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chapter 15

Terms in this set (19)

You are participating in a pension plan where the company's contributions vary from year to year, depending on the firm's performance. This is an example of a(n)
profit-sharing plan
Like many Americans you know that you must plan your retirement funds carefully because there may be a discrepancy between the funds that you will need to survive on during retirement and the income that you will have available during retirement. What will likely be the relationship between fund needs and income available during retirement for most Americans?
They will not be close - needs will be greater than income
If you have a defined-benefit retirement plan through your place of employment, you are considered a(n) ________; and as such, there is an income limit after which your IRA contributions are no longer tax deductible.
active participant
By law, everyone must contribute the maximum amount into their 401(k) plans at work.
false
Frances McClurg favors the Roth IRA over the traditional IRA. What advantage does the Roth provide over the traditional IRA?
She can avoid income taxes when she withdraws.
Why might one want to select the lump-sum payment option for one's retirement funds?
All of the above
Under the annuity for life policy your payments will continue to your beneficiaries upon your passing up until a specified time.
true
The good thing about retirement is you no longer have to pay income taxes.
false
You and your spouse both have good retirement plans through work and you both receive good Social Security checks based on your own incomes. If your goal is to maximize the size of your annuity check every month, which option should you choose?
NOT Joint and Survivor Annuity
A joint and survivor annuity provides payments for both you and your spouse.
true
The difference between a Money Purchase Plan and a Profit Sharing plan is that
NOT both with the Profit Sharing Plan the employee is guaranteed to see profits in their retirement funds and Profit Sharing Plans constantly outperform Money Purchase Plans are correct.
A 'self-directed' retirement plan is one in which a plan administrator determines how much your contributions will be and what investment options you will have available.
false
Because inflation makes goods and services cost more over time, one would be wise to always plan for inflation when planning one's retirement.
true
You should take advantage of any matching your company is willing to do for your 401(k).
true
It is a good idea to start saving for retirement as early as possible to take advantage of compounding returns on your savings.
true
Lucius starts saving $100 per month at age 25 and averages 6% per year compounded monthly. Hector starts saving $1,215.22 per month at age 55 and averages 6% per year compounded monthly. Who will be better off at age 65 assuming neither had in money in their account when they started?
NOT Lucius will have $199,149.07 and Hector will have $163,879.34 at age 65
Under a single life annuity, you receive a set monthly payment for the rest of your life.
true
Two of the most important considerations when saving for retirement is the time you have to save and the return you earn on your savings.
true
A ________ option provides payments over the life of both you and your spouse no matter how long you live.
joint and survivor annuity
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