personal finance 14

True or false: An individual retirement account (IRA) is an account where the employer deposits money for each individual employee.

False

True or false: Many companies are discontinuing defined-benefit plans and moving toward defined-contribution plans, which shifts more responsibility to the company for providing retirement benefits.

False

True or false: A Roth IRA may be better for you than a traditional IRA depending on your anticipated tax bracket.

True

True or false: An estate is everything you own.

True

Which of the following is not a type of will?

joint tenants will

Both revocable and irrevocable trusts avoid the lengthy process of:

probate.

Sources of retirement income usually include:

public pension plans employer pension plans payments from annuities

With a(n) ______, your employer will often match your contributions up to a specific dollar amount or percentage of your salary.

401(k) plan

If you are born after 1928, you become eligible for Social Security retirement benefits if you have earned credits based on quarters of work and payment into the system through the Social Security tax.

Blank 1: 40 or forty

For a traditional IRA in 2020, you can contribute up to $6,000 per year if you are under age 50 and up to $ if you are age 50 or older.

Blank 1: 7,000 or 7000

A (Roth/traditional) IRA may be better for you than a (Roth/traditional) IRA if you are saving for your first home at an age lesser than 59.5 years and have had your account open for at least five years, as contributions can be withdrawn at any age and without penalty.

Blank 1: Roth Blank 2: traditional

A defined-contribution retirement plan provides an individual for each participant. (Enter only one word per blank.)

Blank 1: account

A(n) is a contract purchased from an insurance company that provides an income at regular intervals for a certain number of years or for life.

Blank 1: annuity

A(n) -shelter trust is one that enables the spouse of a deceased person to avoid paying federal taxes on a certain amount of assets left to him/her as part of an estate.

Blank 1: credit

The 403(b) and 401(k) accounts are examples of employee retirement -contribution plans.

Blank 1: defined

The move by most companies to - plans sometimes called individual account plan has forced employees to take more responsibility for retirement.

Blank 1: defined Blank 2: contribution

A will is the legal that specifies how you want your property to be after your death.

Blank 1: document or declaration Blank 2: distributed, disposed, allocated, divided, transferred, dispersed, disbursed, or dispensed

With a Roth IRA, contributions are not tax-deductible, but accumulate tax-free.

Blank 1: earnings or interest

A pension plan is a retirement plan that is funded, at least in part, by a(n) .

Blank 1: employer

A federal tax collected on the value of a deceased person's property at the time of his or her death is called a(n) tax.

Blank 1: estate

A(n) includes everything you own.

Blank 1: estate

When you retire, some living expenses may be reduced, such as work-related expenses, clothing, and taxes.

Blank 1: federal Blank 2: income

A(n) will is one that is handwritten.

Blank 1: holographic

A(n) will probably be your most valuable asset in retirement, so it is important to consider carefully what size of payments you can afford.

Blank 1: house or home

A(n) retirement account is a special account in which the person sets aside a portion of income for retirement.

Blank 1: individual

A(n) trust cannot be changed by the creator (trustor).

Blank 1: irrevocable

An annuity is a contract that could provide retirement income for a set number of years or for .

Blank 1: life or lifetime

Estate planning involves the planning for the administration and disposition of property during one's and at death.

Blank 1: life or lifetime

A(n) will is a document in which you state whether you want to be kept alive by artificial means if you become terminally ill and unable to make such a decision.

Blank 1: living

Expenses that may increase as a result of retirement include recreation, health insurance, and care.

Blank 1: medical or health

The belief that you have plenty of time to start saving for retirement is a common about the retirement years.

Blank 1: myth, misconception, or mistake

Jointly property passes directly to the joint owner and may be appropriate for some , such as a home.

Blank 1: owned or held Blank 2: assets or property

Sources of retirement income include public plans, employer pension plans, personal retirement plans, and .

Blank 1: pension Blank 2: annuities or savings

Estate planning is the process of creating a detailed for your assets.

Blank 1: plan or outline Blank 2: managing

A trust is a trust whose terms the grantor retains the right to change.

Blank 1: revocable

A 401(k) plan is a -reduction plan that reduces your salary by the amount of your contributions and results in a lower current tax liability.

Blank 1: salary, income, or wage

A rollover IRA is a(n) IRA that accepts distributions from a retirement plan or from another .

Blank 1: traditional, regular, or classic Blank 2: IRA

A(n) is the creator of a trust.

Blank 1: trustor or grantor

Your right to at least part of the benefits accrued under a pension plan is called .

Blank 1: vesting or vested

Which of the following are true about the rules of a Roth IRA?

Earnings accumulate tax-free. Five years after establishing the account, you can withdraw tax-free distributions if you are at least age 59.5. You can make contributions after age 70.5. Contributions are not tax-deductible.

True or false: An irrevocable trust is one that the trustee cannot change. The only changes can be made by the trustor.

False

True or false: Jointly owned property passes directly to the surviving children and may be appropriate for some assets, such as a home.

False

Which type of trust allows the trustor to retain the right to end or change the terms of the trust?

Revocable

Which of the following IRAs is used to avoid any penalty required to be paid for transferring money from retirement plan to another?

Rollover IRA

When saving for retirement, which of the following is NOT a good advice?

Saving early in small amounts is not as good as saving later in larger amounts.

The contributions and earnings of an employer-sponsored pension plan remain tax-deferred until you withdraw them.

True

Under a defined-benefit plan, the plan's actuary determines the annual employer contribution based on how much money will be needed in the fund as each participant in the plan retires.

True

Which of the following is NOT a document that will normally be needed at the time of death?

Warranties on various property owned.

Which of the following are rules of the traditional IRA?

You can contribute up to $7,000 to a traditional IRA if you are over age 50. You can contribute up to $6,000 to a traditional IRA if you are under age 50.

Which of the following statements is true?

You may need to decide between spending and saving during retirement.

An estate tax is:

a tax collected on the value of property at the time of death

If a will is handwritten, it is known a(n):

holographic will.

Vesting is an employee's right to:

receive some of the employer's pension plan contributions when leaving before retirement

One tip for saving for retirement is to keep your money in your former employer's retirement plan once you leave a job, or you can:

roll over the money into an IRA.

The financial decisions related to housing as you try to maximize current income and prepare for retirement might include:

selling your home and buying a smaller less expensive home. considering a smaller house that is less costly to maintain than a larger home.

The four types of wills are:

stated amount wills traditional marital share wills simple wills exemption trust wills

True or false: A person must work 20 years to be eligible for Social Security retirement benefits.

False

True or false: A trust that you can change during your lifetime is an irrevocable trust.

False

Which of the following is not an important document that may be needed at the time of your death?

College diplomas

Which type of trust allows married couples to leave everything to each other tax free?

Credit-shelter

True or false: A plan that specifies the benefits the employee will receive at the normal retirement age is called a defined-contribution plan.

False

Which of the following is a document where you state whether you wish to be kept alive by artificial means if you become terminally ill?

Living will

Which of the following is the best and most complete definition of estate planning?

The plan for the administration and disposition of property during one's lifetime and at death

Which of the following are myths about retirement planning?

There's plenty of time for me to start saving for retirement. Your pension benefits will increase to stay up with inflation. I can depend on Social Security and pension plan to pay my living expenses. Medicare will cover all my medical expenses.

Which of the following is not considered an alternative to living off your retirement income?

Traveling around the world