Question 1

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

Accepted Answer

A fixed annuity provides a specific return on your investment, ensuring you know the exact amount of money you will receive in the future.

Question 2

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

Accepted Answer

An annuity is a financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees. It is designed to provide payments at regular intervals, either for a specified period of time or for the lifetime of the annuitant.

Question 3

In estimating the future value of your retirement investments, you would consider all of the following, except

Accepted Answer

The age at which your spouse will retire is not directly related to the calculation of the future value of your retirement investments. The future value is determined by the amount invested, the annual return, and the number of years you will invest.

Question 4

A surrender charge

Accepted Answer

A surrender charge is a fee or penalty charged by an insurance or annuity company for withdrawing funds from a policy or contract earlier than a specified period, often within the first several years of the agreement.

Question 5

The fees charged by financial institutions for annuities may include all of the following, except

Accepted Answer

No-load annuities are specifically designed to not have any sales charges or commissions, which is what distinguishes them from other annuity products that may have various fees such as management fees, surrender charges, and insurance fees or commissions.

Question 6

If an employer matches contributions to a 401(k) up to a maximum of $1,800 (employer and employee each contribute $1,800) and an additional $2,200 is contributed by the employee, how much will the employee have in 35 years if the investments in the 401(k) earn an average of 9%?

Accepted Answer

The total annual contribution is $3,600 ($1,800 employer + $1,800 employee) plus an additional $2,200 by the employee, totaling $5,800. Using the future value of an annuity formula with a 9% return over 35 years, the future value is approximately $1,251,122.

Question 7

Use the following two columns of items to answer the matching questions below:
-annuity
A)a financial contract that provides annual payments over a specified period
B)a fee imposed on money withdrawn from an annuity

Accepted Answer

The answer of Use the following two columns of items...

Question 8

All of the following is good advice on retirement planning and savings, except

Accepted Answer

Starting early, taking advantage of employer plans, and utilizing tax savings are all sound strategies for retirement planning. However, relying solely on Social Security is not advisable as it may not be sufficient to cover all retirement expenses. It's important to have additional savings or income sources.

Question 9

What three factors do you need to calculate how much money you will accumulate by retirement?

Accepted Answer

The answer of What three factors do you need to...

Question 10

Use the following two columns of items to answer the matching questions below:
-surrender charge
A)a financial contract that provides annual payments over a specified period
B)a fee imposed on money withdrawn from an annuity

Accepted Answer

The answer of Use the following two columns of items...

Question 11

How much would need to be contributed each year for 30 years to accumulate $1,300,000 assuming a return on the investments of 8%? Round to the nearest dollar if needed.

Accepted Answer

To solve this, we use the formula for the future value of a series of annuities: FV = P * [((1 + r)^n - 1) / r], where FV is the future value ($1,300,000), P is the annual payment, r is the annual interest rate (8% or 0.08), and n is the number of payments (30 years). Rearranging the formula to solve for P gives us P = FV / [((1 + r)^n - 1) / r]. Plugging in the numbers: P = $1,300,000 / [((1 + 0.08)^30 - 1) / 0.08] ≈ $11,476.

Question 12

Describe two types of annuities.

Accepted Answer

The answer of Describe two types of annuities....

Question 13

If an employee earning $75,000 per year annually for 20 years contributes 6% to their 401(k) plan and the employer matches 3%, plus contributes $5000 to a Roth IRA annually for 20 years, how much money will the employee have at the end of 20 years assuming all funds are invested at 6% per annum?

Accepted Answer

The correct answer is A because the employee will have contributed $30,000 (6% of $75,000 for 20 years) to their 401(k) plan, and the employer will have contributed $15,000 (3% of $75,000 for 20 years) plus $100,000 ($5,000 per year for 20 years) to the Roth IRA. The total amount contributed will be $145,000. Assuming a 6% annual return, the total value of the investments at the end of 20 years will be $432,231.

Question 14

How much could a self-employed individual earning $187,000 per year accumulate in a SEP plan if the individual invests the maximum allowed for 20 years at a return of 9%? Round to the nearest dollar if needed.

Accepted Answer

The answer of How much could a self-employed individual earning...

Question 15

List three sources of income when you retire.

Accepted Answer

The answer of List three sources of income when you...

Quiz 19: Retirement Planning