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Business Quiz 2

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Business Quiz 2 Question 1 Sally and Burt own a small family business where together they average about $40,000 per year in total combined income. Since they have a small child it’s hard for them to save any money for their retirement. What would you recommend them to do? Set up and budget and make their retirement savings a very important goal. Set up a qualified retirement account. Be sure to claim the Savers Tax Credit on their income taxes. all of these are correct. Both Set up and budget and make their retirement savings a very important goal and Set up a qualified retirement account are correct. Question 2 Defined-benefit pension plans are generally ________ and they lack ________. contributory; vesting noncontributory; vesting contributory; portability noncontributory; portability vested; portability Question 3 Monitoring your retirement plan is an ongoing process. You should keep the following in mind during the process. Question 3 answers Don’t neglect your insurance coverage. You may still live a long time once retired. Allow for inflation and continued growth. Consider an investment planning software program. all of these Question 4 Relative to insurance, when a payout arrangement is made in which one receives all benefits in one single payment, this is called a ________. Question 4 answers cash payout lump-sum option single distribution plan point plan none of these Question 5 A(n)________ is a pension plan in which you and your employer or your employer alone contribute funds directly to a retirement account set aside specifically for you. Question 5 answers defined-benefit plan cash balance plan defined-contribution plan percentage plus inflation plan none of these Question 6 How are Social Security retirement benefits determined? Question 6 answers It depends on the number of credits a person has earned in their lifetime. It depends on the level of income a person has averaged over their lifetime. It depends on how many years you have paid in Social Security taxes. all of these are correct. Both It depends on the level of income a person has averaged over their lifetime and It depends on how many years you have paid in Social Security taxes are correct. Question 7 When planning the retirement payout, there are several options from which to choose. With the ________ option your beneficiary receives your benefit if you die within 20 years of beginning withdrawals until the end of the stated period. single life annuity lump sum annuity joint and survivor annuity annuity for life combination annuity Question 8 You have determined that you will need to accumulate $1,000,000 in your retirement account in order to cover your inflation-adjusted shortfall. How much money would you have to put into a tax-deferred retirement account every year if you plan on retiring in 40 years? Assume a 8% average return on this account and there is nothing in the account today. $1,458 $3,860 $5,957 $8,444 Question 9 Tran is employed at a Company where at the end of every year, the Company will contribute anywhere from 2% up to 12% of his salary into his retirement plan, depending on how well the Company’s financials were for the year. This type of contribution plan is a ________ plan. 401k ESOP Profit Sharing Performance Question 10 Why is it rare for Companies to offer a defined-benefit retirement plan to their employees any more? Demographics have changed where people are living longer than they used to, driving up costs for employers. American Companies are facing global competition by Foreign Companies who don’t pay for retirement making them more cost competitive. Most employees don’t like defined-benefit plans anymore. all of these are correct. Both Demographics have changed where people are living longer than they used to,

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