Question 1

With a lump-sum distribution of your retirement benefits,you must pay all of the income taxes on the entire amount up front.

Accepted Answer

A lump-sum distribution requires you to pay all of the income taxes on the entire amount at once.

Question 2

Which of the following statements about saving for college is not true?

Accepted Answer

This statement is not true. You do not have to open a 529 plan sponsored by the state in which you reside. You can invest in any state's plan, although certain tax benefits may apply if you invest in your own state's plan.

Question 3

What is the purpose of a rollover when it comes to retirement plans?

Accepted Answer

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Question 4

Jose does not have a retirement plan at work.He currently earns $30,000 in salary and is in the 15% marginal tax bracket.If he contributes the maximum contribution of $5,500 to his traditional IRA,how much money will he save on his income tax liability?

Accepted Answer

Jose can claim a tax deduction for the full amount of his traditional IRA contribution because he is not covered by a retirement plan at work. This would reduce his taxable income by $5,500, resulting in a tax savings of $825 (15% of $5,500). Therefore, option C is the correct answer. Option A is incorrect because traditional IRAs also offer tax deductions on contributions. Option B is incorrect because Jose's income level does qualify for tax deductions for a traditional IRA. Option D is incorrect because $5,000 is the maximum contribution limit for a SIMPLE IRA, not a traditional IRA.

Question 5

Your decision on what type of annuity to purchase will have a dramatic impact on the monthly payments you will receive upon retirement.

Accepted Answer

This statement is true. The type of annuity chosen determines the amount and frequency of the payments received during retirement. Different annuity types have varying payout rates and methods of payment, such as fixed, variable, or indexed annuities. Therefore, it is essential to research and compare various annuities before purchasing to ensure the chosen annuity aligns with your retirement goals and needs.

Question 6

What are the major differences between the new IRAs and the traditional IRA?

Accepted Answer

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Question 7

What does the term 'self directed' mean concerning retirement accounts?

Accepted Answer

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Question 8

The good thing about retirement is you no longer have to pay income taxes.

Accepted Answer

Retirement does not exempt you from paying income taxes. Although your income may be lower than before, you will still be taxed on any income you receive, including pensions, IRA withdrawals, and social security benefits.

Question 9

Fred and Carlie want to save some money for a down payment on a house.They figure it will take at least 10 years to save up enough money.Which of the following would be the best way for them to save this money?

Accepted Answer

The Roth IRA allows for tax-free withdrawals, as long as certain criteria are met, which makes it a good option for long-term savings goals like a down payment on a house. Unlike a Traditional IRA, contributions to a Roth IRA are made with after-tax dollars, so there are no tax advantages in the short-term, but the long-term benefits are significant. 529 Savings Plans and Keogh Plans are not the best choice for saving for a down payment on a house, as they are typically designed for other savings goals (such as education or retirement).

Question 10

Compare and contrast the defined-contribution plans.

Accepted Answer

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Question 11

How does one set up a qualified individual retirement account?

Accepted Answer

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Question 12

Alicia works two jobs and still makes very little income.Why is the Saver's Tax Credit a good idea for her?

Accepted Answer

The Saver's Tax Credit is a tax credit designed to help low- to moderate-income earners save for retirement. It can increase the taxpayer's tax refund, reduce the amount of income tax that they owe, and allow them to offset part of the first $2,000 that they contribute to an IRA or a 401(k) plan. Since Alicia works two jobs and makes very little income, the Saver's Tax Credit would be a good idea for her as it can provide her with a much-needed financial boost.

Question 13

Under a single life annuity,you receive a set monthly payment for the rest of your life.

Accepted Answer

Under a single life annuity, the payment is for the rest of the annuitant's life, hence it is a set monthly payment for the rest of their life.

Question 14

If you have a defined-benefit retirement plan through your place of employment,you are considered a(n)________;and as such,there is an income limit after which your IRA contributions are no longer tax deductible.

Accepted Answer

If you have a defined-benefit retirement plan through your place of employment, you are considered an active participant; therefore, there is an income limit after which your IRA contributions are no longer tax-deductible.

Question 15

Under the annuity for life policy your payments will continue to your beneficiaries upon your passing up until a specified time.

Accepted Answer

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Question 16

Why is it a wise idea to have 3 retirement plans in place?

Accepted Answer

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Question 17

June and Ward Cleaver are married.June works as an accountant and contributes to a 401(k)plan at work.Ward is a web page designer and works for himself from their home.What type of retirement plan would be an option for Ward?

Accepted Answer

All of the options listed are suitable retirement plans for self-employed individuals like Ward. A Keogh plan is designed for self-employed individuals and offers higher contribution limits. A SEP-IRA allows self-employed individuals to contribute a portion of their earnings to their retirement. An Individual IRA is available to anyone with earned income, including self-employed individuals.

Question 18

Are retirement plans different for the self-employed and employees of small businesses? Do you have to work full-time to qualify for one?

Accepted Answer

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Question 19

Through the single life annuity,once you reach the age of 100 the annuity payments cease.

Accepted Answer

The single life annuity can continue to make payments to the annuitant past the age of 100, depending on the terms of the contract.

Question 20

What are the advantages and disadvantages of a defined-contribution plan like a 401k?

Accepted Answer

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Quiz 15: Retirement Planning