Chapter 19 Finance

Barry has just become eligible for his​ employer-sponsored retirement plan. Barry is 35 and plans to retire at 65. Barry calculates that he can contribute $4,400 per year to his plan.​ Barry's employer will match this amount. If Barry can earn a return of 9​% on his investment, how much will he have at​ retirement?

$599,753.16960 x 2 = 1,199,506.34

Thomas earns ​$59,300 per year. What retirement plan Thomas should consider under the following​ circumstances? ---- B. He works at a university.

403(b) plans are offered by nonprofit organizations

Benefits can be received when: A. you become disabled B. you retire C. you survive the breadwinner of the household D. all of the above

D

A benefit of a defined-contribution plan is that:

First, any money contributed by the employer is like extra compensation.​ Second, the plan ensures you save money each pay period so that you will have sufficient money at the time of retirement.​ Third, the plan allows you to defer taxes on income paid by your employer. That​ is, retirement contributions are deducted from pay before taxes are assessed and the income generated by your investments is not taxed until you withdraw the money after you retire.​ Moreover, you will likely be in a lower tax bracket by the time the investments are taxed.

Individuals must earn:

Individuals must earn 40 credits to qualify for Social Security. An individual who contributes to Social Security earns one credit for each​ $1,220 of earnings each year​ (in the 2015 tax​ year), with a limit of four credits per year.

Thomas earns ​$59,300 per year. What retirement plan Thomas should consider under the following​ circumstances? ----- C. He owns a small firm with employees.

SEP and SIMPLE plans are offered by relatively small firms​ (typically those with less than 100​ employees).

Thomas earns ​$59,300 per year. What retirement plan Thomas should consider under the following​ circumstances? ----- A. He works for a large private firm. Which is the best​ selection?

Thomas works for a large private​ firm, so he should consider the​ 401(k) plan.​

Social Security benefits:

can be taxed for retirees with high income.

Social Security is a _____ program that taxes individuals while they are working and provides them income during retirement.

federal

Social Security is a source of income during retirement. Usually it _____ enough to live on comfortably.

is not

Some employers are switching to this type of plan because​ they:

place more responsibility on the employee to contribute the money and decide how it is invested.

When an employee leaves his​ employer, he cannot choose​ to:

retain his retirement account with his former employer if he has less than $5,000 in the account.

A​ defined-contribution plan:

specifies the guidelines under which you​ and/or your employer can contribute to your retirement account.

One concern about the future of Social Security is:

that the program will not be able to support retirees in the future.

One factor that will not affect the amount of funds available to you at retirement​ is:

the number of jobs you have worked

The amount of income that you receive from Social Security when you retire is dependent​ on:

the number of years in which you earned income and your average level of income.

In an employer-sponsored retirement plan,

you and/or your employer contribute money to a retirement account each pay period.