Retirement Planning – RPA 2 (2025/2026
Latest Exam Prep) | Complete Study Guide &
Verified Practice Q&A
Defined Benefit Plans - correct answerDefined Benefit Plans provide a fixed benefit
guaranteed by the employer in retirement. This type of plan was the most common type
for many years. Over the past 30 years, employers have been moving toward defined
contribution plans.
"Considered a Qualified Plan under ERISA, the Employee Retirement Income Security
Act."
Defined Contribution plans - correct answerIn Defined Contribution Plans, contributions
are made by the employer and also by the employee at the employees direction within
limits set by laws (ERISA). The employee takes the investment risk in Defined
Contribution Plans.
"Considered a Qualified Plan under ERISA, the Employee Retirement Income Security
Act."
Pension Plans - correct answerPension plans are a form of a Defined Benefit Plan.
Defined Benefit Plans will contain a formula that determines the benefits that will be
paid to employees.
Traditional 401(k) Plan - correct answerA traditional 401(k) is a retirement savings plan
which allows workers to save for retirement and have the savings invested while
deferring current income taxes on the saved money and earnings until retirement.
Sponsorship of Traditional 401(k) Plans - correct answerMost 401(k) plans are
employer sponsored where an employer can "match" contributions the employee makes
into the account. The match is usually up to a specific percentage of the employee's
salary.
Most 401(k) plans are participant directed, which means that the employee determines
how the contributed money is invested within specified guidelines.
Taxation and gains on Traditional 401(k) Plans - correct answerThe contributions are
made with Pre-Tax dollars. This is called "tax deferred" money. The funds within the
401(k) are invested, but capital gains and interest income within the account are NOT
taxed. The money in the account grows tax-free. When the 401(k) owner retires, taxes
are paid on any money than is withdrawn from the plan.
, Roth 401 (k) Plan - correct answerA Roth 401(k) is like a traditional 401(k) plan except
that income taxes are paid on the contributions to the Roth 401(k) when they are made.
After-tax dollars are invested in a Roth 401(k).
The funds in the Roth 401(k) grow tax free (no capital gains or interest income taxes).
When the account owner retires and is older than 59 1/2, money can be withdrawn from
the account tax-free.
Traditional 401(k) vs. Roth 401(k) - correct answerIn summary, a Traditional 401(k)
uses Pre-Tax dollars are pays income taxes when money is withdrawn from the
account. A Roth 401(k) uses After-Tax dollars are no taxes are paid when money is
withdrawn.
Distribution - correct answerThe withdrawal of funds from the account
403(b) and 457 plans - correct answer403(b) plans are very similar to 401(k) plans
except that only employees of public education organizations, other non=profits and
self-employed ministers may use them. These employees aren't eligible for 401(k)
plans.
457 plans are also very similar to 401(k) plans are are typically used by governmental
employees.
Both 403(b) and 457 plans have Roth versions available.
Contribution limits [401(k), 403(b), and 457 plans] - correct answerThere are
contribution limits associated with the different retirement plans. These limits changeo n
an annual basis, to take inflation into account. Contributions to these plans are
irrevocable and cannot be withdrawn until retirement. They can, however, be "roller
over" into an IRA.
Once the account owner reaches age 70 1/2, minimum distributions are required to be
taken annually.
Individual Retirement Account (IRA) - correct answerA Traditional IRA is a retirement
account which is available to anyone with a sufficient income to make the contributions.
Contributions to a Traditional IRA are made with Pre-Tax dollars. Investment gains
within the account then grow tax free while they are in the account.
At retirement, the withdrawals are taxed as ordinary income. IRA owners must also take
distributions when they reach the age of 70 1/2.
Individual Retirement Account (IRA) - correct answerA Roth IRA is a retirement account
which is available to individuals within certain income levels. Contributions to a Roth
Latest Exam Prep) | Complete Study Guide &
Verified Practice Q&A
Defined Benefit Plans - correct answerDefined Benefit Plans provide a fixed benefit
guaranteed by the employer in retirement. This type of plan was the most common type
for many years. Over the past 30 years, employers have been moving toward defined
contribution plans.
"Considered a Qualified Plan under ERISA, the Employee Retirement Income Security
Act."
Defined Contribution plans - correct answerIn Defined Contribution Plans, contributions
are made by the employer and also by the employee at the employees direction within
limits set by laws (ERISA). The employee takes the investment risk in Defined
Contribution Plans.
"Considered a Qualified Plan under ERISA, the Employee Retirement Income Security
Act."
Pension Plans - correct answerPension plans are a form of a Defined Benefit Plan.
Defined Benefit Plans will contain a formula that determines the benefits that will be
paid to employees.
Traditional 401(k) Plan - correct answerA traditional 401(k) is a retirement savings plan
which allows workers to save for retirement and have the savings invested while
deferring current income taxes on the saved money and earnings until retirement.
Sponsorship of Traditional 401(k) Plans - correct answerMost 401(k) plans are
employer sponsored where an employer can "match" contributions the employee makes
into the account. The match is usually up to a specific percentage of the employee's
salary.
Most 401(k) plans are participant directed, which means that the employee determines
how the contributed money is invested within specified guidelines.
Taxation and gains on Traditional 401(k) Plans - correct answerThe contributions are
made with Pre-Tax dollars. This is called "tax deferred" money. The funds within the
401(k) are invested, but capital gains and interest income within the account are NOT
taxed. The money in the account grows tax-free. When the 401(k) owner retires, taxes
are paid on any money than is withdrawn from the plan.
, Roth 401 (k) Plan - correct answerA Roth 401(k) is like a traditional 401(k) plan except
that income taxes are paid on the contributions to the Roth 401(k) when they are made.
After-tax dollars are invested in a Roth 401(k).
The funds in the Roth 401(k) grow tax free (no capital gains or interest income taxes).
When the account owner retires and is older than 59 1/2, money can be withdrawn from
the account tax-free.
Traditional 401(k) vs. Roth 401(k) - correct answerIn summary, a Traditional 401(k)
uses Pre-Tax dollars are pays income taxes when money is withdrawn from the
account. A Roth 401(k) uses After-Tax dollars are no taxes are paid when money is
withdrawn.
Distribution - correct answerThe withdrawal of funds from the account
403(b) and 457 plans - correct answer403(b) plans are very similar to 401(k) plans
except that only employees of public education organizations, other non=profits and
self-employed ministers may use them. These employees aren't eligible for 401(k)
plans.
457 plans are also very similar to 401(k) plans are are typically used by governmental
employees.
Both 403(b) and 457 plans have Roth versions available.
Contribution limits [401(k), 403(b), and 457 plans] - correct answerThere are
contribution limits associated with the different retirement plans. These limits changeo n
an annual basis, to take inflation into account. Contributions to these plans are
irrevocable and cannot be withdrawn until retirement. They can, however, be "roller
over" into an IRA.
Once the account owner reaches age 70 1/2, minimum distributions are required to be
taken annually.
Individual Retirement Account (IRA) - correct answerA Traditional IRA is a retirement
account which is available to anyone with a sufficient income to make the contributions.
Contributions to a Traditional IRA are made with Pre-Tax dollars. Investment gains
within the account then grow tax free while they are in the account.
At retirement, the withdrawals are taxed as ordinary income. IRA owners must also take
distributions when they reach the age of 70 1/2.
Individual Retirement Account (IRA) - correct answerA Roth IRA is a retirement account
which is available to individuals within certain income levels. Contributions to a Roth
