Retirement planning Week 2

According to the Social Security Administration, how much pre-retirement income does Social Security replace for a household on average?

42%

Participation in which of the following plans will not be considered active participation for purposes of IRA deductibility?

457 Plan

What is the earliest age that an IRA catch-up contributions can be made?

50

Jacques is 62 years old, and his normal Social Security retirement age is 67. If he retires today, and his normal age retirement PIA is $2,000, how much can Jacques expect to receive as a monthly retirement benefit?

$1400

Rodger has a vested account balance in his employer-sponsored qualified money purchase pension plan of $60,000. He has two years of service with his employer and the plan follows the least generous graduated vesting schedule permitted under PPA 2006. If Rodger has an outstanding loan balance within the prior 12 months of $15,000, what is the maximum loan Rodger could take from this qualified plan, assuming the plan permitted loans?

$15000

Hiral is 62 years old, and his normal Social Security retirement age is 67. He plans on waiting to collect his benefits until he is 70 years old. If he waits until age 70, and his normal age retirement PIA is $2,000, how much can Hiral expect to receive as a monthly retirement benefit at age 70 (without regard to any COLA)?

$2480

Charles, a single 29-year-old CEO of a technology start-up company, earns a $2 million base salary with a $400,000 bonus. He is not a participant in any retirement plans at work. What is the maximum deductible IRA contribution Charles can make during 2022?

$6000

Which of the following plans is not permitted to offer a Roth account as part of the plan?

403 (b)

Which of the following are correct regarding 403(b) plans? i. Employee elective deferrals may be contributed to a Roth account within a 403(b) plan. ii. ERISA protections apply to all 403(b) plans. iii. Tax-exempt organizations, public school districts, educational institutions, and publicly-traded companies can utilize 403(b) plans.

1 Only

Which of the following distributions from a profit-sharing plan would not be subject to the 10 percent early withdrawal penalty, assuming the participant has not attained age 59½?

1. A distribution made to a spouse under a Qualified Domestic Relations Order (QDRO). 2. A distribution from a qualified plan used to pay the private health insurance premiums of a current employee of Clinical Trials Company. 3. A distribution to pay for costs of higher education. 4. A distribution made immediately after separation from service at age 57. 1 and 4

SEPs and SIMPLEs are tax advantaged retirement plans that are less complex than qualified plans and easier to implement. Which of the following statements is (are) true regarding SEPs and SIMPLEs? i. For an employee with a salary of $30,000, more money can be contributed (from both employee and employer) to a SEP than a SIMPLE. ii. The vesting and distribution rules for both plans are almost identical. iii. Both plans have the same coverage and participation rules.

2 only

Which of the following are generally correct about spending during retirement years.

3.)Retirement spending tends to decline during the latter part of retirement.

Seth, who is about 55 years old, runs a local Po-Boy shop in New Orleans. He has several high school kids who work for him part time. Seth's mom, Robin, helps make the best meatballs in the universe and works there full time. Which of the following plans makes the most sense for Seth if he earns about $120,000 and does not want to spend too much on a retirement plan?

401(k) profit sharing plan

Acme Inc., is establishing a retirement plan and they want a plan that includes a Roth account. Which of the following statements is correct about Roth accounts?

Roth accounts permit access for taxpayers who may otherwise not be able to contribute to a Roth IRA

A SEP can be established by which of the following entities? i. S corporation. ii. LLC taxed as a partnership. iii. C corporation

All 3 choices

U.S. government thrift savings plans share which of these characteristics with 401(k) plans?

Savings + tax benefits

Which of the following plans needs an actuary on an ongoing basis?

Defined Benefit or Cash Balance

Which of these assumptions are built into Social Security statements? (select all that apply)

Birth Rates Inflation Interest Rates Labor force participation rate Unemployment rate Demographics (all apply)

Defined benefits plans and cash balance plans are both pension plans. However, they are significantly different plans. Which of the following statements is true?

Both plans can provide for lumpsum benefits upon termination and/or full retirement age

A retirement plan falls into two main categories: a __________ plan or a _________ plan.

Defined Benefit ; Defined Contribution

The primary benefit of a Roth retirement account is

Earnings grow tax free

One of the purposes of a retirement plan is to accumulate retirement assets. Increases in retirement assets are a result of contributions by employers and employees as well as investment earnings on the retirement assets. Which of the following is correct regarding the investment management of retirement assets?

Employers can commingle assets from employees retirement accounts and have a third party asset manager or manage the assets in house

Randolph Reich III is retiring early from his position as CEO of BIG Co. BIG is providing him with a lucrative severance package for early retirement. Which of the following is the name of this type of benefit?

Golden Handshake

Profit sharing plans and stock bonus plans have similarities and differences. Which of the following statements are correct regarding these plans? i. Both plans allow participants to vote their shares held by the plan. ii.Stock bonus plans and profit sharing plans can make lump-sum distributions of employer securities at the termination of an employee.

II Only

Billie is your new client and is of the age where they need to take required minimum distributions (RMD). They have the following accounts:

i. Rollover IRA ii. Traditional IRA iii. Non-retirement joint account iv. 401(k) from Kodak v. 401(k) from Xerox vi. 403(b) from RIT

Without incurring tax liability, assets can be rolled: (select all that apply)

If rolled into Ira in 60 days 498 Any distribution from a 403b plan into a qualified plan, traditional IRA or another 403b retirement account Rolling over 401k that has a loan on it would incur taxes Missing the 60 day window for rollovers The following would not incur taxes: 403b 401k Roth 401k Roth IRA IRA All qualified retirement plans should be able to be rolled over without tax liability

Which of these is not true about nonqualified plans?

It needs IRS approval

All the following types of income are considered earned income for a traditional IRA contribution except:

K-1 income from an S corporation

Which of the following are correct regarding SIMPLEs?

Once deposited in a simple IRA, funds can be distributed by the participant

Which of the following types of income is considered earned income for a traditional IRA contribution?

Partnership income from a law firm

Which of the following expenditures will most likely decrease during retirement?

Retirement Savings

Which of the following statements about stock bonus plans is false?

Stock Bonus plans are generally as cost efficient to operate as cash profit sharing plans

Which of the following statements is not correct regarding stock bonus plans?

Stock bonus plans are generally as cost efficient to operate as profit-sharing plans or money purchase pension plans.

True or false: when a Roth contribution is made in a year, the tax on that contribution is being "locked in".

TRUE

Which of the following is true about distributions from traditional IRAs? (select all that apply)

Taxed as ordinary income at the time of withdrawal Required minimum distribution at 70 i/2 (or age 72 if age 70 ½ is attained after December 31, 2019) AB must be calculated if its a rollover IRA from different account types

In a defined contribution plan, who bears the investment risk?

The employee

True or false: most individuals do not receive their Social Security statements via mail anymore.

True

The primary consideration when trying to decide whether a Roth contribution or traditional contribution makes more sense depends primarily on

Wether your tax bracket will be higher or lower in retirement than your marginal tax bracket is now

Are Social Security benefits adjusted for inflation?

Yes

Taking a loan from a 401(k) plan may be preferable to taking a distribution because (select all that apply)

You don't have to pay a 10% early withdrawal penalty You don't have to pay income taxes