FPQP Module 7 – Retirement Planning, Income Sources, Social Security, IRAs & Distribution
Rules Study Guide
What are reasons why people delay savings for retirement - correct answer ✔✔Procrastination
Confusion about how to begin
Poor cash management (cannot afford to save)
Misperception about being too young to start saving for retirement
College education funding
Paying off debt
Saving for a house
Costs of caring for aging parents
Not wanting to "lock up" money in a retirement plan
Employee elective deferrals to a 401(k) may be subject to which of the following vesting
schedules? - correct answer ✔✔A)
Two- to six-year graded vesting
B)
Immediate vesting
C)
Three-year cliff vesting
D)
None of these
B: Employee deferrals are always 100% vested to the employee. Employer contributions are
subject to minimum vesting schedules, which would include both a three-year cliff and two- to
six-year graded vesting.
, Which of the following retirement plan distributions is subject to 20% withholding? - correct
answer ✔✔A)
A lump sum distribution from a 401(k) plan
B)
A rollover of IRA assets from one IRA to another
C)
None of these
D)
A direct transfer of IRA assets between IRA custodians
A:401(k) retirement plan benefits that are paid (or made payable) to an employee (instead of
the IRA custodian) in the form of a lump sum distribution are subject to 20% withholding.
Which of these would an individual receive at full retirement age (FRA)? - correct answer ✔✔A)
AIME
B)
RMD
C)
PIA
D)
COLA
PIA: The primary insurance amount (PIA) is the dollar amount received at FRA. AIME is the
average indexed monthly earnings and is the inflation-adjusted average wages on which the
worker has paid Social Security taxes. It is used to then calculate the benefit. RMD is the
required minimum distribution from retirement plans. Social Security benefits are subject to
cost of living adjustments (COLAs).
Rules Study Guide
What are reasons why people delay savings for retirement - correct answer ✔✔Procrastination
Confusion about how to begin
Poor cash management (cannot afford to save)
Misperception about being too young to start saving for retirement
College education funding
Paying off debt
Saving for a house
Costs of caring for aging parents
Not wanting to "lock up" money in a retirement plan
Employee elective deferrals to a 401(k) may be subject to which of the following vesting
schedules? - correct answer ✔✔A)
Two- to six-year graded vesting
B)
Immediate vesting
C)
Three-year cliff vesting
D)
None of these
B: Employee deferrals are always 100% vested to the employee. Employer contributions are
subject to minimum vesting schedules, which would include both a three-year cliff and two- to
six-year graded vesting.
, Which of the following retirement plan distributions is subject to 20% withholding? - correct
answer ✔✔A)
A lump sum distribution from a 401(k) plan
B)
A rollover of IRA assets from one IRA to another
C)
None of these
D)
A direct transfer of IRA assets between IRA custodians
A:401(k) retirement plan benefits that are paid (or made payable) to an employee (instead of
the IRA custodian) in the form of a lump sum distribution are subject to 20% withholding.
Which of these would an individual receive at full retirement age (FRA)? - correct answer ✔✔A)
AIME
B)
RMD
C)
PIA
D)
COLA
PIA: The primary insurance amount (PIA) is the dollar amount received at FRA. AIME is the
average indexed monthly earnings and is the inflation-adjusted average wages on which the
worker has paid Social Security taxes. It is used to then calculate the benefit. RMD is the
required minimum distribution from retirement plans. Social Security benefits are subject to
cost of living adjustments (COLAs).
