Series 65: Unit 18 Quiz 1

Without the need to meet any special conditions, a participant in which of the following retirement plans would be able to withdraw funds prior to age 59½ and not incur a 10% tax penalty? A. 457 B. 401(k) C. 403(b) D. 501(c)(3)

457

Maria, age 49, was discussing with some coworkers the recent family vacation she took. She commented that she was able to afford it by taking a penalty-free withdrawal from her retirement plan. Based on that statement, Maria must be covered under A. a 403(b) plan. B. a defined benefit plan. C. a 401(k) plan. D. a 457 Plan.

A 457 Plan

Suzy Stanton's wealthy Uncle Ray is a client of yours and is asking for some advice on funding a program to save for Suzy's college education with the lowest possible tax impact. Ray tells you that he set up an UGMA account for Suzy's older brother, Sammy; but, when Sammy turned 18, he took the money, bought a motorcycle, and joined a commune. Ray wants to avoid seeing something like that happen again. What would probably be the best suggestion to help Ray meet his objectives? A. A Section 529 plan B. A living trust C. An UTMA account D. A Roth IRA for Suzy with Ray's name as co-owner

A Section 529 plan

Which of the following assets will have the greatest effect on minimizing financial assistance when an individual is applying to college and using the FAFSA application? A. A Coverdell ESA B. A prepaid tuition plan C. A Roth IRA D. An UTMA account

An UTMA account

One of your clients is discussing various options for funding his IRA. Current tax law would permit investing in which of the following vehicles? 1. Collectible stamps issued by the U.S. Postal Service 2. Gold or silver coins minted by the U.S. Treasury Department 3. Fixed annuities 4. REITs

Gold of silver coins minted by the U.S. Treasury Department, fixed annuities, REITs

Since its inception in 1986, virtually all the states have replaced the Uniform Gifts to Minors Act with the Uniform Transfers to Minors Act. It is generally agreed that one of the primary benefits offered by UTMA over UGMA is A. greater flexibility in the type of property that may be transferred to the minor B. greater flexibility in naming beneficiaries C. mandatory surrender of control at majority D. greater flexibility in naming custodians

Greater flexibility in the type of property that may be transferred to the minor

Which of the following statements is most accurate regarding employer-sponsored retirement plans? A. The employee in a defined benefit plan bears the shortfall risk. B. In a defined benefit plan, the client can have some reasonable certainty about the amount of income that will be received in retirement. C. In a defined contribution plan, the payments received are related to the number of years of service and the individual's final salary. D. In a defined benefit plan, the payments provided are related to the contributions made and investment performance achieved.

In a defined benefit plan, the client can have some reasonable certainty about the amount of income that will be received in retirement

One of your clients has told you that his employer has just instituted a Roth 401(k) plan. If the employer wishes to make matching contributions, A. the employee may choose whether he wants the matching contribution to be made to the Roth 401(k) or a regular 401(k) B. current tax law does not permit matching contributions to be made on behalf of any employee participating in a Roth 401(k) plan C. it may contribute a specified percentage of the employee's pay to a regular 401(k) D. it may contribute a specified percentage of the employee's pay to the Roth 401(k)

It may contribute a specified percentage of the employee's pay to a regular 401(k)

A single individual earning $250,000 a year may 1. open a Coverdell ESA 2. not open a Coverdell ESA 3. open a 529 college savings plan 4. not open a 529 college savings plan

Not open a Coverdell ESA and open a 529 college savings plan

Under ERISA Section 404(c), plan participants must be able to reallocate plan assets A. once every week B. daily C. once every 3 months D. annually

Once every 3 months

All of the following are general principles of the prudent investor standard except A. reasonable expected returns B. profit guarantees C. liquidity of investment D. diversification

Profit guarantees

The term security would include which of the following? A. 403(b) plans B. Section 529 plans C. Coverdell ERAs D. Indentures

Section 529 plans

If a 41-year-old investor who earns $26,000 this year overcontributes to his IRA, how much will be subject to the 6% penalty? A. There will be no penalty B. The amount by which he over contributed C. His original cost base plus the contribution D. His original cost base

The amount by which he over contributed

Under the UTMA, which of the following statements is not true? A. The maximum amount of money an adult can give to a minor in any one year is $17,000 B. An UTMA account may have only one custodian for only one minor. C. Once a gift is given to a minor, it cannot be reclaimed. D. Only an adult can make a gift to a minor.

The maximum amount of money an adult can give to a minor in any one year is $17,000

When a participant in a 401(k) plan dies before retirement, the proceeds are distributed A. according to the terms of the will without going through probate. B. to the designated beneficiary after going through probate. C. to the designated beneficiary without going through probate. D. according to the terms of the will after going through probate.

To the designated beneficiary w/o going through probate

If your 39-year-old customer is the sole owner of a business, earns $260,000 a year, and makes the maximum contribution to a Keogh plan, how much money may he contribute to his IRA in 2023? A. $6,500 B. $66,000 C. $73,500 D. $0

$6,500

Which of the following statements regarding Section 529 plans is correct? A. Qualified expenses could include tuition for attendance at a foreign university. B. Residents of some states receive a deduction on their federal income tax returns. C. Funds not used for qualified expenses by age 30 must be distributed or rolled over. D. Qualified expenses would include all residence costs incurred by a full-time student.

Qualified expenses could include tuition for attendance at a foreign university

Which of the following statements regarding ERISA and qualified plans is correct? A. ERISA requires the fiduciary to invest for maximum gain under the prudent person rule. B. ERISA regulations are primarily focused on the income tax aspects of qualified plans. C. Qualified plans must meet the requirements of ERISA. D. ERISA applies only to defined benefit pension plans.

