Social Security purposes,fully insured status implies that the worker will receive the maximum dollar amount of benefits allowable.

Question 26

When a worker retires,other members of his or her immediate family may also be eligible to receive Social Security retirement benefits.

Question 27

For Social Security purposes,the full-benefit retirement age is 67 for those born prior to 1960.

Question 28

You can automatically save more for retirement as your income increases by setting your savings target as a percentage of income rather than a specific dollar amount.

Question 29

For Social Security purposes,workers younger than age 72 who have fewer than six credits of work experience are transitionally insured.

Question 30

It is very difficult to estimate your likely future Social Security retirement benefit.

Question 31

All funds in a tax-sheltered retirement plan are taxed every five years.

Question 32

Tax-sheltered retirement accounts allow a certain portion of your income to remain exempt from income taxes for the current year.

Question 33

Dennis Ackley,an innovator in retirement education,suggests looking at your retirement as something you "buy" on the layaway plan.

Question 34

Electing to receive Social Security retirement benefits prior to age 67 increases the monthly benefit received.

Question 35

You immediately benefit from putting money in a tax-sheltered retirement account because you can make the deposits with after-tax money.

Question 36

Your earnings subject to Social Security taxes in your early years will be indexed for inflation when calculating your benefit amount at retirement.

Question 37

If you were born in 1994,you will reach your full-benefit retirement age for Social Security in 2061.

Question 38

When estimating your retirement savings goal in today's dollars,the amount saved must be higher to adjust for inflation.

Question 39

A retirement savings goal is the total amount of accumulated savings and investments needed to meet your living expenses after retirement.

Question 40

Putting money into tax-sheltered retirement plans is the single smartest idea in personal financial planning.

Question 41

With most tax-sheltered accounts other than Roth-type accounts taxes are merely deferred rather than eliminated altogether.

Question 42

In an employer-sponsored retirement plan,the employee should make at least the contributions needed to receive the maximum employer matching contribution provided.

Question 43

People who start saving and investing for retirement during their twenties should aim to reserve 9 to 12 percent of their pretax income every year.

Question 44

Employees of small firms are more likely to be covered by pension plans than employees of large firms.

Question 45

Employer-sponsored retirement plans that have been approved by the IRS for tax-sheltering are said to be "qualified."

Question 46

Those who have delayed planning for retirement until their late thirties or forties should begin investing at least 35 percent annually in an effort to catch up.

Question 47

A salary-reduction plan has tax benefits to the employee because the contributed income is not included in the employee's salary.

Question 48

The funds contributed into a defined-contribution plan are held by the employer until withdrawn by the employee.

Question 49

Employer-sponsored retirement plans have portability,allowing you to transfer the funds to another employer or self-managed retirement account when you leave employment.

Question 50

Because each individual employee makes his or her own investment decisions,a salary-reduction plan could be described as a self-directed retirement plan.

Question 51

Employers usually offer employees retirement plans because the promise of a secure retirement represents an effective way to recruit and keep valuable employees.

Question 52

When you open a retirement account,you must sign a beneficiary designation form.This designation does not take precedence over provisions stated in a will.

Question 53

ERISA requires that employers offer a retirement plan.

Question 54

You decide how to invest the money in a defined-contribution retirement plan.

Question 55

Tax-sheltered retirement accounts allow investment earnings to grow more quickly than traditional accounts because taxes do not have to be paid on earnings until the money is withdrawn.

Question 56

Most types of tax-sheltered retirement accounts are tax-deferred rather than tax-free at withdrawal.

Question 57

A matching contribution can only be partial.

Question 58

You will earn money each year off your tax-deferred retirement accounts without having to pay taxes until the funds are withdrawn.

Question 59

If you wait 7-9 years after starting your first full-time to begin saving for retirement,your nest egg at age 67 will likely be about one-half what it would have been if you had started right away.

Question 60

A tax-free withdrawal occurs any time you withdraw funds from a retirement account once you reach age 65.

Question 61

Early retirement from an employer would be most beneficial for a person expecting to live longer than the average life expectancy.

Question 62

A direct trustee-to-trustee rollover will avoid the IRS's 20 percent withholding on retirement rollover.

Question 63

To avoid income tax withholding on funds being transferred into a rollover IRA,the payment must be made directly to the employee.

Question 64

If all the funds are removed or transferred from a retirement account at one time after changing employers or taking retirement,the disbursement is called a lump-sum distribution.

Question 65

If you inherit a 401(k)retirement account from someone other than a spouse you can avoid taxes by transferring the balance directly into an inherited IRA in your name.

Question 66

If the spouse waives his or her survivor's benefits in a defined-benefit retirement plan,the worker's retirement benefit will increase.

Question 67

Cash-balance pension plans are managed like a defined-benefit plan with employers funding a program to provide retirement benefits based on a years-of-service formula.

Question 68

There are limits on the maximum amount of income an employee may contribute to an employer-sponsored plan.

Question 69

The maximum permissible employer-sponsored retirement plan contribution for most people is about $25,000.

Question 70

Important factors in determining the amount received from a defined-benefit pension plan are number of years worked in the firm and average income.

Question 71

Pensions are paid to retirees by organizations such as the Social Security Administration.

Question 72

Cliff vesting can result in 100 percent vesting after 3 years of employment.

Question 73

An ex-employee may transfer his or her retirement money invested in the former employer's plan to a new employer's retirement plan.

Question 74

Every type of employer-sponsored plan is open to any group of workers.

Question 75

People who expect to live for a longer period than the average expectancy may achieve a better financial position by taking employer pension benefits early.

Question 76

Employee contributions to a retirement plan are immediately vested and always belong to the employee.

Question 77

Vesting requirements apply to both employer and employee contributions into a retirement plan.

Question 78

Rollover IRAs can be used to shelter funds being distributed from other types of retirement plans.

Question 79

People receiving either survivor's or disability benefits from an employer are entitled to an amount equal to the full retirement amount.

Question 80

The majority of new employer-sponsored pension plans are defined-benefit plans.