PFP CH 15

A(n) ________ is a tax−deferred retirement plan that is essentially the same as a​ 401(k) plan, except that it is aimed at employees of schools and charitable organizations. A.403(b) B.​007(a) C.​402(b) D.​404(a) E.none of the above

A

With a​ ________, you, and usually your​ employer, pay funds into your retirement plan. A. contributory retirement plan B. noncontributory retirement plan C. deductedminus−benefit plan D. none of the above

A

Frank is considering a new job. However he is concerned about his pension fund. He knows that​ ________ which is the requirement that he must work for his firm for a specified period of time prior to gaining ownership of the retirement contributions made by his employer has to be met first. A. certifying B. vesting C. tenuring D. validating E. none of the above

B

Social Security is a mandatory insurance program that provides a base level of protection for all of the following occurrences except one. Choose that one. A. Retirement B. Job Loss C. Death D. Health problems E. Disability

B

The system of Social Security is based on young working people paying taxes to support older retired people. The dependency ratio is the number of workers to retirees. Forty years ago it was 16 workers for every one retiree. What will happen to this ratio by the year​ 2048? A. It will reverse so that there will be more retirees than workers. B. It will decline to 2 workers for every 1 retiree. C. It will​ increase, because there will be more young workers than retirees. D. ​Nothing, since the ratio of young people to old people does not change.

B

If your pension fund contained a provision that allowed employees who were leaving the company to retain and transfer any pension benefits earned to another pension​ plan, it would be said to have A. transportance. B. releasability. C. portability. D. transference. E. none of the above.

C

Which of the following benefits is not provided by Social​ Security? A. Disability B. Retirement C. Education D. Health E. Death

C

Your company pays retirement benefits to current retirees out of current​ earnings, on a pay−as−you−go basis. This is an example of​ a(n) A. cash balance plan. B. funded pension plan. C. unfunded pension plan. D. none of the above.

C

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

D

To be eligible for Social Security​ benefits, you receive one credit for every​ $1,200 in wages that you​ earn, up to 4 credits per year. How many total credits do you need to qualify for​ benefits? A. 4 B. 20 C. 30 D. 40

D

​A(n) ________ is a pension plan in which you and your employer or your employer alone contribute funds directly to a retirement account set aside specifically for you. A. percentage plus inflation plan B. defined−benefit plan C.cash balance plan D. defined−contribution plan E.none of the above

D

Social Security is a system where current​ workers' pay taxes that are used to pay current​ retirees' benefits. How is Social Security​ funded? A. Income taxes by all Americans B. Payroll taxes on employers up to a salary cap C. Payroll taxes on employees up to a salary cap D. All of the above are correct. E. Only B and C are correct.

E

Which of the following statements is true regarding Social Security retirement​ benefits? A. Some​ people's benefits may be taxed. B. You may retire beginning at age 62 with reduced benefits. C. It attempts to replace​ 42% of your average earnings. D. Not all occupations are covered. E. All of the above

E

By​ law, everyone must contribute the maximum amount into their​ 401(k) plans at work.

F

Contributions to Roth IRAs are tax deductible.

F

Contributions to a traditional IRA are always tax deductible.

F

For most​ people, there is really no reason to save for retirement since Social Security will provide retirement benefits until you die.

F

For someone wanting to minimize the taxes they are paying​ now, a Roth IRA would be preferable to a traditional IRA.

F

If you have a defined−benefit retirement​ plan, you're considered an​ "inactive participant."

F

Most employees in the United States today are covered by an employer funded defined - benefit plan

F

One of the best things about retirement is that retirees​ don't have to pay income taxes once they retire.

F

Robin was born after​ 1960, therefore, the retirement age for her to receive full Social Security benefits is 65.

F

The main advantage of the Roth IRA over the traditional IRA is the employer matching funds.

F

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

F

With a Roth​ IRA, after five years you can make withdrawals before age 59​ 1/2 without a penalty but you must pay taxes on the withdrawals.

F

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

F

​Today, the typical American worker will receive a defined−benefit retirement plan from their employer.

F

A Coverdell Education Savings Account works just like the Roth IRA for qualified education​ expenses, except with respect to contributions.

T

A person may have more than one qualified retirement plan open at the same time.

T

According to the​ author, 401(k) plans are actually do it yourself variation of a profit−​sharing/thrift plan

T

Anyone can open up an IRA account but not everyone may get tax−advantages from it because there are income limitations.

T

An​ employee's Social Security contributions are invested in a general fund account and will be made available for the employee at retirement.

T

A​ 401(k) plan is a tax−deferred retirement savings plan in which employees of private corporations may contribute a portion of their wages up to a maximum amount set by law.

T

If all contributions to your IRA are tax​ deductible, then all withdrawals from your IRA will be​ taxed, unless​ you're just moving your money into another IRA.

T

Individual retirement arrangements​ (IRAs) are personal savings accounts that give you tax advantages for saving for retirement.

T

It is a good idea to start saving for retirement as early as possible to take advantage of compounding returns on your savings.

T

One of the advantages to a traditional IRA is that it allows you to make a penalty−free withdrawal to purchase your first home.

T

One of the drawbacks to defined−benefit plans are their lack of​ portability, meaning that if you leave the company the value of the pension is not likely to go with you.

T

One of the first steps in planning for your retirement is figuring out just what you want to do when you retire.

T

Social Security is a health​ care, retirement, disability​ income, and life insurance plan.

T

Social Security is a plan where current​ workers' contributions pay for current​ retiree's benefits.

T

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

T

The Roth IRA does not require that distributions begin by age 70​ 1/2.

T

Under a defined benefit plan you receive a promised or​ "defined" benefit payout at retirement.

T

Under a funded pension​ plan, the employer makes regular contributions to a trustee who collects and invests the retirement funds.

T

With an IRA your investment choices include​ stocks, bonds, mutual​ funds, CDs and real estate.

T

You should take advantage of any matching your company is willing to do for your​ 401(k).

T