Personal Finance Quiz 9

All of the following are true about life expectancy today, EXCEPT?

The number of years in retirement is about the same as it was in 1930 because people are working much long on average AND living much longer

In what ways are 401(k) plans, 403(b) plans, and 457 plans similar?

They each provide employees tax advantaged opportunities to save for retirement

Which of the following retirement plans is sponsored by non-profit organizations?

403(b) plan

Employer-sponsored retirement plans that are funded primarily by the employer are:

457 plans, 403(b) plans, and defined contribution plans.

Life expectancies have increased over the years. What is the current life expectancy for those living today?

80 years

What is the difference between defined benefit plans and defined contribution plans?

Defined benefit plans guarantee payments to retirees while defined contribution plans make contributions to retiree account without making guarantees.

Which of the following is true regarding 401(k) plans: I. 401(k) plans are primarily funded by employees. II. 401(k) plans are primarily funded by employers. III. Investments grow tax-deferred in 401(k) plans. IV. Employers may provide matching contributions to 401(k) plans.

I, III, and IV only

Why do 401(k) plan sponsors match employee deferrals? I. It is the right thing to do for employees. II. Employer matching contributions are employee benefits made to encourage productivity and loyalty. III. 401(k) plan sponsors match employee deferrals because they can get a tax deduction that reduces the taxes they will pay. IV. Employees expect their plan sponsor to make matching contributions when they participate in the plan.

II and III only

When should you start to calculate your retirement need?

It's always important, regardless of age

A defined benefit plan is

a pension plan

A _____________________ plan provides a guaranteed payment from an employer for life, whereas a _____________________ plan provides a benefit based on the value of contributions to the account and investment returns.

defined benefit; defined contribution

Defined benefit plans:

guarantee payments to retirees for life

When you graduate from college, you should start thinking about preparing for retirement.

immediately

A trust that is funded at your death is called a

testamentary trust

Assume that a gift tax is applicable. Who is liable for the tax payment?

the person who gave the gift

Natasha and Link have been married for two years. They live in North Carolina and are about to make an offer on their first home. Their goal it to own the property so that if either Natasha or Link were to die, the surviving spouse would own the property outright. They also want to keep things private and avoid probate. How should they title their new home?

they should title the home as JTWROS as a way to accomplish their goals

When must the ownership of property be documented through a title?

when you own an asset with another person or persons

If your employer provides a retirement plan:

you should consider participating in the plan to prepare for retirement

Longevity risk is the risk that:

you will outlive your savings