Finance Quiz Chapter 10
Somerset, age 43, is self-employed and started saving for retirement 8 years ago using a Roth IRA. He liked the idea of someday taking distributions on a tax-free basis. Unfortunately, he has recently run into some business troubles and needs to raise cash quickly. He would like to take a distribution from his Roth IRA immediately. Which of the following statements is true for Somerset?
As long as he only takes out his contributions—not the account earnings—the distribution will be tax- and penalty-free.
What is the difference between defined benefit plans and defined contribution plans?
Defined benefit plans guarantee payments to retirees, whereas defined contribution plans make contributions to retiree accounts without making guarantees.
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?
Fiduciary standard.
Roger is currently age 68. He is creating a retirement income plan. As such, he needs to estimate his future required distributions from his retirement plans. Help Roger by telling him when he must begin taking distributions from his Roth IRA.
He never needs to take a distribution.
Which of the following refers to someone who died without a will?
Intestate.
Which of the following refers to legal documents that allow a named person, often an agent, to act on your behalf?
Power of attorney (POA).
A retirement plan that provides the possibility for a tax-free distributions and tax-deferral of earnings until they are distributed is called a:
Roth IRA.
Xavier recently graduated from college with a degree in mechanical engineering. He currently makes $87,000 per year. He has aspirations to move up with his firm and eventually earn much more. If his plan works out, he will be paying more taxes sometime in the future. Which of the following retirement plan options should Xavier choose today?
Roth IRA.
The person tasked with the responsibility of carrying out a will's directions and disposing of the deceased's property is known as:
The executor.
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.
Mark, age 56, is a single man and died intestate. In addition to household and personal items, he had $450,000 in 401(k) retirement assets, and a named beneficiary for his 401(k) account. Who will receive the 401(k) plan?
Whomever Mark listed as the account beneficiary.
A defined benefit plan is
a pension plan.
Financial counselors tend to be ______________ oriented, whereas financial planners tend to be ______________ oriented.
past; future
A retirement plan that provides the possibility for a tax-deductible contribution and tax-deferral of earnings is called a:
traditional IRA.
A legal document that dictates your desire to distribute your property after death is called a:
will.
