Verified Test Bank Ch18 Starting Early: Retirement Planning - Personal Finance 13e Answer Key + Test Bank by Jack Kapoor. DOCX document preview.
Personal Finance, 13e (Kapoor)
Chapter 18 Starting Early: Retirement Planning
1) You can depend on your employer's health insurance plan and Medicare to pay all your medical expenses when you retire.
Difficulty: 2 Medium
Topic: Retirement living expenses and cash flows
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
2) It is vital to engage in basic retirement planning activities throughout your working years.
Difficulty: 1 Easy
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
3) Saving now for the future requires tackling the trade-offs between spending and saving.
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
4) Only by saving now and curtailing current spending can you ensure a comfortable retirement later.
Difficulty: 1 Easy
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
5) A successful, happy retirement just doesn't happen; it takes planning and continual evaluation.
Difficulty: 1 Easy
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
6) One of the misconceptions about retirement is that your expenses will drop when you retire.
Difficulty: 2 Medium
Topic: Retirement living expenses and cash flows
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
7) You can depend on Social Security and your company pension to pay for your basic living expenses.
Difficulty: 1 Easy
Topic: Retirement income and its sources
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
8) It is almost certain that your pension benefits will increase to keep pace with inflation.
Difficulty: 2 Medium
Topic: Retirement income and its sources
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
9) Saving money doesn't come naturally to many young people.
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
10) The time to begin saving is when you are young.
Difficulty: 1 Easy
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
11) Inflation increases the purchasing power of your retirement savings.
Difficulty: 1 Easy
Topic: Retirement living expenses and cash flows
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
12) Your assets include everything you own that has value.
Difficulty: 1 Easy
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
13) In a reverse annuity mortgage, a lender uses your house as collateral to buy an annuity for you from a life insurance company.
Difficulty: 2 Medium
Topic: Retirement income and its sources; Reverse mortgages
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
14) During retirement, you should increase your premium payments by increasing the face value of your life insurance.
Difficulty: 2 Medium
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
15) The current value of your life insurance and pensions are included in your assets.
Difficulty: 2 Medium
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
16) Generally, the current value of your jewelry is not included in your assets.
Difficulty: 3 Hard
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
17) Your mortgage, car payments, credit card balances, and taxes due are all examples of your liabilities.
Difficulty: 2 Medium
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
18) Divorce creates difficulties when it comes to division of marital assets for adults thinking about their retirement years.
Difficulty: 2 Medium
Topic: Retirement living expenses and cash flows; Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
19) The exact amount of money you will need in retirement can be predicted accurately.
Difficulty: 1 Easy
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
20) Your expenses for leisure activities will probably decrease during retirement.
Difficulty: 1 Easy
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
21) Your work-related expenses, such as driving back and forth to work, will be lower or eliminated during retirement.
Difficulty: 2 Medium
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
22) Your federal income taxes will probably be lower during the retirement years.
Difficulty: 1 Easy
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
23) Although medical expenses vary from person to person, they tend to decrease with age.
Difficulty: 2 Medium
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
24) The potential loss of buying power due to inflation is what makes it so important to plan ahead for your retirement.
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
25) Too many people make the move to change housing during retirement without doing enough research.
Difficulty: 1 Easy
Topic: Retirement housing options
Learning Objective: 18-04 Identify your retirement housing needs.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
26) If you think you want to live in another city during retirement, it's a good idea to plan vacations now in areas you might enjoy later.
Difficulty: 1 Easy
Topic: Retirement housing options
Learning Objective: 18-04 Identify your retirement housing needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
27) According to the Social Security Administration, disabled workers represent 14% of those who receive Social Security benefits.
Difficulty: 3 Hard
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
28) Social Security was originally intended to provide 100 percent of retirement income.
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
29) Most people can qualify for reduced Social Security retirement benefits at age 62.
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
30) The law exempts all Social Security benefits from federal income taxes.
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
31) Under a 401(k) plan, your employer makes nontaxable contributions to the plan for your benefit and reduces your salary by the same amounts.
Difficulty: 1 Easy
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
32) In a Roth IRA, contributions are not tax deductible, but earnings accumulate tax free.
Difficulty: 2 Medium
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
33) Social Security is a package of protection, providing retirement, survivors', and disability benefits.
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
34) Social Security should be the only source of your retirement income.
Difficulty: 1 Easy
Topic: Retirement income and its sources; Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
35) Your Social Security payments will start at age 65 whether you apply for benefits or not.
Difficulty: 3 Hard
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
36) The Social Security office will require you to provide proof of your age to apply for Social Security benefits.
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
37) If you work after 65, your Social Security benefits will neither increase nor decrease.
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
38) Because of longer life expectancies, the full retirement age is greater than age 65 for younger individuals.
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
39) People born after 1928 need at least 60 quarters of coverage to qualify for Social Security benefits.
Difficulty: 3 Hard
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
40) If you leave your company before you retire, then you have a right to a portion of the benefits you have accrued under an employer pension plan only if you are vested.
Difficulty: 3 Hard
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
41) Your Social Security benefits may be reduced if you earn above a certain amount a year, depending on your age and the amount you earn.
Difficulty: 3 Hard
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
42) Social Security benefits do not increase even if the cost of living increased during the preceding year.
Difficulty: 2 Medium
Topic: Social Security; Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
43) When you change jobs, your 401(k) plan savings can be left with the previous employer's plan, can be rolled over to the new employer's plan or to an IRA, or can be cashed out.
Difficulty: 2 Medium
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
44) According to the 2015 OASDI Trustees Report, "Social Security is not sustainable over the long term at current benefit and tax rates."
Difficulty: 1 Easy
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
45) Besides Social Security, the federal government administers several other retirement plans for federal government and railroad employees.
