BUS 1210 (Personal Finance) Ch 14

When thinking about retirement, which of the following is correct? The earlier you start saving, the better.
What steps should be taken in retirement planning Conduct a financial analysis and estimate retirement living expenses.
An “average” older household spends more money on Housing than on contributions, entertainment, and clothing combined.
When you retire, you will probably spend less money on Clothing.
When planning for retirement, inflation Should be considered since income received earlier in retirement will buy more than the same amountreceived later in retirement.
All of the following are examples of defined contribution plans except Defined benefit plan.
Which of the following is not a source of retirement income? All of these are sources of retirement income.
An employer may choose to match money employees invest in a 401(k) plan or a salary reduction plan.
Which retirement plan specifies the benefits you’ll receive at retirement age based on your total earningand years on the job? Defined benefit plan.
In 1974 ERISA was passed. What does ERISA stand for? Employee Retirement Income Security Act
Julian’s annual contributions to his retirement are not tax-deductible, but his earnings accumulate tax-free Roth IRA.
Employees who were born in 1960 or later can receive full Social Security benefits beginning at age 67.
Lawrence is self-employed and wants to have an investment funded by his company. He should set upa SEP plan.
Jill is 45 years old and thinks that her future tax rate will be lower than what she currently pays, so shewants to defer her taxes on her contributions of up to $5,000 in 2012. Which plan would allow her tomeet her goals? Regular IRA
Another name for a Coverdell account is a(n) Education IRA
Another name for an H.R. 10 plan or a self-employed retirement plan is a Keogh plan
If you have fully funded your 401(k) and profit-sharing plans, you may choose to enhance yourretirement savings by using this plan that allows you to withdraw money from the account tax-free andpenalty-free after five years. Roth IRA
Estate planning is an essential part of Both retirement and financial planning
An estate consists of Everything you own.
Which of the following is not a document associated with estate planning? All of these are documents associated with estate planning.
Sean’s estate planning should Take the needs of his wife and children into account.
Intestate is Dying without a valid will
Jacob is updating his estate planning and wants to set up the legal document to leave everything to hiswife. He is writing a(n) Simple will
William is updating his estate planning and wants to set up the legal document to leave all of his assetsexcept a specific amount to his wife. He is writing a(n) Exemption trust will
Darlene is updating her estate planning and wants to set up the legal document to leave $5.1 million toher husband. She is writing a(n) Stated amount will.
A will that is usually prepared with the help of an attorney is known as a(n) Formal will
If you have children and are writing your will, you need to do all of the following except Write the will with the help of an attorney
A will prepared on a preprinted form is called a(n) Statutory will
Multiple copies of a ______________ should be distributed to those closest to you as well as your familydoctor living will
A(n) ______ administers a trust trustee
A(n) ______ is the creator of a trust grantor
A(n) ____ allows you to end the trust or change its terms during your lifetime revocable trust
This trust is designed to allow married couples to take full advantage of the federal estate taxexemption Credit-shelter trust
This is also known as an inter vivos trust Living trust
112.When you die, this tax will be based on the fair market value of your investments, property, and bankaccounts less an exemption (of $5.12 million in 2012).A. Estate taxB. Gift taxC. Inheritance taxD. Trust federal income taxE. Will tax a
This is the best option if you or your beneficiaries are inexperienced in financial matters and if your estatetaxes will be high Testamentary trust
Jason is updating his estate planning and wants to set up the legal document to leave half of the adjusted gross estate to his wife. He is writing a(n) Traditional marital share will
When Paul leaves his job at Acme Bending Company, he may choose to move his 401(k) balance to a plan called a rollover IRA True
Cookie is updating her estate planning and wants to write a legal document that will allow all of her assets to go to her spouse except for a certain amount that will be set up in a trust. The trust (plus interest) can provide her spouse lifelong income that will not be taxed. She is writing a(n) Exemption trust will
A(n) ____ cannot be changed or ended irrevocalbe trust
The letter of last instruction is A non-legally binding document that provides information regarding your death such as funeral arrangements
What percentage of American workers are covered by Social Security 97%
A handwritten will is known as a(n) Holographic will
Retirement means that you will never work again. False
A copy of your living will should be distributed to your family doctor True
When you retire, you will probably spend more money on Health Insurance
When Don retires, his transportation expenses will likely increase False
