Deck 14: Starting Early: Retirement and Estate Planning

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.

Answer 1

True

Question 2

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

Answer 2

False

Question 3

When Don retires,his transportation expenses will likely increase.

Answer 3

False

Question 4

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

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.

Question 6

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

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.

Question 8

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

Question 9

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

Question 10

Social Security covers 97% of all workers in America.

Question 11

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

Question 12

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

Question 13

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

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.

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

Only one will may legally be written during a person's lifetime.

Question 22

A holographic will is legal in all states.

Question 23

A statutory will is one that is prepared with the help of an attorney.

Question 24

When Paul leaves his job at Acme Bending Company,he may choose to move his 401(k)balance to a plan called a rollover IRA.

Question 25

Your estate consists of everything you own.

Question 26

People should never dip into their savings in retirement.

Question 27

Estate planning is important for financial planning but not for retirement planning.

Question 28

Changes to a will should be written in ink on the will and initialed.

Question 29

Retirement means that you will never work again.

Question 30

The longer money accumulates tax-deferred,the bigger the benefit.

Question 31

A holographic will has a holographic seal to prove its authenticity.

Question 32

Every adult should have a written will.

Question 33

If you are single,you should not have beneficiaries.

Question 34

If you die intestate,your beneficiaries will receive your estate.

Question 35

A traditional marital share will has some assets going into a trust to provide your spouse lifelong income that will not be taxed.

Question 36

A stated amount will identifies the amount that will not go to your spouse.

Question 37

A traditional marital share will leaves everything to your spouse.

Question 38

If you are married,your estate will automatically pass to your spouse.

Question 39

If a will is found to be invalid,the result is called in-probate.

Question 40

Probate is a short,quick process.

Question 41

What steps should be taken in retirement planning?

A) Conduct a financial analysis.
B) Estimate retirement living expenses.
C) Exceed budget amounts for spending.
D) Conduct a financial analysis and estimate retirement living expenses.
E) All of these are correct.

Question 42

All of the following are examples of defined contribution plans except

A) Defined benefit plan.
B) Money-purchase plan.
C) Profit-sharing plan.
D) Salary reduction plan.
E) Stock bonus plan.

Question 43

When you retire,you will probably spend less money on

A) Clothing.
B) Health insurance.
C) Medical care.
D) Recreation.
E) All of these.

Question 44

An "average" older household spends most of its money on

A) Entertainment.
B) Food.
C) Housing.
D) Medical care.
E) Transportation.

Question 45

An "average" older household spends more money on

A) Clothing than on housing.
B) Contributions than on medical care.
C) Entertainment than on transportation.
D) Housing than on contributions, entertainment, and clothing combined.
E) Personal insurance than on food.

Question 46

According to the text,which of the following will probably be your most valuable asset at retirement?

A) Automobile.
B) House.
C) Investments.
D) Life insurance.
E) All of these.

Question 47

When planning for retirement,you should review

A) Housing.
B) Life insurance.
C) Investments.
D) Assets.
E) All of these.

Question 48

A power of attorney should handle the estate of a deceased person.

Question 49

An inter vivos trust takes effect while you're alive.

Question 50

When planning for retirement,

A) A mortgage should not affect your financial planning.
B) Investments should be evaluated to determine whether their income can help cover living expenses.
C) Keeping your current, large house will be cheaper to maintain than a move to a smaller house.
D) Life insurance should be avoided.
E) All of these are true.

Question 51

When thinking about retirement,which of the following is correct?

A) You'll spend less money when you retire.
B) Saving just a little bit won't help.
C) You can depend on Social Security and a company pension plan to pay your basic living expenses.
D) The earlier you start saving, the better.
E) Your pension benefits will increase to keep pace with inflation.

Question 52

An individual can give away up to $13,000 per year before paying an inheritance tax to the IRS.

Question 53

When planning for retirement,inflation

A) Decreases through retirement.
B) Should be ignored since it will have no effect on retirement funding.
C) Should be considered since income received earlier in retirement will buy more than the same amount received later in retirement.
D) Is unimportant since pension income does not change in retirement.
E) Should be recognized since it will increase the value of income received in retirement.

Question 54

A revocable trust cannot be changed or ended.

Question 55

When you retire,you will probably spend more money on

A) Clothing.
B) Transportation.
C) Taxes.
D) Health insurance.
E) All of these.

Question 56

Which of the following is not a source of retirement income?

A) Annuity.
B) Employer pension plan.
C) Personal retirement plan.
D) Public pension plan.
E) All of these are sources of retirement income.

Question 57

A testamentary trust takes effect while you're alive.

Question 58

A copy of your living will should be distributed to your family doctor.

Question 59

Another name for a will is a letter of last instruction.