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
46) Employees who are covered under the Railroad Retirement System are also covered by Social Security.
Difficulty: 3 Hard
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
47) Most employer pension plans are either defined-contribution or defined-benefit plans.
Difficulty: 3 Hard
Topic: Defined contribution plans; Defined benefit plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
48) Over the last two decades, the defined-benefit plan has continued to grow rapidly while the number of defined-contribution plans has generally dropped.
Difficulty: 3 Hard
Topic: Defined benefit plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
49) A defined-contribution plan has an individual account for each employee; therefore, these plans are also called individual account plans.
Difficulty: 3 Hard
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
50) Profit-sharing plans and 401(k) plans are examples of defined-contribution plans.
Difficulty: 2 Medium
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
51) If your employer is a tax-exempt institution such as a hospital, university, or museum, then the salary reduction plan is called a Section 403(b) plan.
Difficulty: 2 Medium
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
52) If you are a government employee, then the salary reduction plan may be a Section 457 plan.
Difficulty: 2 Medium
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
53) Money-purchase pension plans, stock bonus plans, profit-sharing plans, 401(k) plans, 403(b) plans, and Section 457 plans are examples of defined-contribution plans.
Difficulty: 3 Hard
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
54) All earnings in a tax-sheltered annuity grow without current federal taxation.
Difficulty: 2 Medium
Topic: Taxation and retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
55) The biggest benefit of an IRA lies in its tax-deferred earnings growth; the longer the money accumulates tax deferred, the bigger the benefit.
Difficulty: 2 Medium
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
56) With a defined-contribution plan, the plan document specifies the benefits promised to the employee at the normal retirement age.
Difficulty: 3 Hard
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
57) Because of their actuarial aspects, defined-benefit plans tend to be more complicated and more expensive to administer than defined-contribution plans.
Difficulty: 3 Hard
Topic: Defined benefit plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
58) The shift to defined-contribution plans has forced employees to take more responsibility for their retirement.
Difficulty: 2 Medium
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
59) Pension plan portability enables you to carry earned benefits from one employer's pension plan to another's when you change jobs.
Difficulty: 1 Easy
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
60) Although the full retirement age is rising, you should still apply for Social Security benefits three months before your 65th birthday.
Difficulty: 2 Medium
Topic: Medical costs; Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
61) ERISA established the Pension Benefit Guaranty Corporation to provide pension insurance.
Difficulty: 1 Easy
Topic: Defined benefit plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
62) The Social Security Administration provides a history of your earnings and an estimate of your future monthly benefits online.
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
63) Your contribution to a Traditional IRA is fully tax deductible regardless of your filing status and your income.
Difficulty: 3 Hard
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
64) You can borrow from your Roth IRA.
Difficulty: 2 Medium
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
65) You may convert your traditional IRA to a Roth IRA.
Difficulty: 2 Medium
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
66) Under certain circumstances, the Roth IRA allows for tax-free, penalty-free distributions.
Difficulty: 2 Medium
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
67) The Education IRA was renamed the Coverdell Education Savings Account.
Difficulty: 1 Easy
Topic: Paying for an education
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
68) You can keep money in most retirement plans indefinitely.
Difficulty: 2 Medium
Topic: Taxation and retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
69) The amount of the minimum required distribution from an IRA at age 70-1/2 is based on your life expectancy at the time of the distribution.
Difficulty: 2 Medium
Topic: Taxation and retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
70) Whether or not you are covered by a pension plan, you can still make nondeductible IRA contributions.
Difficulty: 3 Hard
Topic: Taxation and retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
71) A SEP-IRA plan is simply an individual retirement account funded by the employer.
Difficulty: 2 Medium
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
72) Your contributions to a SEP-IRA, which can vary from year to year, are tax deductible and earnings accumulate on a tax-deferred basis.
Difficulty: 3 Hard
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
73) You can put your IRA funds in many kinds of investments, including stocks, bonds, mutual funds, real estate, and U.S.-minted gold and silver coins.
Difficulty: 3 Hard
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
74) The average 2018 monthly Social Security benefit for a retired worker is approximately $1,408.
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
75) Keogh plans can be defined-contribution plans or defined-benefit plans.
Difficulty: 2 Medium
Topic: Self-employed and other retirement plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
76) An annuity provides guaranteed income for life.
Difficulty: 1 Easy
Topic: Annuities
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
77) You can only buy an annuity by making periodic payments.
Difficulty: 2 Medium
Topic: Annuities
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
78) The rate of return on annuities is rarely tied to market rates.
Difficulty: 2 Medium
Topic: Annuities
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
79) Earned interest on annuities accumulates tax free until the annuity payments begin.
Difficulty: 3 Hard
Topic: Taxation and retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
80) Annuity payouts may either be a fixed or a variable amount.
Difficulty: 2 Medium
Topic: Annuities
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
81) You can create a "my Social Security" account if you are 18 or older and have a Social Security number, valid e-mail, and U.S. mail address.
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
82) Immediate annuities provide income payments at once and are usually purchased with a lump-sum payment.
Difficulty: 2 Medium
Topic: Annuities
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
83) The EGTRRA was passed by Congress in 2001 and increased the employee annual contribution limit for 401(k) and other employer-sponsored retirement plans.
Difficulty: 3 Hard
Topic: Taxation and retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
84) A joint-and-survivor annuity pays its installments until the death of the last designated survivor.
Difficulty: 2 Medium
Topic: Annuities
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
85) With a fixed-dollar annuity, the money you pay is invested in common stocks or other equities that have a guaranteed return.
Difficulty: 2 Medium
Topic: Annuities
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
86) The first step in stretching your retirement income is to make sure you are receiving all of the income to which you are entitled.
