Deck 14: Planning for Retirement

Question 1

When estimating retirement needs,you use the before-retirement investment return rate to adjust the current dollar shortfall to the actual shortfall at retirement.

Answer 1

False

Question 2

If one is unsure about the facts needed to estimate retirement needs,it is better to do nothing for a few years.

Answer 2

False

Question 3

Social Security benefits alone can usually fund a comfortable retirement.

Answer 3

False

Question 4

Social Security benefits may be available to dependents of the retired,disabled,or deceased worker.

Question 5

Even the best retirement plan needs to be reviewed every few years.

Question 6

Whether or not Social Security benefits will be subject to income taxes depends on the age of the recipient.

Question 7

Starting later in life and being too conservative when investing are both common retirement planning mistakes.

Question 8

It really makes little difference whether you start retirement savings at age 25 or at age 45.

Question 9

Government assistance,primarily Social Security,is the largest single source of income for the average retiree.

Question 10

To be eligible for Social Security retirement benefits,30 quarters of covered employment are generally needed.

Question 11

Having an accurate current income and expenditures statement would be very useful when calculating retirement needs.

Question 12

Most people are too conservative when investing their retirement funds.

Question 13

The first step in retirement planning is to identify retirement goals.

Question 14

Household expenses usually increase after retirement.

Question 15

Asset income is the principal source of retirement income for any individual.

Question 16

Integrating a retirement plan with Social Security benefits typically increases a retiree's retirement income.

Question 17

The third step in retirement planning is to formulate an investment program.

Question 18

In short-term retirement planning you estimate the required level of retirement income as a percentage of current income,fund that amount,and then adjust that number every 3 to 5 years.

Question 19

When one estimates retirement needs,one start with a projection of expenses stated in current dollars.

Question 20

In long-term retirement planning you decide on the required level of retirement income and funds needed over a 3 to 5 year series of intervals.

Question 21

More than 50 percent of all wage earners and salaried workers today are covered by some type of employer-sponsored retirement or profit-sharing plan.

Question 22

Social Security is meant to be a retirement income supplement.

Question 23

As Social Security covers more employees,employer-provided pensions and individual retirement plans are covering fewer.

Question 24

Reduced early retirement benefits can be received at age 62.

Question 25

Eligibility requirements for pension and retirement plans are typically determined by the employee's age and years of service.

Question 26

By itself,Social Security is sufficient to allow a worker and spouse to maintain their preretirement standard of living.

Question 27

Whether or not your Social Security benefits will be subject to income taxes depends on how much other income you received during the year.

Question 28

The current trend in retirement plans is toward contributory plans.

Question 29

The two most common sources of retirement income for most people are Social Security and pensions.

Question 30

A graded vesting schedule would legally have to give you some vesting rights if you worked at a company for 2 or more years.

Question 31

Once you begin drawing Social Security benefits,you will receive a fixed level of income for the remainder of your life.

Question 32

Upon retirement,married couples automatically receive 1.5 times the higher earning spouse's Social Security benefit.

Question 33

A graded vesting schedule would legally have to give you some vesting rights even though you worked at a company only 1 year.

Question 34

Qualified pension plans provide employees with tax benefits.

Question 35

A vested employee has a right to receive benefits from an employer's retirement funds even if he no longer works there.

Question 36

Reduced early retirement Social Security benefits can be received at age 60.

Question 37

For most workers,participation in the Social Security system is mandatory.

Question 38

With a noncontributory pension plan,the employer makes no financial contribution to the account.

Question 39

Depending on your age,Social Security retirement benefits could be reduced because of employment income.

Question 40

Self-employed workers pay twice as much for Social Security payroll taxes compared to employed workers.

Question 41

SEP plans are designed for self-employed individuals.

Question 42

One can contribute up to $10,000 annually to a 401(k)plan.

Question 43

The employers are cutting back on traditional pension plans and are offering defined benefit plans.

Question 44

403(b)and 457 plans are similar to 401(k)plans,but they are for employees of public and nonprofit organizations.

Question 45

Supplemental retirement plans are usually voluntary.

Question 46

The employee contributions limits for 401(k)plans are the same as those for 403(b)and 457 plans.

Question 47

Payments from a defined benefits plan will be determined by the investment performance of the retirement funds.

Question 48

For anyone born in 1960 or later,the Social Security Administration defines "full retirement age" as age 67.

Question 49

Like Keogh Plans,SEP plans are only for self-employed persons with no employees.

Question 50

Retirement plan portability is characterized by one's ability to move retirement plan investments from one investment to another investment while working for the company.

Question 51

Employees who have 401(k)plans also have to decide how to invest the funds in their plan.

Question 52

The advantage of profit-sharing plans that invest in their own company stock is that the minimum value of the stock is guaranteed.

Question 53

The amount accumulated in a defined contribution plan will be determined,at least in part,by the investment performance of the retirement funds.

Question 54

It is extremely wise to contribute at least as much to a 401(k)plan as one's employer will match.

Question 55

A company using cliff vesting would legally have to give you vesting rights if you worked at a company 3 or more years.

Question 56

The employers are cutting back on traditional pension plans and are offering 401(k)plans.

Question 57

A person who is self-employed on a part-time basis can qualify for a Keogh account.

Question 58

403(B)plans are the most common salary reduction plans.

Question 59

A 401(k)plan allows you to defer taxes on part of your income.

Question 60

Profit-sharing plans allow flexible employer contributions to the plan.

Question 61

You would most likely purchase an annuity from a bank.

Question 62

IRA withdrawals can be made without tax penalty any time after you reach the age of 59 1/2.

Question 63

ERISA was passed to protect employees participating in private employer retirement plans.

Question 64

Single premium annuities result in single payment of proceeds.

Question 65

Roth IRAs are the only IRAs that have the potential to produce tax-free earnings.

Question 66

Keogh and SEP plans provide tax deferred methods for the self-employed to save for their retirement.

Question 67

Variable annuities are usually better choices than fixed annuities for risk tolerant investors during the withdrawal phase of the annuity.

Question 68

Annuities may provide survivor's benefits.

Question 69

Anyone with earned income can contribute to some type of IRA.

Question 70

Early death results in the loss of annuity capital in a pure life annuity.

Question 71

Annuity proceeds are limited to the life of one person.

Question 72

Annuities may guarantee proceeds for a specific period or for a specific amount.

Question 73

The money you put into a Roth IRA is deductible from your taxable income in the year contributed.

Question 74

Miles has no retirement plan at work.Therefore,$2,000 contributed to his regular IRA will be tax deductible.

Question 75

An IRA is a type of an investment.

Question 76

You would most likely purchase an annuity from an insurance company.

Question 77

The cost of a life annuity is greater for females than it is for males.

Question 78

The period during which annuity payments are made is called the distribution period.

Question 79

Annuity premiums are paid to the insurance company during the accumulation period.

Question 80

Under 401(k)plan,individuals over 50 years old are allowed to contribute more than others.