Qualified plans must meet the requirements of ERISA

Your client's wife retired as a third grade teacher in 2019. She was covered under the school system's 403(b) plan. If she resumes employment with a corporate employer, and that new employer has a 401(k) plan, is she entitled to defer RMDs from the 403(b) plan past the regular age 73 date? A. RMDs may never be deferred for those who were participants in a 403(b) plan. B. RMDs may be deferred as long as the individual is employed on a full-time basis. C. RMDs may be deferred only from the plan sponsored by the current employer. D. RMDs may be deferred only if the current employer offered a 403(b) plan.

RMDs may be deferred only from the plan sponsored by the current employer

An individual has served with the local police force for 15 years. The plan is to remain on the force for another five years to be able to earn a nice pension benefit. Instead of simply retiring, the individual wishes to pursue a B.A. in accounting and then work in corporate tax. The individual approaches you for suggestions on the best way to save for the upcoming college expenses. You would probably suggest opening A. a Section 529 plan. B. a Coverdell ESA. C. an options account. D. an UTMA account.

A Section 529 plan

Jill is an investment adviser representative with FairPlay Advisers, an SEC-registered investment advisory firm. At the recommendation of a close friend who is a client of Jill's, Tom comes in for an interview and portfolio analysis. When examining Tom's IRA, which of the following holdings would Jill feel the need to immediately review? A. ABC Municipal Bond Fund B. GHI Large-Cap Equity Index Fund C. JKL Money Market Fund D. DEF U.S. Government Bond Fund

ABC Municipal Bond Fund

All of the following statements concerning IRA contributions are true except A. if you pay your tax on January 15, you can still deduct your IRA contribution, even if not made until April 15 B. between January 1 and April 15, contributions may be made for the current year, the past year, or both C. contributions can be paid into this year's IRA from January 1 of this year until April 15 of next year D. contributions for the past year may be made after April 15, provided an extension has been filed on a timely basis

Contributions for the past year may be made after April 15, provided an extension has been filed on a timely basis

Each of the following are advantages offered by a nonqualified deferred compensation plan that are not found in a qualified plan except A. employer contributions to the plan are not subject to current taxation to the employee. B. deferred compensation plans are not subject to most of the requirements of the Employee Retirement Income and Security Act of 1974 (ERISA). C. they are an attractive benefit to the employer because participation requirements and nondiscrimination restrictions do not apply. D. they are an attractive benefit for highly compensated employees because they're free from the contribution limits.

Employer contributions to the plan aren't subject to current taxation to the employee

Which of the following circumstances may cause a person to be identified as a fiduciary? 1. Investment adviser representative who becomes a trustee 2. Investment adviser representative who becomes a member of the board of directors of a foundation 3. Investment adviser representative who holds himself out as a fiduciary for ERISA plans and pensions 4. Investment adviser representative who manages a discretionary account

Investment adviser representative who becomes a trustee/a member of the board of directors of a foundation/holds himself out as a fiduciary for ERISA plans and pensions/manages a discretionary account

You have a 62-year-old client who opened a Roth IRA with your firm one year ago. The account was funded with a $6,500 deposit and the account's value is now $7,500. The client has another Roth, opened eight years ago at another firm. The client would like to withdraw $7,000 from this account rather than the one at the other firm. The tax consequences of this withdrawal would be A. ordinary income tax on the $500 that exceeds the original cost. B. ordinary income tax on the entire amount because the account has not been open for 5 years. C. no tax. D. ordinary income tax on the $1,000 growth because the account has not been open for 5 years.

No tax

Which of the following retirement plans is not legally required to establish vesting, funding, and eligibility requirements? A. Payroll deduction plan B. Keogh plan C. Defined benefit pension plan D. Profit-sharing plan

Payroll deduction plan

Which of the following investment activities are acceptable for a fiduciary acting under the prudent expert rule? 1. Purchasing AAA-rated debentures 2. Purchasing a growth mutual fund 3. Purchasing new issues of a AAA-rated issuer 4. Writing covered calls on dividend-paying stocks

Purchasing AAA-rated debentures, purchasing a growth mutual fund, purchasing new issues of a AAA-rated issuer, writing a covered calls on a dividend-paying stocks

If the owner of a $1 million IRA leaves it to his daughter, which of the following best describes the income tax treatment to the daughter? A. She will pay no income taxes because the estate taxes have already been paid. B. She will pay income taxes on the full amount she withdraws each year. C. She will pay income taxes on the full $1 million immediately. D. She will pay income taxes only on a portion of the withdrawals which exceed $1 million.

She will pay income taxes on the full amount she withdraws each year

Which of the following statements regarding a traditional IRA is true? A. Because contributions to a traditional IRA are not currently tax deductible, all qualifying withdrawals are tax free. B. The income and capital gains earned in the account are tax deferred until the funds are withdrawn. C. Distributions without penalty may begin after the age of 59½ and must begin by April 1 of the year before an individual turns 73. D. Distributions before age of 59½ are subject to a 10% penalty in lieu of income taxes.

The income and capital gains earned in the account are tax deferred until the funds are withdrawn

A client has made both tax-deductible and nondeductible contributions to a traditional IRA. When distributions are taken from the IRA, A. they are taxed on a pro rata basis B. they are treated as being from the tax-deductible portion first and the nondeductible last C. they are treated as being from the nondeductible portion first and the deductible portion last D. that portion derived from the nondeductible contributions is not subject to penalty if withdrawn before age 59½

They are taxed on a pro rata basis