Difficulty: 1 Easy
Topic: Retirement income and its sources
Learning Objective: 18-06 Develop a balanced budget based on your retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
87) More than half of Americans ages 65 to 74 are still in the workforce.
Difficulty: 3 Hard
Topic: Postretirement employment
Learning Objective: 18-06 Develop a balanced budget based on your retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
88) During retirement, as long as you do not earn more than the annually exempt amount through part-time work, your Social Security payments will not be affected.
Difficulty: 3 Hard
Topic: Social Security
Learning Objective: 18-06 Develop a balanced budget based on your retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
89) To offset inflation, your retirement assets must earn enough to keep up with, and even exceed, the rate of inflation.
Difficulty: 1 Easy
Topic: Retirement living expenses and cash flows
Learning Objective: 18-06 Develop a balanced budget based on your retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
90) For the average individual, which one of the following statements is most likely correct regarding retirement?
A) My costs of daily living will decrease significantly once I retire.
B) I can only expect to live about ten years in retirement, so I don't need to save that much money.
C) Once I retire, all my medical bills will be paid by Medicare.
D) My employer's pension plan will provide sufficient income to meet all my retirement needs.
E) I need to save whatever I can, even if it's a little bit, to help cover my retirement costs.
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
91) Which one of the following is a true statement about retirement planning?
A) I should wait until at least age 45 to start planning for retirement.
B) My pension benefits will increase to keep pace with inflation.
C) I should update my retirement plan periodically.
D) My employer's health insurance plan will cover my medical expenses.
E) Social Security will cover my basic living expenses.
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
92) Which of the following is a true statement about retirement planning?
A) You can expect to spend about 16 to 30 years in retirement.
B) It's never too early to begin planning for retirement.
C) You should not let your 45th birthday roll by without a comprehensive retirement plan.
D) Retirement planning has both emotional and financial components.
E) All of these statements are true
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
93) Which statement is most likely correct about retirement planning?
A) Social Security is sufficient to cover your cost of living.
B) Your employer's pension combined with your Social Security will cover your basic living expenses.
C) Most retirees don't need to worry about inflation.
D) Your pension may remain constant and not keep pace with inflation.
E) Your expenses will drop once you retire.
Difficulty: 1 Easy
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
94) Your first step in retirement planning is to:
A) estimate your spending needs.
B) analyze your current assets and liabilities.
C) adjust your spending needs for inflation.
D) evaluate your planned retirement income.
E) determine if you'll have to work during retirement.
Difficulty: 3 Hard
Topic: Financial situation analysis
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
95) The people who are in the best position to save are:
A) teenagers.
B) young adults in their 20s.
C) people in their 30s.
D) middle-aged.
E) elderly.
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
96) Some retirement planning experts suggest that you start retirement planning while you are:
A) in school.
B) married.
C) divorced.
D) middle-aged.
E) still employed.
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
97) Why is financial planning for retirement critically important?
A) You can expect to live in retirement up to 30 years.
B) Social Security and your private pension may be insufficient to cover the cost of living.
C) Inflation may diminish the purchasing power of your retirement savings.
D) You can expect to live in retirement for a minimum of 16 years.
E) All of the listed factors are critically important.
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
98) You can determine your net worth by:
A) subtracting your assets from your liabilities.
B) subtracting the value of your home from the mortgage balance.
C) adding your liabilities and assets.
D) subtracting your liabilities from your assets.
E) adding the value of your home to that of your other assets.
Difficulty: 1 Easy
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
99) When a lender uses your house as collateral to buy an annuity for you from a life insurance company, it is called a reverse annuity mortgage or:
A) an obverse annuity mortgage.
B) an equity conversion.
C) mortgage life insurance.
D) a level-premium annuity.
E) whole life insurance.
Difficulty: 2 Medium
Topic: Reverse mortgages
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
100) You can get a reverse annuity mortgage if:
A) you are willing to sell your house immediately.
B) you buy a new home and pay only a minimal down payment.
C) your mortgage is largely or completely paid off.
D) you owe more in monthly mortgage interest than the annuity amount.
E) you are willing to allow your principal mortgage balance to increase monthly.
Difficulty: 2 Medium
Topic: Reverse mortgages
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
101) During a divorce, pension benefits are generally divided between the spouses primarily based on the:
A) length of the divorce period.
B) life expectancies of each spouse.
C) length of the marriage.
D) current age of each spouse.
E) living arrangements for the couple's children.
Difficulty: 2 Medium
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
102) In a marriage that lasts more than 15 years, there's generally a ________ split of the marital assets during a divorce.
A) 10-90
B) 30-70
C) 40-60
D) 50-50
E) 60-40
Difficulty: 3 Hard
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
103) Which statement is correct regarding retirement living expenses?
A) It is impossible to estimate your spending needs.
B) Your spending patterns will probably not change.
C) You'll use a smaller share of your income for food, housing, and medical care than non-retired families.
D) The exact amount of money you'll need is impossible to predict.
E) Work-related expenses, such as driving back and forth to work, tend to be higher during retirement.
Difficulty: 1 Easy
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
104) Which one of the following expenses for retirees is most likely to increase?
A) Medical expenses
B) Federal income taxes
C) Clothing expenses
D) Work-related expenses
E) Housing expenses
Difficulty: 1 Easy
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
105) Which one of the following expenses for retirees is most likely to decrease?
A) Clothing expenses
B) Insurance expenses
C) Medical expenses
D) Expenses for leisure activities
E) Gifts and contributions
Difficulty: 1 Easy
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
106) Which one of the following expenses for retirees is most likely to decrease?
A) Gifts and contributions
B) Insurance
C) Expenses for leisure activities
D) Medical expenses
E) Federal income taxes
Difficulty: 2 Medium
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
107) Which type of housing is preferred by most people who are approaching retirement?