When planning for retirement Investments should be evaluated to determine whether their income can help cover living expenses
An employer’s contribution will vary according to the company’s profits in a Profit-sharing plan
Another name for a will is a letter of last instruction False
When planning for retirement, you should review All of these
Vesting is the right to receive the Employer’s contributions to pension plan
The longer money accumulates tax-deferred, the bigger the benefit True
If a will is found to be invalid, the result is called in-probate False
A power of attorney should handle the estate of a deceased person False
When an employer’s contribution is used to buy stock in the company for its employees, it has stock bonus plan
According to the text, which of the following will probably be your most valuable asset at retirement House
This trust becomes effective upon your death Tetamentary trust
A holographic will is legal in all states False
An example of a defined contribution plan is a stock bonus plan True
A salary reduction plan is also known as 401(k) plan
A holographic will has a holographic seal to prove its authenticity False
Gladys wants to set up a trust that is also known as a bypass trust, family trust, “residuary” trust, A/B trust, and exemption equivalent trust. She should set up a(n Credit-shelter trust
About one out of every three Americans currently collects some form of Social Security benefit False
Only one will may legally be written during a person’s lifetime False
A legal arrangement that helps manage the assets of your estate for your benefit or that of your beneficiaries is called a Trust
This allows the trustor to receive benefits during his or her lifetime Inter vivos trust
When an employer promises to set aside a certain amount of money for each employee each year, it has set up Money-purchase plan
When planning for retirement, you should consider all of the following excep Withdrawing all retirement savings within five years of retirement.
Cindy’s net worth should increase each year as she moves closer to her retirement True
Trusts and estates must pay quarterly estimated taxes based on taxable income for their Trust federal income tax
A benefit of an employer pension plan is that taxes are eliminated False
An inter vivos trust takes effect while you’re alive True
A stated amount will identifies the amount that will not go to your spouse False
If you are married, your estate will automatically pass to your spouse False
How is eligibility determined for receiving Social Security retirement benefits Credits
A defined benefit plan specifies the benefits that you will receive at retirement age True
This tax is only imposed by state governments Inheritance tax
The maximum gift that can be given to another person without incurring gift taxes is $13,000
A revocable trust cannot be changed or ended False
A codicil is A document that explains, adds, or deletes provisions in an existing will
Robert’s wife Fiona does not work, and they file a joint tax return. Robert can contribute on behalf of Fiona into Spousal IRA
The four primary sources of retirement income are employer pension plans, personal retirement plans, annuities, and public pension plans True
The best time to begin planning for retirement is at age 27 False
Annabelle works at Acme Cleaning Company. When she retires, her employer’s health insurance plan and Medicare should cover all her medical expenses False
Bruce and Christopher are both retiring from Best Conditioning Company. They both should have the same amount of money in their retirement funds regardless of the lifestyle they should expect during retiremen False
Housing and life insurance are so important to one’s retirement income that other invests can be ignored as you review your assets False
Because of potential effect of inflation, individuals should underestimate the amount of money needed for retirement False
Lora is a full time employee at Harley Davidson, Inc. She should be eligible to participate the company’s 401(k) plan to save for retirement True
When Social Security was established, it was intended to provide less than 100 percent of one’s retirement income True
Eight years ago, Thomas began investing in his Roth IRA. He is now purchasing his first home. He may withdraw some money from his Roth IRA tax-free and penalty-free for this purchase True
The SEP IRA is the simplest type of retirement plan if a person is self-employed True
People should never dip into their savings in retirement False
If you are single, then you should not have beneficiaries False
If you die intestate, your beneficiaries will receive your estate False
A traditional marital share will leaves everything to your spous False
A traditional marital share will has some assets going into a trust to provide your spouse lifelong income that will not be taxed True
A Stated Amount Will identifies the amount that will not go to your spouse False
Probate is a short, quick process False
Changes to a will should be written in ink on the will and initialed False
A disclaimer trust is appropriate for couples who do not have enough assets to need a credit shelter trust True
A testamentary trust takes effect while you’re alive False
An individual can give away up to $13,000 per year (as of 2009) before paying an inheritance tax to the IRS False

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