FIN 101 - Quizlet 10

Give three examples of a defined contribution plan?

Answer: 401(k), 403(b), 457(b)

What is 403(b)?

Answer: 403 (b) is a defined contribution plan designed for public education and not-for-profit entities.

What is a Defined contribution plan?

Answer: A retirement account that is funded primarily by the employee.

What is a statutory will?

Answer: A will that is created by a fill-in-the-blank, online legal form

What is the typical wage replacement rate? a. Between 30% and 40%. b. Between 40% and 50%. c. Between 60% and 70%. D. Between 70% and 80%.

Answer: D. Between 70% and 80%.

Which of the following requires financial professionals to act in the best interest of the client at all times and to fully disclose any and all conflicts of interests? - Commission - Conflict of interest - Fiduciary standard - Suitability standard

Answer: Fiduciary standard

Once you determine how much to save for retirement, your next step in reaching your retirement goal is to choose?

Answer: How you want your money invested.

What is a Retirement savings rate?

Answer: It refers to the percent of your income that you are putting aside for retirement.

The file cabinet approach to retirement accounts suggests that each retirement account represents a drawer with hanging folders that represent different investments. The investment folders might contain what?

Answer: Mutual funds, stocks and bonds. The investment folder could NOT contain mortgages.

1. Which of the following refers to living longer than expected? a. Longevity risk. b. Market risk. c. Liquidity risk. d. Business risk.

Answer: a. Longevity risk.

Which of the following refers to owning property with another person? a. Tenancy in common. b. Fee simple. c. Tenancy by the entirety. d. Community property.

Answer: a. Tenancy in common.

Which of the following refers to proof of property ownership? a. Title. b. Fee simple. c. Tenancy by the entirety. d. Community property.

Answer: a. Title.

Which of the following refers to the court-supervised process of distributing assets and paying debts after someone's death? a. Title. b. Probate. c. Payable upon death. d. Transfer on death.

Answer: b. Probate.

Traditional IRAs allow you to claim a tax: a. credit. b. deduction. c. exemption. d. saving.

Answer: b. deduction.

Give some situations should prompt someone to draft a new will ?

Answer: birth of a child, receipt of insurance proceeds, death of a spouse

Mia contributed $25,000 to a Roth IRA. She retired at age 60 and would like to withdraw the funds. She is in the 25% federal marginal tax bracket. How much will she pay in income taxes on the funds? a. $6,250. b. $6,250 plus a 10% penalty. c. $5,000. d. $0.

Answer: d. $0. A Roth IRA is tax-exempt.

How much of your IRA contribution may be deducted from your federal income tax return if you do not have access to an employer-provided retirement plan? a. 50%. b. 70%. c. 90%. d. 100%.

Answer: d. 100%. If you do not have access to an employer-provided retirement plan, then 100% of your IRA contribution may be deducted from your federal income tax return.

You will incur a penalty if you withdraw money from your IRA before what age, unless it meets an exception? a. 45. b. 50. c. 55. d. 59½.

Answer: d. 59½. If any money is taken from a traditional IRA before age 59½, then a 10% penalty will generally be assessed by the IRS.

Which of the following is a benefit of an individual retirement account (IRA)? a. Tax benefits. b. Asset protection from creditors. c. Access to retirement savings in the event of certain emergencies. d. All of these answer choices are correct.

Answer: d. All of these answer choices are correct.

What is a Pension plan?

Answer: provides retirees with a guaranteed payment from their employer for the remainder of the retirees life.