A) House-sharing
B) Present home
C) A smaller apartment
D) Nursing home
E) Boarding-house/rooming house
Difficulty: 2 Medium
Topic: Retirement housing options
Learning Objective: 18-04 Identify your retirement housing needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
108) Which type of housing is designed to allow people to stay in their homes as they grow older and more frail?
A) Two-story house
B) Multi-story apartment complex
C) Rooming house
D) Universal design
E) Rental unit
Difficulty: 2 Medium
Topic: Retirement housing options
Learning Objective: 18-04 Identify your retirement housing needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
109) Which of the following is a tip from retirement specialists on how to uncover hidden taxes and other costs of a retirement area before moving?
A) Call or write the local Chamber of Commerce to get an economic profile.
B) Contact the state's tax department to find out state income, sales, and inheritance taxes.
C) Call a local CPA to find out which taxes are rising.
D) Rent for a while instead of buying immediately.
E) Retirement specialists recommend all of these.
Difficulty: 2 Medium
Topic: Retirement housing options
Learning Objective: 18-04 Identify your retirement housing needs.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
110) Which one of the following is the most widely used source of retirement income?
A) IRAs
B) Keogh plans
C) Social Security
D) Company pension plans
E) Union pension plans
Difficulty: 1 Easy
Topic: Retirement income and its sources
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
111) Which employer retirement plan specifies the benefits promised to the employee at the normal retirement age?
A) Defined-contribution plan
B) SEP IRA
C) 401(k)
D) Roth IRA
E) Defined-benefit plan
Difficulty: 2 Medium
Topic: Defined benefit plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
112) Which federal law sets minimum standards for pension plans in private industry and protects more than 50 million workers?
A) Employee Retirement Income Security Act
B) Tax Reform Act
C) Early Retirement Act
D) Income Protection and Guarantee Act
E) Civil Rights Act
Difficulty: 2 Medium
Topic: Defined benefit plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
113) What are the two most popular personal retirement plans?
A) Keogh account and Social Security
B) Social Security and Roth IRA Plus
C) Keogh accounts and individual retirement accounts (IRAs)
D) 401(k) and Social Security
E) 403(b) and 401(k)
Difficulty: 2 Medium
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
114) Possible sources of income for many retirees include:
A) Social Security
B) Other public pension plans
C) Employer pension plans
D) Personal retirement plans
E) All of these
Difficulty: 1 Easy
Topic: Retirement income and its sources
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
115) Which retirement plan was specifically developed for self-employed individuals and their employees?
A) Roth IRA
B) Traditional IRA
C) Defined-contribution plan
D) Keogh plan
E) Defined-benefit plan
Difficulty: 2 Medium
Topic: Self-employed and other retirement plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
116) What type of annuity is generally purchased by people of retirement age?
A) Deferred annuity
B) Immediate annuity
C) Single-premium deferred annuity
D) Flexible-premium deferred annuity
E) Keogh annuity
Difficulty: 2 Medium
Topic: Annuities
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
117) An annuity in which payments stop when you die, whether a month or many years after the payout begins is called:
A) straight life annuity.
B) life annuity with installment certain.
C) installment refund annuity.
D) a life with period certain annuity.
E) Keogh annuity.
Difficulty: 3 Hard
Topic: Annuities
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
118) Which type of annuity gives more income per dollar of outlay than any other type?
A) Installment refund annuity
B) Life annuity with installment certain
C) Straight life annuity
D) Keogh annuity
E) Life with period certain annuity
Difficulty: 3 Hard
Topic: Annuities
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
119) Once you retire, which of the following is true about drawing on your savings?
A) Timing depends on your financial circumstances.
B) Timing depends on your age.
C) Timing depends on how much you want to leave to your heirs.
D) You should do so with caution.
E) All of these are true
Difficulty: 3 Hard
Topic: Retirement income and its sources
Learning Objective: 18-06 Develop a balanced budget based on your retirement income.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
120) Which one of the following is probably the best suggestion for staying within your retirement income?
A) Skip leisure activities
B) Cut your food expenditures
C) Cancel your life and property insurance
D) Use your skills and time instead of your money
E) Get rid of your health insurance
Difficulty: 2 Medium
Topic: Retirement income and its sources
Learning Objective: 18-06 Develop a balanced budget based on your retirement income.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
121) With respect to your federal income taxes, which one of the following may you have to do during retirement, even if you did not have to do so prior to retiring?
A) Report your dividend and interest income
B) Visit your local IRS office
C) File semiannual tax returns in April and October
D) File quarterly estimated tax returns or arrange for withholding on pension payments
E) File semiannual reports listing all of your income sources
Difficulty: 2 Medium
Topic: Income tax payments and penalties
Learning Objective: 18-06 Develop a balanced budget based on your retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
122) Which one of the following is a disadvantage associated with Social Security retirement income?
A) Earned income may partially offset benefits
B) Forced savings
C) Portable from job to job
D) Cost shared with employer
E) Inflation-adjusted survivorship rights
Difficulty: 3 Hard
Topic: Social Security
Learning Objective: 18-06 Develop a balanced budget based on your retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
123) Beverly Foster is planning for her retirement. She has determined that her car is worth $12,000, her home is worth $160,000, her personal belongings are worth $80,000, and her stocks and bonds are worth $250,000. She owes $50,000 on her home and $5,000 on her car. What step in the retirement planning process is Beverly completing?
A) Analyzing her current assets and liabilities
B) Estimating her spending needs
C) Evaluating her planned retirement income
D) Evaluating her retirement housing
E) Developing a balanced budget based on her retirement income
Difficulty: 2 Medium
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
124) 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?
