#1
What is the recommended percentage of income to save for retirement?
15%
ExplanationSave 15% of income for retirement.
#2
Which of the following is a tax-advantaged retirement account in the United States?
All of the above
ExplanationAll options are tax-advantaged retirement accounts.
#3
What is a '401(k) match'?
An employer contribution matching the employee's contribution to a 401(k) plan
ExplanationA 401(k) match is when an employer matches employee contributions.
#4
What is the purpose of a '529 plan' in financial planning?
To save for college expenses
Explanation529 plans are for saving for college expenses.
#5
What is the 'rule of thumb' for retirement savings needed to maintain pre-retirement lifestyle?
15 times your annual income
ExplanationSave 15 times your annual income for retirement.
#6
Which of the following is a strategy to catch up on retirement savings if you're behind?
All of the above
ExplanationAll options are strategies to catch up on retirement savings.
#7
What is the '4% rule' in retirement planning?
A rule stating you can safely withdraw 4% of your retirement savings each year
ExplanationThe 4% rule allows for a safe withdrawal rate from retirement savings.
#8
What is the main advantage of a Roth IRA over a traditional IRA?
Tax-free withdrawals in retirement
ExplanationRoth IRA withdrawals are tax-free in retirement.
#9
What is the role of Social Security in retirement planning?
To provide supplemental income in retirement
ExplanationSocial Security provides additional income in retirement.
#10
What is the purpose of asset allocation in retirement planning?
To diversify investments and manage risk
ExplanationAsset allocation diversifies investments to manage risk.
#11
What is a 'target-date fund' in retirement planning?
A fund that adjusts its asset allocation based on the investor's age and retirement date
ExplanationA target-date fund adjusts investments based on age and retirement date.
#12
What is a 'spousal IRA'?
An IRA that allows a non-working spouse to make contributions based on the working spouse's income
ExplanationA spousal IRA allows a non-working spouse to contribute based on the working spouse's income.
#13
What is the 'Medicare gap'?
The period between retirement and eligibility for Medicare
ExplanationMedicare gap is the period between retirement and Medicare eligibility.
#14
What is the purpose of a 'rollover IRA'?
To consolidate multiple retirement accounts into one
ExplanationRollover IRA consolidates multiple retirement accounts.
#15
What is the 'rule of 72'?
A rule of thumb to estimate the number of years it will take for an investment to double at a given interest rate
ExplanationRule of 72 estimates the time for an investment to double.
#16
What is a 'SIMPLE IRA'?
A retirement account for small businesses with fewer than 100 employees
ExplanationSIMPLE IRA is for small businesses with fewer than 100 employees.
#17
What is an annuity in the context of retirement planning?
A guaranteed stream of income
ExplanationAn annuity provides a guaranteed income stream.
#18
What is a 'required minimum distribution' (RMD) in retirement accounts?
The minimum amount you must withdraw from your retirement account each year after reaching a certain age
ExplanationRMD is the minimum withdrawal required from retirement accounts at a certain age.
#19
What is the 'sequence of returns risk' in retirement planning?
The risk of receiving lower returns early in retirement when withdrawals are made
ExplanationSequence of returns risk is the risk of lower returns early in retirement.
#20
What is a 'longevity risk' in retirement planning?
The risk of outliving your retirement savings
ExplanationLongevity risk is the risk of outliving savings.
#21
What is the purpose of a 'backdoor Roth IRA'?
To make contributions to a Roth IRA for high-income earners
ExplanationA backdoor Roth IRA allows high-income earners to contribute to a Roth IRA.
#22
What is the 'safe withdrawal rate' in retirement planning?
The maximum percentage of retirement savings that can be withdrawn annually without running out of money
ExplanationSafe withdrawal rate is the maximum percentage of savings that can be withdrawn annually.
#23
What is the purpose of a 'life annuity' in retirement planning?
To provide a guaranteed income for life
ExplanationLife annuity provides guaranteed income for life.
#24
What is the purpose of a 'stretch IRA'?
To provide income to beneficiaries over an extended period
ExplanationStretch IRA provides income to beneficiaries over time.
#25
What is the 'back-end load' in investment?
A fee charged when shares are redeemed from a mutual fund
ExplanationBack-end load is a fee when shares are redeemed from a mutual fund.