#1
What is the primary advantage of contributing to a 401(k) retirement plan?
Tax-deductible contributions
ExplanationContributions are tax-deductible, reducing taxable income in the present.
#2
What is the maximum annual contribution limit for a Traditional IRA in 2024?
$6,500
ExplanationThe maximum annual contribution limit for a Traditional IRA in 2024 is $6,500.
#3
What is the concept of dollar-cost averaging in the context of retirement investing?
Investing a fixed amount at regular intervals, regardless of market conditions
ExplanationDollar-cost averaging involves investing a fixed amount regularly, irrespective of market conditions.
#4
What is the primary purpose of a 457(b) retirement plan?
For employees of non-profit organizations and government entities
Explanation457(b) is designed for employees of non-profit organizations and government entities.
#5
What is the penalty for failing to take the Required Minimum Distribution (RMD) from a retirement account?
10%
ExplanationFailing to take RMD incurs a 10% penalty.
#6
Which retirement plan allows self-employed individuals to contribute as both employer and employee?
SEP IRA (Simplified Employee Pension)
ExplanationSelf-employed individuals can contribute as both employer and employee in a SEP IRA.
#7
What is the penalty for early withdrawal from a traditional IRA before the age of 59½?
10%
ExplanationEarly withdrawal from a traditional IRA incurs a 10% penalty before age 59½.
#8
Which of the following retirement plans allows for catch-up contributions for individuals aged 50 and older?
All of the above
Explanation401(k), IRA, and Roth IRA all allow catch-up contributions for individuals aged 50 and older.
#9
What is the primary advantage of a Roth IRA over a Traditional IRA?
Tax-free withdrawals in retirement
ExplanationRoth IRA offers tax-free withdrawals in retirement, unlike Traditional IRA.
#10
In a 403(b) retirement plan, which type of employer is eligible to sponsor the plan?
Government entities and certain non-profit organizations
ExplanationGovernment entities and certain non-profit organizations can sponsor a 403(b) plan.
#11
What is the penalty for early withdrawal from a 401(k) before the age of 59½?
10%
ExplanationEarly withdrawal from a 401(k) incurs a 10% penalty before age 59½.
#12
Which of the following retirement plans does not have required minimum distributions (RMDs) during the account owner's lifetime?
Roth IRA
ExplanationRoth IRA doesn't have RMDs during the account owner's lifetime.
#13
In the context of retirement savings, what does the term 'annuitization' refer to?
The process of converting assets into a series of periodic payments
ExplanationAnnuitization is converting assets into periodic payments.
#14
What is the penalty for excess contributions to an IRA that are not corrected before the tax filing deadline?
5% penalty on the excess amount
ExplanationExcess IRA contributions not corrected incur a 5% penalty.
#15
Which retirement plan is specifically designed for nonprofit organizations and public schools?
403(b)
Explanation403(b) is designed for nonprofit organizations and public schools.
#16
Which of the following retirement plans is known for allowing both pre-tax and after-tax (Roth) contributions?
401(k)
Explanation401(k) allows both pre-tax and after-tax (Roth) contributions.
#17
What is the 'Rule of 72' in the context of retirement planning?
A formula to estimate the number of years it takes for an investment to double in value
ExplanationThe 'Rule of 72' estimates years for an investment to double in value.