Question 1

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.

Accepted Answer

According to IRS rules, you can withdraw contributions made to a Roth IRA at any time and for any reason without taxes or penalties. In addition, you may be able to withdraw earnings tax-free and penalty-free for a first-time home purchase, as long as you have had the account for at least five years.

Question 2

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

Accepted Answer

A plan for a nonprofit organization is called a Section 403(b) plan.

Question 3

When Don retires,his transportation expenses will likely increase.

Accepted Answer

Transportation and clothing expenses may decrease; nevertheless, recreation, health insurance, and medical care costs may increase.

Question 4

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

Accepted Answer

As Cindy continues to save and invest for her retirement, her net worth should increase over time. This is assuming she is making sound financial decisions and not incurring excessive debt or losses.

Question 5

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.

Accepted Answer

Each retiree needs enough money to suit his or her lifestyle. That amount will be different for each individual.

Question 6

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

Accepted Answer

These are the four primary sources of retirement income.

Question 7

Lora is a full-time employee at Harley-Davidson Inc.She should be eligible to participate in the company's 401(k)plan to save for retirement.

Accepted Answer

Full-time employees at Harley-Davidson Inc. are generally eligible to participate in the company's 401(k) plan, unless they are excluded based on certain criteria such as job classification or collective bargaining agreements.

Question 8

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

Accepted Answer

Other investments should also be included in the review of assets.

Question 9

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

Accepted Answer

A defined benefit plan is a type of retirement plan that specifies the benefits that an employee will receive upon retirement. The benefits are typically based on a formula that takes into account factors such as the employee's salary and years of service. In contrast, a defined contribution plan (such as a 401(k) plan) does not specify the retirement benefits and instead focuses on the contributions that are made to the plan.

Question 10

Social Security covers 97% of all workers in America.

Accepted Answer

According to the Social Security Administration, 97% of American workers are covered by Social Security.

Question 11

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

Accepted Answer

One should estimate high because of inflation.

Question 12

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

Accepted Answer

It is never too early to start planning for retirement..

Question 13

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

Accepted Answer

You may receive a reduced benefit at age 62, the full benefit at age 67, or an increased benefit at age 70.

Question 14

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

Accepted Answer

All of her medical expenses will likely not be covered by Medicare and her employer's health insurance plan.

Question 15

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

Accepted Answer

Taxes on an employer pension plan are tax-deferred.

Question 16

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

Accepted Answer

Others can receive a benefit, including widows or widowers and certain dependents of workers.

Question 17

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

Accepted Answer

A stock bonus plan is a type of defined contribution plan in which an employer makes contributions to employee accounts based on the company's stock performance.

Question 18

When Social Security was established,it was intended to provide less than 100% of one's retirement income.

Accepted Answer

Social Security was never intended to be the sole source of retirement income for individuals, but rather a supplemental source of income. It was designed to provide only a portion of an individual's retirement income.

Question 19

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

Accepted Answer

The SEP IRA (Simplified Employee Pension Individual Retirement Arrangement) is often considered the simplest type of retirement plan for self-employed individuals because it has minimal administrative requirements and allows for higher contributions than other types of plans.

Question 20

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

Accepted Answer

About one out of six receives a benefit.

Quiz 14: Starting Early: Retirement and Estate Planning