A) Analyzing her current assets and liabilities
B) Estimating her spending needs
C) Evaluating her planned retirement income
D) Evaluating her retirement housing
E) Developing a balanced budget based on her retirement income
Difficulty: 2 Medium
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
125) Rebecca Murphy is planning for her retirement. She has done some checking and thinks she will get about $1,408 a month from Social Security. She also thinks her pension plan will pay her about $1,125 per month. In addition, she has some personal retirement accounts that she thinks will pay her $400 per month. What step in the retirement planning process is Rebecca completing?
A) Analyzing her current assets and liabilities
B) Estimating her spending needs
C) Evaluating her planned retirement income
D) Evaluating her retirement housing
E) Developing a balanced budget based on her retirement income
Difficulty: 2 Medium
Topic: Retirement income and its sources
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
126) 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?
A) Analyzing her current assets and liabilities
B) Estimating her spending needs
C) Evaluating her planned retirement income
D) Evaluating her retirement housing
E) Developing a balanced budget based on her retirement income
Difficulty: 2 Medium
Topic: Retirement housing options
Learning Objective: 18-04 Identify your retirement housing needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
127) Janice Jacobs is planning for her retirement. She knows what assets and liabilities she has now and expects to have in the future. She knows what her spending patterns are likely to be and adjusted them for inflation. She also has identified all of her sources of income after she retires. Now she is sitting down and planning her income and expenses each month. After she has finished this plan, she knows that she has enough income to cover her expected expenses and still have $200 extra each month for emergencies and other unplanned activities. Even with inflation, she thinks she can sustain this plan for approximately 30 years. What step in the retirement planning process is Janice completing?
A) Analyzing her current assets and liabilities
B) Estimating her spending needs
C) Determining her planned retirement income
D) Increasing her retirement income
E) Determining how long her retirement savings will last.
Difficulty: 2 Medium
Topic: Budgeting process
Learning Objective: 18-06 Develop a balanced budget based on your retirement income.
Bloom's: Analyze
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
128) What is most likely to be an individual's single biggest asset?
A) Automobile
B) Jewelry
C) Bank account
D) Home
E) Furniture
Difficulty: 2 Medium
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
129) Ted Riley owns a vehicle worth $20,000 and a home worth $230,000. He has a checking account balance of $1,000, a savings account balance of $1,000, and a mutual fund worth $75,000. His personal assets are worth $100,000. He still owes $10,000 on his car, $101,000 on his home, and $1,000 on his credit card. What is Ted's net worth?
A) $538,000
B) $427,000
C) $315,000
D) $112,000
E) $136,000
Explanation: Assets (20,000 + 230,000 + 1,000 + 1,000 + 75,000 + 100,000) − Liabilities (10,000 + 101,000 + 1,000) = 427,000 − 112,000 = $315,000
Difficulty: 3 Hard
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
130) As people reach retirement age, what is the most likely housing choice they would make? Assume they are moving to a new geographic area.
A) Split-level house with two sets of stairs
B) 100-year old house that needs lots of renovations
C) Smaller condominium close to the city bus line
D) House with 10 acres far out in the country
E) Larger rental house
Difficulty: 2 Medium
Topic: Retirement housing options
Learning Objective: 18-04 Identify your retirement housing needs.
Bloom's: Analyze
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
131) If you do not plan to retire early, then when should you apply for Social Security?
A) 3 months before your 65th birthday
B) 1 year before your 65th birthday
C) 1 year after your 65th birthday
D) 10 years before your 65th birthday
E) On your 65th birthday
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
132) What happens to your Social Security income if you retire early at age 62 instead of 65?
A) There is a temporary reduction of 5/9 of one percent for each month that you receive payments before age 65.
B) There is a permanent reduction of 5/9 of one percent for each month that you receive payments before age 65.
C) There is a temporary reduction of one percent for each year that you receive payments before age 65.
D) There is a permanent reduction of one percent for each year that you receive payments before age 65.
E) There is no impact on your Social Security income if you retire early.
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
133) If you work after age 65, your Social Security benefit will increase by one-fourth of one percent for each month you delay retirement up until what age?
A) 67
B) 70
C) 75
D) 80
E) 85
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
134) 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?
A) Money-purchase pension plan
B) Stock bonus plan
C) Profit-sharing plan
D) 403(b) plan
E) Defined benefit plan
Difficulty: 2 Medium
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
135) As its retirement plan contribution, Aaron Copeland's employer has been buying shares of the company's stock for Aaron's benefit. What type of retirement plan does Aaron most likely have?
A) Money-purchase pension plan
B) Stock bonus plan
C) Profit-sharing plan
D) Salary reduction plan
E) 403(b) plan
Difficulty: 2 Medium
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
136) The contribution Billy Foster's employer makes to his retirement plan depends on the profits of the company. What type of retirement plan does Billy have?
A) Money-purchase pension plan
B) Stock bonus plan
C) Profit-sharing plan
D) Salary reduction plan
E) 403(b) plan
Difficulty: 2 Medium
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
137) 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?
A) Money-purchase pension plan
B) Stock bonus plan
C) Profit-sharing plan
D) Defined benefit plan
E) 403(b) plan
Difficulty: 2 Medium
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
138) Ben Carmichael has been making contributions into an individual retirement account for his retirement. His contributions are tax deductible (based on his tax filing status and income) as his employer does not offer a retirement plan. What type of individual retirement account does he have?
A) Traditional IRA
B) Roth IRA
C) Spousal IRA
D) Coverdell Education Savings Account
E) 401(k)
Difficulty: 2 Medium
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
139) Jeremiah Brown has been making contributions into an individual retirement account for his retirement. His contributions are not tax deductible but his earnings accumulate tax free. What type of individual retirement account does he have?
A) Traditional IRA
B) Roth IRA
C) Spousal IRA
D) Coverdell Education Savings Account
E) 401(k)
Difficulty: 2 Medium
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
140) Bruce Wills has been making contributions into an individual retirement account on behalf of his nonworking wife. What type of individual retirement account is this?
