Exam 14: Planning for Retirement

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Vested rights are [ forfeitable | nonforfeitable ] rights to receive some benefits in a pension plan.

Workers who elect to retire early-at age 72-will receive reduced Social Security retirement benefits.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Dan and Betty, both in their early 30s, want to withdraw $9,000 from their individual retirement account (IRA) to put toward the purchase of their first home. They [ will | will not ] have to pay a penalty.

Melissa's retirement plan is described in her employee handbook as follows: Noncontributory Cliff vesting (100%) after 3 years of full-time employment Monthly retirement benefits based on average salary over the last 3 years of employment and the total number of years worked for the company Which of the following statements about this retirement plan is true?

Marcia works for Telephonic Industries and participates in its supplemental retirement plan. Last year, the firm did not earn a profit. Therefore, it did not contribute to the supplemental retirement plan. This plan is a(n):

Jamie has worked for ABC Printing for 5 years. During this period, ABC Printing has contributed $25,000 to her noncontributory retirement plan. Assuming ABC uses cliff vesting, the longest period allowed, how much will Jamie be able to roll into an individual retirement account (IRA) if she leaves ABC Printing?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. If Melissa converts her traditional individual retirement account (IRA) to a Roth IRA, she [ will | will not ] have to pay taxes on any earnings and pretax contributions.

Planning for retirement over a series of short-run time frames requires:

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. The period during which annuity payments are made to an annuitant is called the [ distribution | accumulation ] period.

Profit-sharing plans enable employees to participate in the earnings of their employer.

Jacque Solis, a 38-year-old, is leaving her current job and would like to take a long vacation before a new job. She has $62,000 in an individual retirement account (IRA) that she would like to live on during this period. If she is in a 25% marginal tax bracket, how much will she have left after paying taxes and penalties?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. The initial estimates of retirement expenses and income should be done in [ today's | future ] dollars.

Which of the following is the principal source of income for the average retiree?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. For most people, participation in the Social Security system is [ voluntary | mandatory ].

Marshall will need $1,250,000 in his retirement fund in 40 years at the time of his retirement. If Marshall can earn 8% annually over this period, how much does Marshall need to save annually to meet that goal? (Show all work. Round the answer to the nearest dollar.)

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. [ 401(k) | 403(b) ] plans would be available for employees of a public school or university.

You would most likely purchase an annuity from a bank.

If a covered worker dies, the surviving spouse can receive full survivor's benefits from Social Security if he or she is at least 60 years of age or has a dependent and unmarried child of the deceased worker in his or her care.

The current trend in retirement plans is toward contributory plans.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. With a life annuity, period certain, a payment will be made for a stated period of time [ only to the annuitant if he or she lives | to someone else if the annuitant dies ].