Question 1

Employees of state and local governments cannot participate in the Social Security system.

Accepted Answer

A) True 
 B)False

Question 2

In long-term retirement planning, you decide on the required level of retirement income and funds needed over a 3- to 5-year series of intervals.

Accepted Answer

A) True 
 B)False

Question 3

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 employee is subject to the investment risk in a defined [ contribution | benefit ] plan.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 4

If an annuity plan is designed so that the monthly payment is adjusted by the actual investment experience of the insurer, it is a(n):

Accepted Answer

A)  guaranteed-minimum annuity. 
B)  equity annuity. 
C)  variable annuity. 
D)  uncertain annuity. 
E)  temporary annuity.

Question 5

It really makes little difference whether you start retirement savings at age 25 or at age 45.

Accepted Answer

A) True 
 B)False

Question 6

An annual contribution of $3,000 to a retirement account that earns 6% will be worth approximately _____ in 20 years. (Round the answer to the nearest whole dollar.)

Accepted Answer

A)  $60,120 
B)  $96,788 
C)  $100,000 
D)  $110,357 
E)  $192,624

Question 7

The first step in retirement planning is to set retirement goals.

Accepted Answer

A) True 
 B)False

Question 8

Today, more than 50% of all wage earners and salaried workers are covered by some type of employer-sponsored retirement or profit-sharing plan.

Accepted Answer

A) True 
 B)False

Question 9

In which of the following procedures does vesting take place gradually over the first 6 years of employment?

Accepted Answer

A)  Cliff vesting 
B)  Contributory vesting 
C)  Self-directed schedule 
D)  Graded schedule 
E)  Maximum vesting

Question 10

Gordon and Lisa estimate that they will need $1,875,000 in 40 years for their retirement fund. If they can earn 8% annually on their funds, how much do they need to save annually? (Round the answer to the nearest whole dollar.)

Accepted Answer

A)  $7,238 
B)  $7,987 
C)  $8,103 
D)  $9,234 
E)  $9,875

Question 11

Self-employed workers pay twice as much for Social Security coverage compared to employed workers.

Accepted Answer

A) True 
 B)False

Question 12

A bailout provision allows you to withdraw your money without incurring any surrender fees if the rate of return on your annuity falls below a specified minimum level.

Accepted Answer

A) True 
 B)False

Question 13

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 most common investment amount of a single premium annuity contract is [ $5,000 | $10,000 ].

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 14

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. 
You can offset the effects of earning a lower rate of return on your money by [ increasing the amount you invest each year  | shortening the period over which you build up your retirement account ].

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 15

Which of the following statements regarding individual retirement accounts (IRAs) is true?

Accepted Answer

A)  Traditional IRAs can be opened by anyone with a modified adjusted gross income (MAGI) of more than $50,000. 
B)  A 10% tax penalty applies to any funds withdrawn from a traditional IRA before 70½. 
C)  Withdrawals from Roth IRAs are tax free, so long as the account has been open for 5 years and the individual is past the age of 59½. 
D)  It is not possible to convert a traditional IRA to a Roth IRA. 
E)  Contributions made to traditional IRAs are made with after-tax dollars.

Question 16

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. 
Under a defined contribution plan, an employee [ is | is not ] able to estimate what his pension payment would be upon retirement.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 17

Single premium annuities result in a lump-sum payment of benefits.

Accepted Answer

A) True 
 B)False

Question 18

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. 
[ SEP | Keogh ] plans are easier to administer.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 19

Harry starts receiving reduced retirement benefits at age 62. These benefits:

Accepted Answer

A)  will increase when he reaches the "full retirement age." 
B)  are not subject to federal income taxes. 
C)  are deducted from the future benefits he will receive after age 67. 
D)  increase the tax deductions available to him. 
E)  will remain the same when he reaches the "full retirement age."

Question 20

The most popular type of supplemental retirement program is the 401(k) plan.

Accepted Answer

A) True 
 B)False

Exam 14: Planning for Retirement

Employees of state and local governments cannot participate in the Social Security system.

In long-term retirement planning, you decide on the required level of retirement income and funds needed over a 3- to 5-year series of intervals.

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 employee is subject to the investment risk in a defined [ contribution | benefit ] plan.

If an annuity plan is designed so that the monthly payment is adjusted by the actual investment experience of the insurer, it is a(n) :

It really makes little difference whether you start retirement savings at age 25 or at age 45.

An annual contribution of $3,000 to a retirement account that earns 6% will be worth approximately _____ in 20 years. (Round the answer to the nearest whole dollar.)

The first step in retirement planning is to set retirement goals.

Today, more than 50% of all wage earners and salaried workers are covered by some type of employer-sponsored retirement or profit-sharing plan.

In which of the following procedures does vesting take place gradually over the first 6 years of employment?

Gordon and Lisa estimate that they will need $1,875,000 in 40 years for their retirement fund. If they can earn 8% annually on their funds, how much do they need to save annually? (Round the answer to the nearest whole dollar.)

Self-employed workers pay twice as much for Social Security coverage compared to employed workers.

A bailout provision allows you to withdraw your money without incurring any surrender fees if the rate of return on your annuity falls below a specified minimum level.

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 most common investment amount of a single premium annuity contract is [ $5,000 | $10,000 ].

Which of the following statements regarding individual retirement accounts (IRAs) is true?

Single premium annuities result in a lump-sum payment of 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. [ SEP | Keogh ] plans are easier to administer.

Harry starts receiving reduced retirement benefits at age 62. These benefits:

The most popular type of supplemental retirement program is the 401(k) plan.