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| 1 | |
Which of the following is a common misconception about retirement planning? |
| | A) | My expenses will drop after I retire. |
| | B) | My retirement will last only 15 years. |
| | C) | There is plenty of time to start saving for retirement. |
| | D) | Saving just a little bit won't help. |
| | E) | All of the above are common misconceptions. |
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| 2 | |
You save $1000 per year (at the end of the year) for the next 40 years. If interest rates are 12% throughout this period, how much will you have at the end of 40 years? |
| | A) | $767,091 |
| | B) | $40,000 |
| | C) | $93,051 |
| | D) | $8,244 |
| | E) | None of the above |
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| 3 | |
It is the day of your retirement and you saved $750,000 all together. If you expect to live for 20 years after you retire and interest rates are 10%, what is the amount you can withdraw from your account each year and have $750,000 left at the end of 20 years? |
| | A) | $75,000 |
| | B) | $13,095 |
| | C) | $5,045,625 |
| | D) | $88,095 |
| | E) | None of the above |
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| 4 | |
Which of the following expenses would likely increase after retirement? |
| | A) | Housing expenses |
| | B) | Federal income taxes |
| | C) | Clothing expenses |
| | D) | Leisure activity expenses |
| | E) | None of the above would increase. |
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| 5 | |
Linda Hall works for Cisco Systems and is participating in the retirement plan offered by the company. Cisco contributes money to purchase stock in Cisco which is held in trust until she retires. What type of retirement plan is this? |
| | A) | Social Security |
| | B) | Another public pension plan |
| | C) | An employer pension plan |
| | D) | A personal retirement plan |
| | E) | None of the above |
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| 6 | |
Mason Sharp is thinking about opening an IRA account to save for his retirement. He has done some research and has found that his $2000 contributions are not tax deductible. He has also found that if he meets certain guideline the withdrawals are tax-free. What type of IRA account is he likely to be looking at? |
| | A) | Traditional IRA |
| | B) | Roth IRA |
| | C) | Spousal IRA |
| | D) | Rollover IRA |
| | E) | Education IRA |
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| 7 | |
Jay Edwards is thinking about buying an annuity. The annuity he is looking at will pay him income for the rest of his life. However, there is a minimum number of 20 annual payments. This means that if he dies prematurely his son and heir will receive the balance of the 20 payments on this annuity. What type of annuity is Jay looking at? |
| | A) | Life income annuity |
| | B) | Life with period certain annuity |
| | C) | Joint and survivor annuity |
| | D) | None of the above |
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| 8 | |
Which of the following is an advantage of an individual savings plan for retirement such as an IRA account? |
| | A) | It is portable from job to job. |
| | B) | You have control over the management of the funds in this. |
| | C) | Can usually use as much of the funds as you want, when you wish. |
| | D) | There is inflation adjusted survivor benefits. |
| | E) | Both B and C above |
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| 9 | |
A(n) _______________ is a mortgage in which the lender uses the borrower's house as collateral to buy an annuity for the borrower. |
| | A) | Reverse annuity mortgage |
| | B) | Life income annuity |
| | C) | Life with period certainty annuity |
| | D) | Joint and survivor annuity |
| | E) | None of the above |
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| 10 | |
A(n) _______________ is a contract, generally offered by a life insurance company, that provides an income for life. |
| | A) | 401(k) plan |
| | B) | 403(b) plan |
| | C) | Keogh plan |
| | D) | Annuity |
| | E) | Social security |
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