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Retirement Plan Fundamentals Quiz

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#1

What is the purpose of the Required Minimum Distribution (RMD) rule in retirement accounts?

To ensure a minimum income flow in retirement
Explanation

Ensures minimum income post-retirement.

#2

What is the term for the strategy of gradually shifting investments to less risky options as an individual approaches retirement?

Lifecycle investing
Explanation

Investment strategy for retirement.

#3

What is the purpose of a target-date fund in a retirement portfolio?

To automatically adjust asset allocation based on the investor's target retirement date
Explanation

Automated asset allocation based on retirement date.

#4

What is the term for the period during which an individual is actively contributing to their retirement accounts and building savings?

Accumulation phase
Explanation

Active saving phase pre-retirement.

#5

What is the purpose of a spousal IRA?

To allow a non-working spouse to contribute to an IRA
Explanation

Enables IRA contributions for non-working spouse.

#6

What is the maximum contribution limit for an individual's 401(k) plan in 2022?

$18,500
Explanation

Contribution limit set by IRS for 2022.

#7

Which of the following retirement accounts is known for providing tax-free withdrawals in retirement?

Roth IRA
Explanation

Allows tax-free withdrawals.

#8

At what age can individuals start making catch-up contributions to their retirement accounts?

50
Explanation

Age when catch-up contributions start.

#9

Which of the following is NOT a common investment option in a 401(k) plan?

Cryptocurrency
Explanation

Excluded investment option.

#10

What is the maximum annual contribution limit for a Traditional IRA in 2022?

$7,000
Explanation

Maximum contribution set by IRS.

#11

Which type of retirement plan is designed for small businesses and self-employed individuals?

SEP IRA
Explanation

Plan for small businesses & self-employed.

#12

What is the penalty for failing to take the Required Minimum Distribution (RMD) from a retirement account?

50%
Explanation

Penalty for not withdrawing minimum amount.

#13

What is the penalty for early withdrawal from a 401(k) before the age of 59½?

10%
Explanation

Penalty for premature withdrawal.

#14

Which retirement plan allows self-employed individuals to contribute both as an employer and an employee?

Solo 401(k)
Explanation

Unique plan for self-employed.

#15

What is the primary advantage of a Roth IRA over a Traditional IRA?

Tax-free withdrawals in retirement
Explanation

Tax-free withdrawal benefit.

#16

In a 403(b) plan, which group of employees is typically eligible to participate?

Non-profit organization employees
Explanation

Targeted employees for 403(b).

#17

What is the purpose of the Social Security Administration's Full Retirement Age (FRA)?

To determine when retirees can receive full Social Security benefits
Explanation

Determines eligibility for full benefits.

#18

Which retirement plan allows contributions with pre-tax dollars and offers tax-deferred growth?

Traditional 401(k)
Explanation

Pre-tax contributions & tax-deferred growth.

#19

What is the purpose of the 10% early withdrawal penalty on retirement accounts?

To discourage premature withdrawals
Explanation

Deterrence for early withdrawals.

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