Question 1

____ means that on termination of employment,an employee can keep his or her savings in a tax-sheltered account by transferring the retirement funds from the employer's account to another account without penalty.

Accepted Answer

Portability refers to the ability of an employee to transfer their retirement savings or benefits from one employer's plan to another's or into an individual retirement account (IRA) without losing their accumulated benefits or facing penalties. This is crucial for maintaining the continuity of retirement savings, especially for employees who change jobs frequently.

Question 2

In a tax-sheltered retirement plan which of the following is always true?

Accepted Answer

The answer of In a tax-sheltered retirement plan which of...

Question 3

The best way to get an estimate of future Social Security benefits is to

Accepted Answer

Ordering your Social Security estimate online from the Social Security Administration is the most accurate and up-to-date way to get an estimate of your future Social Security benefits. Contacting an accountant or calculating it based on your own earnings data may not take into account all factors and may result in an inaccurate estimate. Looking it up in the Social Security Administration manual may not include updated information or factors specific to your individual case.

Question 4

The age at which retirees born in 1960 or later will be able to receive full Social Security benefits

Accepted Answer

The full retirement age for those born in 1960 or later is 67. While people can start receiving reduced benefits as early as age 62, waiting until full retirement age results in a higher monthly benefit.

Question 5

To account for inflation,the income you earn over the years is ____ in order to calculate your Social Security benefits.

Accepted Answer

To account for inflation, the income earned over the years is indexed, which means that it is adjusted to reflect changes in the general level of prices. This adjustment is important to ensure that Social Security benefits keep up with the rising cost of living over time.

Question 6

Financial experts estimate that retirees need at least ____ percent of their preretirement income to live comfortably.

Accepted Answer

Financial experts commonly estimate that retirees need between 80 to 100 percent of their preretirement income to maintain their standard of living and live comfortably in retirement. This range accounts for the reduction in certain expenses but also the potential increase in others, such as healthcare.

Question 7

You can set up your retirement plan account to go to a designated heir upon your death outside of your will by completing a

Accepted Answer

Completing a beneficiary designation form is the best choice because it allows you to specifically designate who will receive your retirement plan account upon your death. This designation will override any conflicting instructions in your will, so it is important to keep your beneficiary designation form up-to-date to ensure your assets are distributed according to your wishes.

Question 8

Which descriptor below indicates that the funds in that type of retirement account will be eligible for a tax-free withdrawal?

Accepted Answer

Roth retirement accounts allow for tax-free withdrawals in retirement, as contributions to the account are made with after-tax dollars.

Question 9

The amount of one's retirement account value depends directly on the success of investments in the retirement fund if your retirement account is a ____ retirement plan.

Accepted Answer

In a defined-contribution retirement plan, the amount of money in the account at retirement depends on the success of the investments made by the individual or their employer on their behalf. The contributions made are defined, but the final amount is not guaranteed like a defined-benefit plan. Cash-balance plans are a type of defined-benefit plan that can provide a guaranteed benefit based on a formula, while vested refers to an employee's right to receive a promised benefit from their employer.

Question 10

The primary purpose of the Employee Retirement Income Security Act (ERISA)is to

Accepted Answer

The primary purpose of the Employee Retirement Income Security Act (ERISA) is to regulate employer-sponsored pension plans. ERISA sets minimum standards for employer-sponsored retirement plans and provides guidelines for the management of plan assets to ensure that beneficiaries receive their promised benefits. ERISA also provides protections for plan participants and beneficiaries, including the right to sue for benefits and fiduciary breaches, and mandates reporting and disclosure requirements for plan sponsors. ERISA does not require employer-sponsored pension plans for large companies, nor does it collect taxes on retirement benefits.

Question 11

Upon termination of employment,an employee can keep his or her savings in a tax-sheltered account by transferring the retirement funds from the employer's account to another account without penalty in a protection called

Accepted Answer

The protection being described is portability, which allows an employee to transfer retirement funds from their employer's account to another account without penalty upon termination of employment. Severance refers to the pay or benefits an employee may receive upon termination, vesting is the process of earning ownership of an employer's contributions to a retirement plan, and sheltering generally refers to tax benefits of retirement accounts.

Question 12

The main purpose of using a tax-sheltered retirement account to invest for retirement is to

Accepted Answer

The main purpose of using a tax-sheltered retirement account is to allow you to accumulate more money for retirement without having to pay taxes on the earnings until you withdraw the money in retirement. This allows your money to grow faster and potentially reach a higher value than if it were invested in a taxable account.

Question 13

How many years are you allowed for correcting any errors in your earnings history as listed in your Social Security Estimate?

Accepted Answer

The answer of How many years are you allowed for...

Question 14

Women need to save more money for retirement than men because they

Accepted Answer

Women tend to receive lower Social Security benefits than men due to earning less over their lifetime, and they are less likely to have access to employer-sponsored retirement plans. Additionally, women tend to live longer than men, which means they will need more retirement savings to cover their longer retirement years. Therefore, women need to save more money for retirement than men.

Question 15

Employer-sponsored retirement plans that are approved by the IRS are said to be

Accepted Answer

Retirement plans that are approved by the IRS are called qualified plans. These plans have certain tax benefits and must meet certain requirements set forth by the government, such as nondiscrimination testing and contribution limits.

Question 16

If deductible,the funds deposited into a tax-sheltered retirement account are

Accepted Answer

Deposits into a tax-sheltered retirement account, such as a traditional IRA or 401(k), are typically made with pretax money, meaning the funds are not subject to income tax at the time they are deposited. However, they will be subject to taxation when they are withdrawn in retirement.

Question 17

Making tax-deferred deposits into a retirement account means that the funds are

Accepted Answer

Making tax-deferred deposits into a retirement account means that the funds are not taxed when deposited but taxed when withdrawn. This allows individuals to save money on taxes during their working years and potentially have a lower tax rate in retirement when they withdraw the funds.

Question 18

When estimating retirement needs,you should estimate

Accepted Answer

Estimating retirement needs requires considering all of these factors: retirement expenses, sources of retirement income, and additional retirement savings needed to reach your goals. By doing so, you can create a comprehensive plan that takes into account your financial obligations and goals for your retirement years.

Question 19

Translating your current required annual retirement savings amount into a percentage of total income and then investing that same percentage throughout your working life will help you build a retirement savings fund that keeps up with
Social Security.

Accepted Answer

Investing a percentage of total income that is equivalent to the required annual retirement savings amount will help the savings keep up with inflation, ensuring that the purchasing power of the savings is not eroded over time.

Question 20

​An employer-sponsored retirement plan in which the employer or the employee puts money in a retirement account for the employee,and the amount of the retirement benefit depends on how well the investment yields,is called a

Accepted Answer

The description matches that of a defined-contribution plan, where the amount of retirement benefit depends on the contributions made and the investment performance of those contributions.

Quiz 17: Retirement Planning