ch 19

Under federal guidelines, the 2012 maximum contribution to a 401(k) is A) $17,000. B) 80% of gross income. C) $400 per month. D) there is no limit.

A) $17,000.

Which of the following employers might offer you a SEP? A) Al's Gas Station B) Ford Motor Company C) U.S. Army D) General Electric

A) Al's Gas Station

Which of the following plans is available to both firms with one to ten employees as well as self-employed individuals? A) SEP plan B) ESOP C) Keogh plan D) 403(b) plan

A) SEP plan

In retirement planning, which of the following is false? A) Social Security is enough for retirement B) IRAs are a good investment C) Additional tax deferred investments are needed D) You should have several pension investments

A) Social Security is enough for retirement

Contributing to which of the following will give you an immediate tax benefit? A) Traditional IRA B) Roth IRA C) Rollover IRA D) Regular brokerage account

A) Traditional IRA

If you are close to retirement, you should consider investing in ________ for your retirement account. A) Treasury bond funds B) certificates of deposit (CDs) C) mutual funds with high growth stocks D) corporate bonds

A) Treasury bond funds

Generally, there are tax penalties for ________ withdrawals from a traditional IRA. A) both early and late B) only early C) only late D) all

A) both early and late

If your retirement plan has no vesting requirement then it is not a A) defined-benefit plan. B) defined-contribution plan. C) traditional IRA. D) Keogh plan.

A) defined-benefit plan.

You get a job with the Allred Corporation. Their retirement plan will pay you $250 a month for each year you work for the company commencing on your 65th birthday. You must work for the company for 10 years in order to qualify for the pension. This plan is a A) defined-benefit plan. B) defined-contribution plan. C) traditional IRA. D) Keogh plan.

A) defined-benefit plan.

Under a SEP, an employee A) is not allowed to make contributions. B) can contribute up to $6,000 per year. C) is not taxed until his or her contributions are withdrawn. D) can defer taxes with contributions.

A) is not allowed to make contributions.

In an employer-sponsored retirement plan, you should contribute at least A) the amount the employer will match. B) 3% of your gross income in middle age. C) 1% of your net income in your early working years. D) 15% of your income in the last few working years.

A) the amount the employer will match.

Your worst choice as an investment option for your 401(k) would be A) the stock of the company for which you work. B) mutual funds investing in high growth stocks. C) mutual funds investing in blue chip stocks. D) mutual funds investing in bonds

A) the stock of the company for which you work.

Social Security replaces approximately ________% of a worker's average annual income from his/her working years. A) 100 B) 40 C) 75 D) 85

B) 40

If you are age 60, which of the following investments would you most likely not consider? A) Money market funds B) Junk bond funds C) Treasury bonds D) CDs

B) Junk bond funds

Which of the following is false about a 401(k) plan? A) Withdrawals before age 59-1/2 result in a 10% tax penalty B) Less than 50% of all employers offering these plans match a portion of employee's contributions C) Your contributions are limited to a set dollar amount each year D) The money you contribute is deducted from your paycheck before taxes are assessed

B) Less than 50% of all employers offering these plans match a portion of employee's contributions

With which of the following retirement plans will your withdrawals not be subject to taxes if you are over 59-1/2 and have had the account for at least five years? A) Rollover IRA B) Roth IRA C) Traditional IRA D) Keogh plan

B) Roth IRA

If you are about to invest in a stock that has excellent growth potential over the next few years and the investment is to be part of your retirement, the best place to do this would be in a A) bank trust account. B) Roth IRA. C) rollover IRA. D) regular brokerage account.

B) Roth IRA.

Which of the following statements with regards to SEP plans is not true? A) Self-employed individuals can contribute up to 25% of annual net income. B) They are easier to set up than a Keogh plan. C) The maximum contribution in 2012 is $50,000. D) An SEP is a defined-contribution plan.

B) They are easier to set up than a Keogh plan.

Which of the following statements is not true of annuities? A) They can provide annual payments for life B) They provide no tax advantages C) They have high fees D) You can withdraw your investment as a lump sum

B) They provide no tax advantages

Which of the following employers would be most likely to offer a 403(b) plan? A) General Motors B) Wright State University C) Duke Power D) SBC Corporation

B) Wright State University

A(n) ________ is a financial contract that provides annual payments until a specified year or until one's death. A) savings account B) annuity C) mortgage D) trust

B) annuity

You can elect to receive Social Security retirement benefits A) at the normal retirement age, which is being raised from 65 to 69. B) at age 62 and take a reduced amount. C) and limit your ability to keep on working and earning income. D) and not be taxed on them, no matter how much money you make.

