#1
What is an annuity?
A type of investment that provides regular payments over a set period or for life
ExplanationProvides regular payments over time.
#2
What is a defined benefit pension plan?
A retirement plan where the employer promises a specified monthly benefit at retirement
ExplanationEmployer promises a specific monthly benefit.
#3
What is a 401(k) plan?
A retirement savings plan sponsored by an employer
ExplanationEmployer-sponsored retirement savings.
#4
What is the main advantage of an immediate annuity?
The ability to provide a guaranteed income stream for life
ExplanationGuaranteed lifetime income.
#5
What is the key characteristic of a fixed annuity?
Guaranteed minimum interest rate
ExplanationGuaranteed interest rate.
#6
What is the 'annuitization phase' in an annuity?
The period when the annuity payments begin
ExplanationStart of annuity payments.
#7
Which retirement income option provides a stream of income for a specified period but may not guarantee lifetime payments?
Term certain annuity
ExplanationProvides income for a set period.
#8
Which retirement income option involves the gradual withdrawal of funds from a retirement account?
Systematic withdrawal plan
ExplanationGradual fund withdrawals.
#9
What is the main advantage of a systematic withdrawal plan?
Flexibility in withdrawal amounts
ExplanationFlexible withdrawal options.
#10
At what age must individuals start taking required minimum distributions (RMDs) from their retirement accounts?
72
ExplanationStart RMDs at age 72.
#11
What is the benefit of a spousal IRA?
Allows a spouse with no earned income to contribute to an IRA
ExplanationNon-earning spouse can contribute.
#12
What is the primary difference between a 401(k) plan and a 403(b) plan?
Eligible employers
ExplanationDifference in eligible employers.
#13
What is a target-date fund (TDF) commonly used for in retirement planning?
To automatically adjust asset allocation based on retirement date
ExplanationAutomatic asset allocation adjustment.
#14
Which of the following is NOT a type of annuity?
Term life annuity
ExplanationNot a type of annuity.
#15
Which of the following is NOT a factor to consider when choosing a retirement income option?
Employment status
ExplanationNot relevant to retirement income options.
#16
What is the main risk associated with a variable annuity?
Market risk
ExplanationRisk linked to market fluctuations.
#17
What is the purpose of a qualified longevity annuity contract (QLAC)?
To provide income later in retirement to address longevity risk
ExplanationAddressing longevity risk in retirement.
#18
What is the primary benefit of a Roth IRA over a traditional IRA for retirement savings?
Tax-free withdrawals in retirement
ExplanationWithdrawals are tax-free in retirement.
#19
What is the penalty for withdrawing funds from a traditional IRA before age 59½?
10% penalty plus ordinary income tax
ExplanationPenalty and tax on early withdrawals.
#20
Which retirement income option allows for investment growth potential while providing a guaranteed minimum income?
Fixed indexed annuity
ExplanationCombines growth potential with guaranteed income.
#21
What is a required minimum distribution (RMD) from a traditional IRA?
The minimum amount you must withdraw each year starting at age 72
ExplanationMinimum annual withdrawals starting at age 72.
#22
Which of the following is a characteristic of a fixed indexed annuity?
Investment growth tied to market indexes
ExplanationGrowth linked to market indexes.
#23
What is the penalty for failing to take the required minimum distribution (RMD) from a retirement account?
50% of the amount not withdrawn
ExplanationPenalty for not taking required withdrawals.
#24
What is the benefit of a stretch IRA?
Allows for extended tax-deferred growth
ExplanationExtended tax-deferred growth.
#25
What is a joint and survivor annuity?
An annuity that covers two lives and continues payments until both have passed away
ExplanationContinued payments for two lives.