Chapter 14 Retirement and Estate Planning Quiz Preparation Set

Housing

- If owned, probably your biggest single asset- If large equity, a reverse mortgage could provide additional retirement income- Sell your home, buy a less expensive one, and invest the difference

Which of the following statements best characterizes estate planning as part of the retirement and financial planning process?

Estate planning involves building assets through savings, investing, and insurance. Estate planning involves planning how to distribute your assets at death through a manner you have specified.

True or false: A living trust has the downside that it does not protect one's privacy upon death.

False

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

False

True or false: A statutory will is usually prepared by an attorney and varies in content from person to person.

False

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

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 of the following is true regarding statutory wills?

It is prepared on a preprinted form It is best to seek a lawyer's advice when you prepare your will The form could include provisions that are not in the best interest of your heirs

Because of changes in life expectancy, the full retirement age has (decreased/increased) recently.

increased

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

irrevocable

Two strategies with regards to life insurance that may be employed to make retirement affordable involve reducing your payments by decreasing your life insurance .

premium, coverage or policy

A trust can help you avoid and immediately your assets to the beneficiaries.

probate, give

A(n) will is prepared on a preprinted form, available from lawyers, stationary stores, or internet sites.

statutory

A(n) is a legal arrangement through which one's assets are held by a trustee.

trust

Who is the creator of a trust.?

trustee

Death normally causes a transfer of your estate to:

your heirs and charities

Misconceptions About Retirement Planning

• You have plenty of time to start saving for retirement ...• Saving just a little bit won't help ...• You'll spend less money when you retire ...• My retirement will only last 15 years ...• You can depend on Social Security and a company pension to pay your basic living expenses ...• Your pension benefits will increase to keep pace with inflation ...• Your employer's health insurance plan and Medicare will cover all your medical expenses when you retire...

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.

40

Which of the following ideas is related to the living will and authorizes someone to act on your behalf if you become seriously ill or injured?

Power of attorney

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

Which of the following are steps you should take to ensure your online content is handled when you die?

State how you would like your online profile to be handled upon your death. Give the social media executor a list of all the websites where you have a profile, along with usernames and passwords. Appoint an online executor to ensure your social media presence is handled by him on your behalf.

Work expenses, such as the cost of clothing, transportation, and pension contributions, may not be as much after retirement.

True

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

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

A defined-contribution retirement plan provides an individual for each participant.

account

When you have funded your 401(k), 403(b), Keogh, and profit-sharing plans, but you still want to put more money away for retirement, then a(n) _____ is likely your next best option.

annuity

One way to (decrease/increase) the tax liability on your estate is to give away assets while you are alive.

decrease

A(n) employee pension plan is an individual retirement account funded by an employer.

simple

Tammy was born in 1961. The full retirement age to receive Social Security benefits for Tammy is:

67

Defined Contribution

An individual account to which the employer contributes a specific amount annually- Money-purchase pension plans • % of earnings set aside annually, along with any employer contributions- Stock bonus plans • Employer's contribution buys stock in your company for you- Profit-sharing plans • Employer's contribution depends on the company's profits

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

College diplomas

Which of the following are rules of a SEP IRA?

Contributions are tax-deductible. It is an IRA funded by the employer. Each employee sets up an IRA with a bank or brokerage house.

The education IRA is also called the:

Coverdell education savings account

If your heirs cannot find the necessary legal that outline your estate objectives, then they may experience emotionally painful delays.

document

With a _____ plan, your employer promises to set aside a certain amount of money for you each year.

money-purchase

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

pension, savings