A) Traditional IRA
B) Roth IRA
C) Spousal IRA
D) Coverdell Education Savings Account
E) SEP-IRA
Difficulty: 2 Medium
Topic: Individual retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
141) Sam Waterston has been making contributions into an individual retirement account to help pay for his children to go to college. Which type of account is he most likely using?
A) Traditional IRA
B) Roth IRA
C) SEP-IRA
D) Coverdell Education Savings Account
E) Rollover IRA
Difficulty: 2 Medium
Topic: Paying for an education
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
142) At a 3 percent rate of inflation, approximately how many years will it take for prices to double?
A) 9 years
B) 15 years
C) 21 years
D) 24 years
E) 30 years
Difficulty: 3 Hard
Topic: Retirement living expenses and cash flows
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
143) Which is correct with respect to life expectancy?
A) Men have a longer life expectancy than women at age 65.
B) There is no difference in life expectancy between men and women at age 65.
C) Women have a longer life expectancy than men at age 65.
D) There is no difference in life expectancy among retirees in retirement communities at age 65.
E) At age 65, the average life expectancy for a man is 25 years.
Difficulty: 1 Easy
Topic: Life expectancy
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
144) Jasmine Smith owns a condo worth $250,000, a car valued at $15,000, and miscellaneous assets worth $7,000. She owes $125,000 on the condo and $10,000 on the car and has no other debts. Her retirement account, in which she is fully vested, contains $28,000 in mutual funds. She was just insured with a $200,000 term life insurance policy. What are her total assets?
A) $200,000
B) $300,000
C) $100,000
D) $592,500
E) $600,000
Explanation: Assets = 250,000 + 15,000 + 7,000 + 28,000 = $300,000
Difficulty: 3 Hard
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Analyze
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
145) Which of the following is typically a characteristic of a defined benefit plan?
A) Employer funded with federal rules setting the amounts that employers must contribute
B) Employee contributions generally required
C) No federal guarantee of benefits
D) Employee-managed investments
E) Account balances transferable to IRAs
Difficulty: 3 Hard
Topic: Defined benefit plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
146) Which of the following is typically a characteristic of a defined contribution plan?
A) Employer promises a retirement benefit
B) No employee contributions
C) No federal guarantee of benefits
D) Retirement benefit computed based on an age, wage, and years of service formula
E) Account balance not transferable to an IRA
Difficulty: 3 Hard
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
147) Which one of the following is not a typical characteristic of a defined benefit plan?
A) Employer contributions
B) Formula-based benefit
C) Investments managed by plan officials
D) Federal government guarantees some benefit amount
E) Employee required contributions
Difficulty: 3 Hard
Topic: Defined benefit plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
148) Which one of the following is not a typical characteristic of a defined contribution plan?
A) Employer may match contributions
B) Ability to transfer account balance to an IRA
C) Guaranteed formula-based benefit
D) Employee-managed investments
E) Benefit depends on employee contributions
Difficulty: 3 Hard
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
149) Which one of the following is not a private source of retirement income?
A) Traditional IRAs
B) Social Security
C) Defined contribution plans
D) Defined benefit plans
E) Spousal IRAs
Difficulty: 1 Easy
Topic: Retirement income and its sources
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
150) Which of the following is a feature of an Education IRA?
A) Can be used for elementary and secondary school costs
B) Renamed the Coverdell Education Savings Account
C) Annual contribution limit of $2,000 for each child
D) Non-deductible contributions
E) All of these are features of an Education IRA.
Difficulty: 2 Medium
Topic: Paying for an education
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
151) Social Security covers approximately what percent of all U.S. workers?
A) 72
B) 78
C) 86
D) 97
E) 99
Difficulty: 1 Easy
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
152) The Social Security Administration estimates that what percent of individuals age 65 and older would live in poverty without Social Security benefits?
A) 18
B) 23
C) 37
D) 41
E) 47
Difficulty: 1 Easy
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
153) According to the 2017 Trustees Report, in what year is it projected that the funds available for paying Social Security benefits will be exhausted at current benefit and tax rates?
A) 2021
B) 2033
C) 2047
D) 2050
E) 2062
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
154) If a rollover from a retirement fund or other IRA is not made directly to a similar employer-provided retirement plan or an IRA, there will be a mandatory federal income tax withholding equal to what percent of the taxable distribution?
A) 5
B) 10
C) 15
D) 20
E) 25
Difficulty: 2 Medium
Topic: Taxation and retirement accounts
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
155) Almost one out of every ________ Americans collects some kind of Social Security benefit.
A) 2
B) 4
C) 5
D) 6
E) 10
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
156) Up to what percent of your Social Security benefits may be subject to federal income tax?
A) 10
B) 25
C) 50
D) 75
E) 85
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
157) People born after 1928 need at least how many quarters of coverage to qualify for Social Security benefits?
A) 20
B) 40
C) 60
D) 80
E) 100
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
158) The full Social Security benefit for a spouse is what percent of the retired worker's full benefit?
A) 25
B) 40
C) 50
D) 65
E) 80
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
159) Which of the following are considered tax-sheltered annuity plans?
A) Education IRAs
B) Stock bonus plans
C) Profit-sharing plans
D) Money-purchase pension plans
E) 401(k) plans, Section 403(b) plans, and Section 457 plans
Difficulty: 3 Hard
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
160) Your right to at least a portion of the benefits you have accrued under an employer pension plan is called:
A) vesting.
B) inflation-adjusted survivorship.
C) lump-sum withdrawal option.
D) guaranteed formula-based benefit.
