#1
What is the recommended percentage of income to save for retirement?
10-15%
ExplanationTo ensure sufficient savings without compromising current lifestyle.
#2
Which of the following is a tax-advantaged retirement account in the United States?
401(k)
ExplanationOffers tax benefits for retirement savings through employer-sponsored plans.
#3
What is the purpose of a 529 plan in personal finance?
To save for education expenses
ExplanationTax-advantaged savings for education costs.
#4
Which of the following is NOT a common source of retirement income?
Rental property income
ExplanationTypically requires active management and may be volatile.
#5
What does IRA stand for in the context of retirement savings?
Individual Retirement Account
ExplanationProvides tax advantages for individual retirement savings.
#6
What is the 'Rule of 72' used for in finance?
Estimating the time it takes for investments to double in value
ExplanationSimple tool for estimating investment growth.
#7
What is the '4% rule' often referenced in retirement planning?
A guideline for estimating annual retirement withdrawals
ExplanationRule of thumb for sustainable withdrawal rates.
#8
Which of the following factors typically has the greatest impact on retirement savings growth?
Length of time invested
ExplanationCompound interest amplifies savings over time.
#9
What is the primary benefit of a Roth IRA compared to a traditional IRA?
Tax-free withdrawals in retirement
ExplanationAllows tax-free growth and withdrawals.
#10
What is the term used to describe the period when a retiree gradually reduces work hours before retiring completely?
Gradual retirement
ExplanationSmooth transition from full-time work to retirement.
#11
What is the purpose of asset allocation in retirement planning?
To ensure a steady income stream during retirement
ExplanationBalances risk and return for long-term financial stability.
#12
What does 'vesting' refer to in the context of employer-sponsored retirement plans?
The period of time required before employees own employer-contributed funds
ExplanationDetermines ownership of employer-provided contributions.
#13
Which of the following investment types is generally considered the least risky for retirement savings?
Bonds
ExplanationOffers relatively stable returns with lower risk.
#14
What is the term used to describe the situation when inflation reduces the purchasing power of retirement savings?
Inflation risk
ExplanationThreat to the value of retirement funds over time.
#15
What is the primary purpose of long-term care insurance in retirement planning?
To provide income in case of disability or chronic illness
ExplanationProtects against high healthcare costs in retirement.
#16
Which of the following is NOT a common strategy to maximize Social Security benefits?
Taking a lump-sum payment
ExplanationLump-sum payments not typically available for Social Security benefits.