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Exam 18: Starting Early: Retirement Planning

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Question 71

Multiple Choice

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Which of the following is(are) a feature of an Education IRA?

A) tax-deferred interest and earnings
B) 10% early withdrawal penalty waiver when money is used for higher-education
C) annual limit on individual contributions
D) non-deductible contributions
E) all of the features listed in the other answers

F) A) and B)
G) A) and D)

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Question 72

True/False

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The amount of the minimum required distribution from a 401(k)at age 70½ is based on your life expectancy at the time of the distribution.

A) True
B) False

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Question 73

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Keogh plans can be both defined-contribution and defined-benefit plans.

Explain the difference between a defined-contribution and defined benefit plan.

Your expenses for leisure activities will probably decrease during retirement.

Karen Endicott is planning for her retirement.She knows that after she retires she will no longer need her own single family dwelling.She plans on buying a condominium in Chicago,close to the bus and train line and close to a grocery store.What step in the retirement planning process is Karen completing?

Saving money doesn't come naturally to many young people.

John Carpenter works as a manager of a retail store.His employer has been setting money aside for him each month in the amount of 7 percent of his monthly earnings.What type of retirement plan does John have?

Nancy Moore is planning for her retirement.She guesses that by the time she retires her mortgage will be paid off on her home.She expects she will pay $600 a month on food and that her medical expenses will be $400 a month.She also estimates that she will spend $400 a month on things that she enjoys like traveling,going to concerts,reading and other similar activities.What step in the retirement planning process is Nancy completing?

Which of the following is typically a characteristic of a defined benefit plan?

Sarah Logan is a professor at a public university.Her employer makes nontaxable contributions to a plan in her name and reduces her salary by the same amount.What type of retirement plan does Sarah have?

If a marriage lasted more than 15 years,the marital assets are generally split 50-50 if the couple divorces.

With a defined-contribution plan,the plan document specifies the benefits promised to the employee at the normal retirement age.

Pension plan portability enables you to carry earned benefits from one employer's pension plan to another's when you change jobs.

The potential loss of buying power during inflation is what makes it so important to plan ahead for your retirement.

Why is it important to review your assets and liabilities before your retirement?

Some retirement planning experts suggest that you start retirement planning while you are:

You can keep money in most retirement plans indefinitely.

The people who are in the best position to save are:

Social Security should be the only source of your retirement income.