E) None of these
Difficulty: 2 Medium
Topic: Defined contribution plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
161) According to the Securities and Exchange Commission, one of the easiest ways to boost your retirement savings is:
A) apply for Social Security
B) save by regular, automatic deductions from your paycheck
C) move to less expensive housing
D) rent out a room in your house
E) begin saving a lot when you reach age 45
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
162) What percent of the average worker's preretirement earnings is replaced by Social Security?
A) 25%
B) 40%
C) 50%
D) 70%
E) 90%
Difficulty: 2 Medium
Topic: Social Security
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
163) For every 10 years you delay before starting retirement, you will need to save ________ times as much each month to catch up.
A) ten
B) nine
C) six
D) five
E) three
Difficulty: 3 Hard
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
164) Developing the habit of saving for retirement is easier when you are:
A) young.
B) married.
C) divorced.
D) middle-aged.
E) self-employed.
Difficulty: 1 Easy
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
165) Jasmine Smith owns a condo worth $250,000, a car valued at $15,000, and miscellaneous assets worth $7,500. She owes $190,000 on the condo and $10,000 on the car and has no other debts. Her retirement account, in which she is fully vested, contains $28,000 in mutual funds. She was just insured with a $300,000 term life insurance policy. What are her total liabilities?
A) $200,000
B) $300,000
C) $100,000
D) $592,500
E) $600,000
Explanation: Liabilities = 190,000 + 10,000 = $200,000
Difficulty: 2 Medium
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Analyze
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
166) Jasmine Smith owns a condo worth $260,000, a car valued at $25,000, and miscellaneous assets worth $7,500. Her retirement account, in which she is fully vested, contains $27,500 in mutual funds. Her net worth is $165,000. What are her total liabilities?
A) $165,000
B) $155,000
C) $320,000
D) $465,000
E) $260,000
Explanation: Assets (260,000 + 25,000 + 7,500 + 27,500) − Net Worth (165,000) = $320,000 - $165,000 = $155,000
Difficulty: 3 Hard
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
167) Jasmine Smith owes $175,000 on her condo and $15,000 on her car and has no other debts. Her net worth is $132,000. What are her total assets?
A) $78,000
B) $132,000
C) $175,000
D) $190,000
E) $322,000
Explanation: Liabilities (175,000 + 15,000) + Net worth ($132,000) = $322,000
Difficulty: 2 Medium
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
168) Before you get a reverse mortgage of any kind, consider that:
A) there are origination fees, closing costs, servicing fees, and mortgage insurance premiums
B) interest rates may change over the life of the mortgage
C) you are still responsible for property taxes, insurance, utilities, and maintenance expenses
D) you may leave fewer or no assets for your heirs
E) All of these should be considered.
Difficulty: 3 Hard
Topic: Reverse mortgages
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
169) Which of the following have formidable retirement-planning challenges?
A) Single parents
B) Gays and lesbians
C) Divorced couples
D) Unmarried individuals living together
E) All of these
Difficulty: 1 Easy
Topic: Retirement planning considerations and goals
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
170) Which of the following is not a variable expense?
A) Food
B) Rent or mortgage payments
C) Clothing
D) Medical expenses
E) Vacations
Difficulty: 1 Easy
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
171) Which of the following is not true of unforeseen expenses?
A) They rarely occur during retirement.
B) They can require the use of an emergency fund.
C) They may require building a cushion to cope with inflation.
D) They may come in the form of higher than expected prices for goods and services.
E) They can occur while you are living a tranquil life.
Difficulty: 2 Medium
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Apply
Accessibility: Keyboard Navigation
Gradable: automatic
172) According to the U.S. Bureau of Labor Statistics, the annual inflation rate in the United States was ________ percent in April 2018.
A) 1
B) 2.5
C) 3
D) 3.5
E) 4
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation
Gradable: automatic
173) Which of the following is not a question that will help assess your financial condition as you approach retirement?
A) Do you know where your health insurance will come from after retirement?
B) Do you save according to your retirement plan, shifting from safe investments to risky, growth type investments?
C) Do you have your own credit history?
D) Do you talk regularly and frankly to family members about retirement finances?
E) Do you know where you plan to live in retirement?
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: automatic
174) During retirement planning, you would need to estimate your monthly retirement expenses. Provide examples of monthly expenses that are fixed and monthly expenses that are variable.
Variable Expenses: food and beverages, household operation and maintenance, furnishings and equipment, clothing, personal, transportation, medical care, recreation and education, gifts and contributions
Difficulty: 2 Medium
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
175) Cynthia Coleman is reviewing her assets and liabilities. What is her net worth?
Assets:
Cash in checking account, $1,000
Cash in savings account, $2,800
Current value of Investments in U.S. savings bonds, $4,000
Current value of Investments in stocks & mutual funds, $9,700
Current cash value of life insurance, $7,300
Current value Accrued pension benefit, $25,000
Current value of house, $155,000
Current value of furniture and appliances, $8,000
Current value of Jewelry, $600
Current value of automobile, $7,200
Liabilities:
Current unpaid bills, $800
Home mortgage unpaid balance, $100,000
Auto loan unpaid balance, $3,200
Property Taxes owed, $1,000
Home improvement loan balance, $1,200
Difficulty: 2 Medium
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Apply
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
176) If you did not start early to prepare for retirement, what are 5 tips to help you prepare for retirement when there is little time left?
• It's never too late to start. It's only too late if you don't start at all.
• Save everything you can into your tax-sheltered retirement plans and personal savings. Try to put away at least 20 percent of your income.
• Reduce expenses. Put the savings into your nest egg.
• Take a second job or work extra hours.
• Make sure your investments are part of the solution, not part of the problem. To boost your returns, diversify your holdings and keep an eye on fees. But don't take risks you can't afford, and don't trade too much.
• Retire later. You may not need to work full-time beyond your planned retirement age. Part-time may be enough.
