FIN 201: Ch.14 Reading Assignment

Select all that apply Which of the following are myths about retirement planning?

- There's plenty of time for me to start saving for retirement. - I can depend on Social Security and pension plan to pay my living expenses. - Your pension benefits will increase to stay up with inflation. - Medicare will cover all my medical expenses.

Select all that apply The two most important initial questions to ask about a private pension plan are: - What is the mode of payment of benefits? - When do I become eligible for pension benefits? - What will be the benefits? - What will be the annual payout during the accumulation phase?

- What will be the benefits? - When do I become eligible for pension benefits?

Select all that apply Sources of retirement income usually include:

- employer pension plans - public pension plans - payments from annuities

Select all that apply The expenses that typically increase as a result of retirement include:

- recreation - health insurance - medical costs

Select all that apply The financial decisions related to housing as you try to maximize current income and prepare for retirement might include: - selling your home and buying a smaller less expensive home. - purchasing a larger dream home in a warmer climate. - considering a smaller house that is less costly to maintain than a larger home.

- selling your home and buying a smaller less expensive home. - considering a smaller house that is less costly to maintain than a larger home.

With a(n) _______, your employer will often match your contributions up to a specific dollar amount or percentage of your salary.

401(k) plan

Which plan's retirement payments are determined by the employer and specifies what you will receive at retirement age?

Defined-benefit plan

True or False: Many companies are discontinuing defined-benefit plans and moving toward defined-contribution plans, which shifts more responsibility to the company for providing retirement benefits.

False

True or false: A person must work 20 years to be eligible for Social Security retirement benefits.

False

Based on U.S. Bureau of Labor Statistics, which of the following is true?

Retired families spend a greater share of their income for food, housing, and medical care than nonretired families.

When saving for retirement, which of the following is NOT a good advice?

Saving early in small amounts is not as good as saving later in larger amounts.

True or False: The contributions and earnings of an employer-sponsored pension plan remain tax-deferred until you withdraw them.

True

True or False: The use of an emergency fund during retirement is for unexpected situations that arise.

True

True or False: Under a defined-benefit plan, the plan's actuary determines the annual employer contribution based on how much money will be needed in the fund as each participant in the plan retires.

True

True or False: When planning for a successful retirement savings plan, one should determine the current financial situation.

True

A defined-contribution retirement plan provides an individual ______ for each participant. (Enter only one word per blank.)

account

Once your children become self-sufficient, you may consider ______ (increasing/decreasing) your life insurance coverage.

decreasing

The 403(b) and 401(k) accounts are examples of employee retirement ______-contribution plans.

defined

The move by most companies to ______-______ plans sometimes called individual account plan has forced employees to take more responsibility for retirement.

defined; contribution

Social Security provides more benefits than just retirement protection, including survivors' and benefits to ______ persons.

disabled

As you consider your retirement living expenses, remember to plan for ______.

emergencies

A pension plan is a retirement plan that is funded, at least in part, by a(n) ______.

employer

Your first step in retirement planning is to determine your current ______ situation.

financial

A(n) ______ will probably be your most valuable asset in retirement, so it is important to consider carefully what size of payments you can afford.

house

Retired families spend a ______ (smaller/larger) share of their income on food, housing, and medical care than nonretired families.

larger

Federal income taxes will probably be ______ during retirement.

lower

With a _____ plan, your employer promises to set aside a certain amount of money for you each year.

money-purchase

The belief that you have plenty of time to start saving for retirement is a common ______ about the retirement years.

myth

Sources of retirement income include public ______ plans, employer pension plans, personal retirement plans, and ______.

pension; annuities

Some pension plans allow ______ which means that you can carry earned benefits from one pension plan to another when you change jobs.

portability

Two strategies with regards to life insurance that may be employed to make retirement affordable involve reducing your ______ payments by decreasing your life insurance ______.

premium; coverage

With a money-______ pension plan, the employer promises to set aside a certain amount of money for you each year.

purchase

Vesting is an employee's right to:

receive some of the employer's pension plan contributions when leaving before retirement

One tip for saving for retirement is to keep your money in your former employer's retirement plan once you leave a job, or you can:

roll over the money into an IRA.

A 401(k) plan is a ______-reduction plan that reduces your salary by the amount of your contributions and results in a lower current tax liability.

salary

In a ______ plan, your employer's contribution is used to buy stock in the company for you.

stock bonus

With a(n) ______ bonus plan, your employer's contribution is used to buy shares of your employer's stock, which is held in ______ until you retire.

stock; trust

Your right to at least part of the benefits accrued under a pension plan is called ______.

vesting