B) at age 62 and take a reduced amount.

In the last 10 years, many employers have shifted from A) defined-contribution to defined-benefit plans. B) defined-benefit to defined-contribution plans. C) 401(k) plans to 403-b plans. D) SEP plans to SIMPLE plans.

B) defined-benefit to defined-contribution plans.

A(n) ________ annuity provides a specific return on your investment so you know how much money you will receive at a future point. A) guaranteed B) fixed C) variable D) insured

B) fixed

The best way to save for retirement is to A) wait until after the bills are paid. B) have it deducted directly from your check. C) take a loan so you will pay it back fast. D) wait until you have accumulated the amount in your checking account.

B) have it deducted directly from your check.

When you contribute to a retirement account, it is usually with ________ dollars. A) after-tax B) pre-tax C) optional D) discretionary

B) pre-tax

Key retirement planning decisions are all of the following except A) how much to contribute. B) whether or not you should contribute. C) when to contribute. D) how to invest your contributions

B) whether or not you should contribute.

How much would need to be contributed each year for 30 years to accumulate $1,300,000 assuming a return on the investments of 8 percent? Round to the nearest dollar if needed. A) $43,333 B) $46,800 C) $11,476 D) $15,000

C) $11,476

To qualify for Social Security benefits, your income has to be at least ________ per quarter for ten years. A) $730. B) $874. C) $1130. D) $1,123.

C) $1130.

Bob and Bonnie, husband and wife ages 56 and 58, have income of $80,000. What is the maximum IRA contribution that they can make in 2012? A) $10,000 B) $11,000 C) $12,000 D) $40,000

C) $12,000

Bill is self-employed and has established a Keogh retirement plan. Bill's net income for 2012 is $74,500. How much can Bill contribute to the Keogh plan? A) $50,000 B) $17,000 C) $18,625 D) $11,500

C) $18,625

What would be the difference in the tax consequences of an $18,000 withdrawal from a Roth IRA versus a Traditional IRA if $15,000 represents long-term capital gains, $2,000 short-term capital gains, and $1,000 is interest? Assume a tax rate of 30% and a capital gains tax rate of 10 percent. A) $5,200 more in taxes with a Traditional IRA B) $4,800 more in taxes with a Traditional IRA C) $5,400 more in taxes with a Traditional IRA D) $5,400 more in taxes with a Roth IRA

C) $5,400 more in taxes with a Traditional IRA

Which of the following is not a characteristic of a traditional IRA? A) For a married couple, the contribution limit doubles B) Individuals over 50 are allowed to make additional catch-up contributions C) Everyone is eligible regardless of income. D) 10% penalty normally applies if funds are withdrawn before age 59-1/2

C) Everyone is eligible regardless of income.

Which of the following is a defined-contribution plan intended for firms with 100 or fewer employees? A) 401(k) plan B) SEP plan C) SIMPLE plan D) 403(b) plan

C) SIMPLE plan

Which of the following is true about a 401(k) plan? A) There is no penalty for early withdrawal of these funds B) There is no limit on the dollar amount you can contribute C) Your contributions are automatically vested and are yours, regardless of when you leave the firm D) 401(k) contributions are made after taxes are paid on your salary

C) Your contributions are automatically vested and are yours, regardless of when you leave the firm

Payments to Social Security are based on salary and made monthly by A) employees only. B) employers only. C) both employees and employers. D) everyone except self-employed people.

C) both employees and employers.

If you are far away from retirement, you should consider investing in ________ for your retirement account. A) Ginnie Mae or Treasury bond funds B) certificates of deposit (CDs) C) mutual funds with high growth stocks D) corporate bonds

C) mutual funds with high growth stocks

Retirement fund withdrawals are usually taxed as ________ income. A) short-term capital gains B) long-term capital gains C) ordinary D) tax-free

C) ordinary

A ________ is established to transfer assets tax-free from a company retirement plan. A) SEP B) traditional IRA C) rollover IRA D) Keogh

C) rollover IRA

If you have a claim to a portion of the money in an employer-sponsored retirement account, you are considered to be ________ in the plan. A) committed B) permanent C) vested D) endowed

C) vested

Your Social Security retirement benefits are determined primarily by the amount A) of current contributions by other employees. B) of savings you have. C) you contributed to Social Security over the years. D) of the prime interest rate.

