Retirement Planning Review

Question 1

What are 3 factors that determine the amount of retirement income available from a defined contribution

Answer 1

1. how much your employer contributed
2. how much you contribute
3. how well your investments fared

Question 2

what type of account do employers match the amount employees are contributing

Answer 2

401K

Question 3

what is the penalty for withdrawing money early from 401K

Answer 3

10%

Question 4

What is the earliest age you can start withdrawing money from 401K

Answer 4

59.5

Question 5

what are the 2 factors that contribute to the amount of retirement income available from a defined benefit plan

Answer 5

1. final salary

2. number of years working for company

Question 6

how much can you contribute in pre tax dollars to an IRA

Answer 6

$5500

if older t than 50 then $6500

Question 7

in which account does the employer offer a pre-selected menu of investment choices to choose from

Answer 7

401K

Question 8

what type of account is beneficial for individuals starting their own business

Answer 8

IRA

Question 9

what account do you have complete control

Answer 9

IRA

Question 10

what account grows tax free

Answer 10

Roth IRA

Question 11

what are the 3 reasons why there has been a shift from defined benefit plans (reg. pensions) to defined contribution plans (401K, IRA..)

Answer 11

• People are living longer
• people are switching jobs frequently
• cost for employers is less

Question 12

plan that requires NO participation from employee

Answer 12

defined benefit plan

Question 13

what are 2 advantages to a 401K

Answer 13

1. reduces your reported income and thus current taxes

2. employers may match your contributions

Question 14

In a 401K… employers__ and employees__

Answer 14

employers- limit employer costs

employees- contribute pretax dollars

Question 15

what are the 5 investment choices in a typical 401K

Answer 15

stocks 
bonds
mutual funds
company stocks
money market funds