Question 60

A disclaimer trust is appropriate for couples who do not yet have enough assets to need a credit shelter trust.

Question 61

Robert's wife Fiona does not work,and they file a joint tax return.Robert can contribute on behalf of Fiona into a

A) 401(k) plan.
B) Regular IRA.
C) Roth IRA.
D) SEP plan.
E) Spousal IRA.

Question 62

When an employer promises to set aside a certain amount of money for each employee each year,it has set up a

A) Defined benefit plan.
B) Money-purchase plan.
C) Profit-sharing plan.
D) Salary reduction plan.
E) Stock bonus plan.

Question 63

If you have fully funded your 401(k)and profit-sharing plans,you may choose to enhance your retirement savings by using this plan that allows you to withdraw money from the account tax-free and penalty-free after five years.

A) Annuity
B) Keogh plan
C) Roth IRA
D) SEP plan
E) Spousal IRA

Question 64

When planning for retirement,you should consider all of the following except

A) Checking that you are receiving all income to which you are entitled.
B) Evaluating all assets or valuables that you might be able to convert to cash or sources of income.
C) Receiving special discounts because of your retiree status or age.
D) Working during retirement.
E) Withdrawing all retirement savings within five years of retirement.

Question 65

Employees who were born in 1960 or later can receive full Social Security benefits beginning at age

A) 59½.
B) 62.
C) 65.
D) 67.
E) 70.

Question 66

Vesting is the right to receive the

A) Employer's contributions to a pension plan.
B) 401(k) contributions made by the employee.
C) Employee's contributions each pay period.
D) Portable employee benefits from a defined benefit plan.
E) Employee of the month award at a company that makes life jackets.

Question 67

Another name for a Coverdell account is a(n)

A) Education IRA.
B) Regular IRA.
C) Roth IRA.
D) SEP plan.
E) Spousal IRA.

Question 68

What percentage of American workers are covered by Social Security?

A) 15%
B) 50%
C) 78%
D) 97%
E) 100%

Question 69

Lawrence is self-employed and wants to have an investment funded by his company.He should set up a

A) 401(k) plan.
B) Regular IRA.
C) Roth IRA.
D) SEP plan.
E) Spousal IRA.

Question 70

An employer may choose to match money employees invest in a

A) 401(k) plan or a salary reduction plan.
B) Money-purchase plan.
C) Stock bonus plan.
D) Profit-sharing plan.
E) Individual retirement account.

Question 71

A salary reduction plan is also known as a

A) 401(k) plan.
B) Money-purchase plan.
C) Profit-sharing plan.
D) Salary reduction plan.
E) Stock bonus plan.

Question 72

In 1974 ERISA was passed.What does ERISA stand for?

A) Employee Retirement Income Security Act
B) Employer Retirement Income Security Act
C) Employee Retirement Investment Security Act
D) Employer Retiring Investment Stock Act
E) Entity Retirement Investment Security Act

Question 73

How is eligibility determined for receiving Social Security retirement benefits?

A) Marital status.
B) Credits.
C) Family size.
D) Salary.
E) All of these.

Question 74

Julian's annual contributions to his retirement are not tax-deductible,but his earnings accumulate tax-free.He is investing in a

A) 401(k) plan.
B) Regular IRA.
C) Roth IRA.
D) SEP plan.
E) Spousal IRA.

Question 75

Another name for an H.R.10 plan or a self-employed retirement plan is a

A) 401(k) plan.
B) Keogh plan.
C) Regular IRA.
D) SEP plan.
E) Spousal IRA.

Question 76

Jill is 45 years old and thinks that her future tax rate will be lower than what she currently pays,so she wants to defer her taxes on her contributions of up to $5,000 in 2012.Which plan would allow her to meet her goals?

A) 401(k) plan
B) Regular IRA
C) Roth IRA
D) SEP plan
E) Spousal IRA

Question 77

Which retirement plan specifies the benefits you'll receive at retirement age based on your total earning and years on the job?

A) Defined benefit plan.
B) Money-purchase plan.
C) Defined contribution plan.
D) Profit-sharing plan.
E) 401(k) plan.

Question 78

An employer's contribution will vary according to the company's profits in a

A) 401(k) plan.
B) Money-purchase plan.
C) Stock bonus plan.
D) Profit-sharing plan.
E) Salary reduction plan.

Question 79

When an employer's contribution is used to buy stock in the company for its employees,it has a

A) 401(k) plan.
B) Money-purchase plan.
C) Profit-sharing plan.
D) Salary reduction plan.
E) Stock bonus plan.

Question 80

Social Security

A) Covers about 97% of all American workers.
B) Offers full retirement benefits beginning at age 62.
C) Provides benefits only for retirees.
D) Provides 100% of retirement income for recipients.
E) Was established in 1947.