Question 1

Why have employers switched to defined-contribution plans instead of defined-benefits plans for most companies?

Accepted Answer

A)  They remove the financial risk for future pension costs away from the company and pass it on to the employee. 
B)  The employer doesn't want to do any bookkeeping for the retirement plan. 
C)  Employers care deeply about what employees eventually receive from their plan. 
D)  All of the above are correct. 
E)  Only A and B are correct. 
A)  They remove the financial risk for future pension costs away from the company and pass it on to the employee. 
B)  The employer doesn't want to do any bookkeeping for the retirement plan. 
C)  Employers care deeply about what employees eventually receive from their plan. 
D)  All of the above are correct. 
E)  Only A and B are correct. A

Question 2

How is the size of a person's Social Security retirement benefits determined?

Accepted Answer

A)  It depends on the number of credits earned in a person's lifetime. 
B)  It depends on the average level of earning over a person's lifetime. 
C)  It depends on the number of years a person has paid Social Security taxes. 
D)  All of the above are correct. 
E)  Only B and C are correct. 
A)  It depends on the number of credits earned in a person's lifetime. 
B)  It depends on the average level of earning over a person's lifetime. 
C)  It depends on the number of years a person has paid Social Security taxes. 
D)  All of the above are correct. 
E)  Only B and C are correct. D

Question 3

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

Accepted Answer

A) True 
 B)False  False

Question 4

When an employer makes pension fund contributions directly to a trustee who holds and invests those funds, the plan is said to be a(n) ________.

Accepted Answer

A)  defined-contribution plan 
B)  funded pension plan 
C)  unfunded pension plan 
D)  cash balance plan 
E)  none of the above 
A)  defined-contribution plan 
B)  funded pension plan 
C)  unfunded pension plan 
D)  cash balance plan 
E)  none of the above

Question 5

Brian works for Walmart. Walmart contributes company stock into his retirement account instead of cash. This is called a(n) ________.

Accepted Answer

A)  ESOP 
B)  thrift 
C)  EFLP 
D)  stock-contribution plan 
E)  none of the above 
A)  ESOP 
B)  thrift 
C)  EFLP 
D)  stock-contribution plan 
E)  none of the above

Question 6

With a traditional IRA and a Roth IRA, you can make withdrawals at any time with no penalties.

Accepted Answer

A) True 
 B)False

Question 7

To avoid paying income taxes on your lump-sum distribution, you could roll it over into a qualified IRA.

Accepted Answer

A) True 
 B)False

Question 8

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

A)  Keogh plan 
B)  SEP-IRA plan 
C)  Individual IRA 
D)  All of the above are correct. 
E)  Only A and C are correct. 
A)  Keogh plan 
B)  SEP-IRA plan 
C)  Individual IRA 
D)  All of the above are correct. 
E)  Only A and C are correct.

Question 9

Under a defined-contribution plan, your employer alone or you and your employer together contribute directly to an individual account set aside specifically for you.

Accepted Answer

A) True 
 B)False

Question 10

Relative to insurance, when a payout arrangement is made in which one receives all benefits in a single payment, this is called a ________.

Accepted Answer

A)  cash payout 
B)  lump-sum option 
C)  single distribution plan 
D)  point plan 
E)  none of the above 
A)  cash payout 
B)  lump-sum option 
C)  single distribution plan 
D)  point plan 
E)  none of the above

Question 11

You and your spouse both have good retirement plans through work and you both receive good Social Security checks based on your own incomes. If your goal is to maximize the size of your annuity check every month, which option should you choose?

Accepted Answer

A)  Single Life Annuity 
B)  Annuity for Life or Certain Period 
C)  Joint and Survivor Annuity 
D)  All annuities have equal payment amounts, so it doesn't matter which you choose. 
A)  Single Life Annuity 
B)  Annuity for Life or Certain Period 
C)  Joint and Survivor Annuity 
D)  All annuities have equal payment amounts, so it doesn't matter which you choose.

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

A)  Because it will possibly increase her tax refund. 
B)  Because it will possibly reduce the amount of income tax that she owes. 
C)  It allows her to offset part of the first $2,000 that she can contribute to an IRA or a 401(k) plan. 
D)  All of the above are correct. 
E)  Only A and B are correct. 
A)  Because it will possibly increase her tax refund. 
B)  Because it will possibly reduce the amount of income tax that she owes. 
C)  It allows her to offset part of the first $2,000 that she can contribute to an IRA or a 401(k) plan. 
D)  All of the above are correct. 
E)  Only A and B are correct.

Question 13

A joint and survivor annuity provides payments for both you and your spouse.

Accepted Answer

A) True 
 B)False

Question 14

Consistently saving a little money for retirement when you are in your twenties is much better than saving a lot more money when you are in your fifties.

Accepted Answer

A) True 
 B)False

Question 15

Once May Lou starts receiving her $1,200 monthly annuity payments she will pay income tax as if the annuity were ________.

Accepted Answer

A)  tax-deferred 
B)  tax-sheltered 
C)  tax-exempt 
D)  tax-free income 
E)  normal income 
A)  tax-deferred 
B)  tax-sheltered 
C)  tax-exempt 
D)  tax-free income 
E)  normal income

Question 16

Tran is employed at a company that annually contributes anywhere from 2% up to 12% of his salary into his retirement plan, depending on how good the company's financials were that year. This type of contribution plan is a(n) ________ plan.

Accepted Answer

A)  401(k) 
B)  ESOP 
C)  profit-sharing 
D)  performance 
A)  401(k) 
B)  ESOP 
C)  profit-sharing 
D)  performance

Question 17

You are participating in a pension plan where the company's contributions vary from year to year, depending on the firm's performance. This is an example of a(n) ________.