• Refine your goal. You may have to live a less expensive lifestyle in retirement.
• Delay taking Social Security. Benefits will be higher when you start taking them.
• Make use of your home. Rent out a room or move to a less expensive home and save the profits.
• Sell assets that are not producing much income or growth, such as undeveloped land or a vacation home, and invest in income-producing assets.
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
177) What are the basic steps in retirement planning?
Before you decide where you want to be financially, you have to find out where you are. Your first step, therefore, is to analyze your current assets and liabilities. Then estimate your retirement spending needs and adjust them for inflation. Next, identify your housing needs and whether you plan to move or stay in your present home. Next, evaluate your planned retirement income. Finally, increase your income by working part-time, if necessary.
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
178) Why is retirement planning important?
Retirement planning is important because you will probably spend many years in retirement. Social Security and a private pension may be insufficient to cover the cost of living, and inflation may erode the purchasing power of your retirement savings. The earlier you begin to plan and save, the better prepared you will be.
Retirement can be a rewarding phase of your life. However, a successful, happy retirement doesn't just happen; it takes planning and continual evaluation. Thinking about retirement in advance can help you anticipate future changes and gain a sense of control over the future. According to the Securities and Exchange Commission, the easiest ways to boost your retirement savings are to take advantage of your employer's matching some or all of your contributions to the retirement plan, focus on low fees and expenses, and save by regular, automatic deductions from your paycheck.
The ground rules for retirement planning are changing rapidly. Reexamine your retirement plans if you hold any of these misconceptions:
• My expenses will drop when I retire.
• My retirement will last only 15 years.
• I can depend on Social Security and my company pension to pay for my basic living expenses.
• My pension benefits will increase to keep pace with inflation.
• My employer's health insurance plan and Medicare will cover my medical expenses.
• There's plenty of time for me to start saving for retirement.
• Saving just a little bit won't help.
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
179) Why is it important to review your assets and liabilities before your retirement?
Reviewing your assets to ensure they are sufficient for retirement is a sound idea. Make any necessary adjustments in your investments and holdings to fit your circumstances.
Difficulty: 1 Easy
Topic: Financial situation analysis
Learning Objective: 18-02 Analyze your current assets and liabilities for retirement.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
180) What types of expenses may be lowered or eliminated during retirement?
Difficulty: 1 Easy
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
181) What types of expenses might increase during retirement?
Difficulty: 1 Easy
Topic: Retirement living expenses and cash flows
Learning Objective: 18-03 Estimate your retirement spending needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
182) What types of housing options are available to retirees?
Difficulty: 2 Medium
Topic: Retirement housing options
Learning Objective: 18-04 Identify your retirement housing needs.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
183) How can retirees avoid being surprised by hidden tax and financial traps when they move?
• Write or call the local chamber of commerce to get an economic profile and details on area property taxes.
• Contact the state's tax department to find out state income, sales, and inheritance taxes and special exemptions for retirees. If your pension will be taxed by the state you're leaving, check whether the new state will give you credit for those taxes.
• Subscribe to the Sunday edition of a local newspaper.
• Call a local CPA to find out which taxes are rising.
• Check with local utilities to estimate your energy costs. Visit the area in as many seasons as possible. Talk to retirees and other local residents about costs of health care, auto insurance, food, and clothing.
• Rent for a while instead of buying immediately.
Difficulty: 2 Medium
Topic: Retirement housing options
Learning Objective: 18-04 Identify your retirement housing needs.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
184) What are the possible sources of income for retirees?
Possible private sources: Employer Pension Plans (Defined contribution plans and Defined benefit plans) and Personal plans (IRAs and Annuities).
Possible Government sources: Social Security, The Veterans Administration, The Railroad Retirement System, State/County/City Governments.
Part-time employment is also an option, or necessity, for many retirees.
Difficulty: 3 Hard
Topic: Retirement income and its sources
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
185) Explain the difference between a defined-contribution and defined-benefit plan.
A defined-contribution plan has an individual account for each employee. These plans are sometimes called individual account plans. The plan document describes the amount the employer will contribute, but it does not promise any particular benefit. When a plan participant retires or otherwise becomes eligible for benefits, the benefit is the total amount in the participant's account, including past investment earnings on amounts put into the account. Defined-contribution plans include the following:
• Money-purchase pension plans.
• Stock bonus plans.
• Profit-sharing plans.
• Salary reduction or 401(k) plans, Section 403(b) plans, and Section 457 plans.
In a defined-benefit plan, the plan document specifies the benefits promised to the employee at the normal retirement age. The plan itself does not specify how much the employer must contribute annually. The plan's actuary determines the annual employer contribution required so that the plan fund will be sufficient to pay the promised benefits as each participant retires. If the fund is inadequate, the employer must make additional contributions. Because of their actuarial aspects, defined-benefit plans tend to be more complicated and more expensive to administer than defined-contribution plans.
Difficulty: 2 Medium
Topic: Defined contribution plans; Defined benefit plans
Learning Objective: 18-05 Determine your planned retirement income.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual
186) Describe 4 of the 7 misconceptions about retirement planning found in the chapter and explain what you should do if you hold any of these.
• My expenses will drop when I retire.
• My retirement will last only 15 years.
• I can depend on Social Security and my company pension to pay for my basic living expenses.
• My pension benefits will increase to keep pace with inflation.
• My employer's health insurance plan and Medicare will cover my medical expenses.
• There's plenty of time for me to start saving for retirement.
• Saving just a little bit won't help.
Difficulty: 2 Medium
Topic: Retirement planning considerations and goals
Learning Objective: 18-01 Recognize the importance of retirement planning.
Bloom's: Understand
Accessibility: Keyboard Navigation; Screen Reader Compatible
Gradable: manual