C) you contributed to Social Security over the years.

What is the difference between a SEP and a Keogh retirement plan? A) A Keogh plan does not allow early withdrawals without a penalty B) Under a SEP, there is a maximum contribution of up to $42,000 allowed C) Under a Keogh plan, a contribution of up to 25% of net income is allowed D) A Keogh plan is always individually funded

D) A Keogh plan is always individually funded

Which of the following is not a characteristic of employer-sponsored retirement plans? A) Help you save B) Generally of two types C) Part of a good benefits package D) A good place from which to borrow

D) A good place from which to borrow

With which of the following plans will you be able to most accurately predict your retirement income? A) 401(k) B) 403-b C) Traditional IRA D) Defined-benefit plan

D) Defined-benefit plan

Which of the following investments is least likely to be allowed with most defined-contribution plans? A) Stock mutual funds B) Bond mutual funds C) Money market funds D) Individual corporate bonds

D) Individual corporate bonds

Which of the following is not a defined-contribution retirement plan offered by employers? A) 401(k) plan, 403-b plan B) SEP C) ESOP D) Keogh plan

D) Keogh plan

Which of the following statements about IRAs is not true? A) Annual contribution limit will increase gradually B) The level will be adjusted periodically for inflation C) Individuals over age 50 will be able to make larger contributions D) Penalties for early withdrawal are being phased out

D) Penalties for early withdrawal are being phased out

Social Security is all but A) a good starting point to plan for your retirement funding. B) financed through working individuals and employers. C) a government benefit paid to the elderly and disabled. D) a specific savings plan to which individuals contribute and from which they benefit.

D) a specific savings plan to which individuals contribute and from which they benefit.

Under a defined-contribution plan, there are specific guidelines for all but A) how much you can contribute to your retirement fund. B) how much your employer can contribute to your retirement fund. C) early withdrawal penalties. D) estimating how much you will receive monthly at retirement.

D) estimating how much you will receive monthly at retirement.

All of the following is good advice on retirement planning and savings except A) start early. B) take advantage of employer plans. C) take advantage of tax savings. D) if you are eligible for Social Security, you will not need to worry about additional savings.

D) if you are eligible for Social Security, you will not need to worry about additional savings.

In determining the amount of money you will need for retirement, you should consider all of the following except A) your personal needs and who else you will be supporting. B) the expected cost of living due to inflation. C) the number of years you will live while retired. D) inheritance from your children.

D) inheritance from your children.

How much to contribute to a retirement plan should not depend on your A) liquidity. B) age. C) other investments. D) mood at the time.

D) mood at the time.

The fees charged by financial institutions for annuities may include all of the following except A) management fees. B) surrender charges. C) insurance fees or commissions. D) no-load annuity fees

D) no-load annuity fees

Most defined-contribution plans allow some investment flexibility and allow you to choose all of the following except A) money market funds. B) stock mutual funds. C) bond mutual funds. D) put and call options.

D) put and call options.

In estimating the future value of your retirement investments, you would consider all of the following except A) the amount invested. B) your annual return. C) the number of years you will invest. D) the age at which your spouse will retire

D) the age at which your spouse will retire

If a person who qualifies for Social Security benefits dies, all of the following are benefits provided to the survivors except A) a one-time payment to the spouse. B) monthly income payments to the spouse. C) monthly income payments to children. D) tuition reimbursement for a child attending college.

D) tuition reimbursement for a child attending college.

When deciding whether to invest in a Traditional IRA or a Roth IRA one would consider all except A) the amount of income you expect to make at retirement. B) whether you are covered by an employer-sponsored retirement plan and, if so, how much income you earn. C) if you want to start drawing out the money at 70-1/2 or not. D) whether you want the money to accumulate tax-free or not

D) whether you want the money to accumulate tax-free or not

When you leave an employer, your options with your 401(k) are all of the following except A) leave it with your former employer. B) transfer it to your new employer. C) transfer it to a rollover IRA. D) withdraw it with no tax penalty if done in 90 days.

D) withdraw it with no tax penalty if done in 90 days.