Accepted Answer

A)  variable contribution plan 
B)  earnings establishment plan 
C)  performance retirement plan 
D)  profit-sharing plan 
E)  none of the above 
A)  variable contribution plan 
B)  earnings establishment plan 
C)  performance retirement plan 
D)  profit-sharing plan 
E)  none of the above

Question 18

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

A)  restricted participant 
B)  deactivated participant 
C)  active participant 
D)  All of the above are correct. 
E)  Only A and C are correct. 
A)  restricted participant 
B)  deactivated participant 
C)  active participant 
D)  All of the above are correct. 
E)  Only A and C are correct.

Question 19

The Federal Insurance Contributions Act isn't an investment, but rather a mandatory insurance plan that one pays into through salary deductions.

Accepted Answer

A) True 
 B)False

Question 20

The only difference between a defined-benefit plan and a defined-contribution retirement plan is the tax deduction for the defined-contribution plan.

Accepted Answer

A) True 
 B)False

Why have employers switched to defined-contribution plans instead of defined-benefits plans for most companies?

How is the size of a person's Social Security retirement benefits determined?

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

When an employer makes pension fund contributions directly to a trustee who holds and invests those funds, the plan is said to be a(n) ________.

Brian works for Walmart. Walmart contributes company stock into his retirement account instead of cash. This is called a(n) ________.

With a traditional IRA and a Roth IRA, you can make withdrawals at any time with no penalties.

To avoid paying income taxes on your lump-sum distribution, you could roll it over into a qualified IRA.

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?

Under a defined-contribution plan, your employer alone or you and your employer together contribute directly to an individual account set aside specifically for you.

Relative to insurance, when a payout arrangement is made in which one receives all benefits in a single payment, this is called a ________.

You and your spouse both have good retirement plans through work and you both receive good Social Security checks based on your own incomes. If your goal is to maximize the size of your annuity check every month, which option should you choose?

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

A joint and survivor annuity provides payments for both you and your spouse.

Consistently saving a little money for retirement when you are in your twenties is much better than saving a lot more money when you are in your fifties.

Once May Lou starts receiving her $1,200 monthly annuity payments she will pay income tax as if the annuity were ________.

Tran is employed at a company that annually contributes anywhere from 2% up to 12% of his salary into his retirement plan, depending on how good the company's financials were that year. This type of contribution plan is a(n) ________ plan.

You are participating in a pension plan where the company's contributions vary from year to year, depending on the firm's performance. This is an example of a(n) ________.

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.

The Federal Insurance Contributions Act isn't an investment, but rather a mandatory insurance plan that one pays into through salary deductions.

The only difference between a defined-benefit plan and a defined-contribution retirement plan is the tax deduction for the defined-contribution plan.

The Financial Planning Process

Measuring Your Financial Health and Making a Plan

Understanding and Appreciating the Time Value of Money

Tax Planning and Strategies

Cash or Liquid Asset Management

Using Credit Cards: The Role of Open Credit

Using Consumer Loans: The Role of Planned Borrowing

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

Investment Basics

Securities Markets

Investing in Stocks

Investing in Bonds and Other Alternatives

Mutual Funds: An Easy Way to Diversify

Estate Planning: Saving Your Heirs Money and Headaches

Financial Life Events Fitting the Pieces Together

Filters

Exam 16: Retirement Planning

Why have employers switched to defined-contribution plans instead of defined-benefits plans for most companies?

How is the size of a person's Social Security retirement benefits determined?

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

When an employer makes pension fund contributions directly to a trustee who holds and invests those funds, the plan is said to be a(n) ________.

Brian works for Walmart. Walmart contributes company stock into his retirement account instead of cash. This is called a(n) ________.

With a traditional IRA and a Roth IRA, you can make withdrawals at any time with no penalties.

To avoid paying income taxes on your lump-sum distribution, you could roll it over into a qualified IRA.

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?

Under a defined-contribution plan, your employer alone or you and your employer together contribute directly to an individual account set aside specifically for you.

Relative to insurance, when a payout arrangement is made in which one receives all benefits in a single payment, this is called a ________.

You and your spouse both have good retirement plans through work and you both receive good Social Security checks based on your own incomes. If your goal is to maximize the size of your annuity check every month, which option should you choose?

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

A joint and survivor annuity provides payments for both you and your spouse.

Consistently saving a little money for retirement when you are in your twenties is much better than saving a lot more money when you are in your fifties.

Once May Lou starts receiving her $1,200 monthly annuity payments she will pay income tax as if the annuity were ________.

Tran is employed at a company that annually contributes anywhere from 2% up to 12% of his salary into his retirement plan, depending on how good the company's financials were that year. This type of contribution plan is a(n) ________ plan.

You are participating in a pension plan where the company's contributions vary from year to year, depending on the firm's performance. This is an example of a(n) ________.

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.

The Federal Insurance Contributions Act isn't an investment, but rather a mandatory insurance plan that one pays into through salary deductions.

The only difference between a defined-benefit plan and a defined-contribution retirement plan is the tax deduction for the defined-contribution plan.

The Financial Planning Process

Measuring Your Financial Health and Making a Plan

Understanding and Appreciating the Time Value of Money

Tax Planning and Strategies

Cash or Liquid Asset Management

Using Credit Cards: The Role of Open Credit

Using Consumer Loans: The Role of Planned Borrowing

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

Investment Basics

Securities Markets

Investing in Stocks

Investing in Bonds and Other Alternatives

Mutual Funds: An Easy Way to Diversify

Estate Planning: Saving Your Heirs Money and Headaches

Financial Life Events Fitting the Pieces Together

Filters