Retirement Planning – Exam 2 (2025/2026
Latest Exam Prep) | Complete Study Guide &
Verified Practice Q&A
Retirement issues - correct answer1. People are living longer after they retire
2. Few companies offer pension plans now
3. Most people don't start saving for retirement until their late 30s
4. Average savings rate in the US is 3%
5. Government spending on the elderly substantially exceeds that for the rest of the
population
6. Average ages of retirement has declined from 67 to 63
Common risk factors of retirement - correct answer1. Health difficulties
2. Company forces you to retire early or they fire you at an advanced age and you
cannot find a replacement job
3. Medical bills are higher than expected
4. Investment returns are lower than expected
5. Planning for retirement was not done in a logical, structured way; often not done at all
Common alternatives during retirement - correct answer1. Cutback on cost of living
2. Moving to a lower-cost region
3. Receiving help from others, typically financial aid can come from children
4. Taking a part-time job
Different types of retirement plans - correct answer1. Employee
2. Employer
3. 401K - Traditional vs. Roth
4. IRA - Traditional vs. Roth
Employee retirement plans - correct answer1. Defined contribution plans vs. defined
benefit plans
2. Qualified plan vs. non-qualified plan
3. Social security
Employee benefit plans - correct answerSimple IRA vs. SEP plans vs. individual 401K
Traditional vs. Roth - correct answer1. Traditional - pay taxes later; when retire
2. Roth - pay taxes now; fund with after-tax dollars
401K - correct answer1. Workplace retirement plans
2. Many companies match the first 2-5% of your contributions - or more
, 3. You can contribute up to $18,000 per year
Catch up rule - correct answerIf you're over 50 years of age you can put more than the
max amount into your 401K or your IRA
403(b) Plans - correct answerBasically a 401K but for people who work for non-profit
companies
Basics of retirement plans for employees - correct answer1. Start with company plan,
always take the company match
2. Put money into an IRA (traditional or Roth)
3. If the client still has extra money, put it in the company plan
4. Any remaining amounts would be saved in a taxable account
Withdrawing money from an IRA - correct answer1. In general you need a 59 1/2 years
old to withdrawal money, otherwise you will have to pay a 10% penalty and any taxes
due on the amount withdrawn
2. You must start taking minimum payments OUT of you *traditional IRA* by age 70 1/2
or you will get penalized 50%
Pensions - correct answer1. Pensions are a defined retirement plan
2. What types of employers are most likely to have pensions?
3. Vesting
A pension is a defined retirement plan - correct answer1. The risk of having enough
money to fund the pension is on the employer
2. The amount you receive is based on a formula
What types of employers are most likely to have pensions? - correct answer1.
Educational institutes
2. Police and firefighters
3. Union members
Vesting - correct answerThe point at which an employee is entitled to a stated amount
of non-revocable benefits from an employer
1. Most vesting periods do not exceed 6 years
Other facts about pensions - correct answer1. The US government has mandated that
plans to be nondiscriminatory by being open to all workers
2. The Employee Retirement Income Security Act requires that employers act as
fiduciaries managing investment assets in the employee's best interests
3. The Pension Benefit Guarantee Corporation, guarantees pension assets or income
when companies go bankrupt
Simple IRA - correct answerGood for small companies with *100 of fewer employees*
Latest Exam Prep) | Complete Study Guide &
Verified Practice Q&A
Retirement issues - correct answer1. People are living longer after they retire
2. Few companies offer pension plans now
3. Most people don't start saving for retirement until their late 30s
4. Average savings rate in the US is 3%
5. Government spending on the elderly substantially exceeds that for the rest of the
population
6. Average ages of retirement has declined from 67 to 63
Common risk factors of retirement - correct answer1. Health difficulties
2. Company forces you to retire early or they fire you at an advanced age and you
cannot find a replacement job
3. Medical bills are higher than expected
4. Investment returns are lower than expected
5. Planning for retirement was not done in a logical, structured way; often not done at all
Common alternatives during retirement - correct answer1. Cutback on cost of living
2. Moving to a lower-cost region
3. Receiving help from others, typically financial aid can come from children
4. Taking a part-time job
Different types of retirement plans - correct answer1. Employee
2. Employer
3. 401K - Traditional vs. Roth
4. IRA - Traditional vs. Roth
Employee retirement plans - correct answer1. Defined contribution plans vs. defined
benefit plans
2. Qualified plan vs. non-qualified plan
3. Social security
Employee benefit plans - correct answerSimple IRA vs. SEP plans vs. individual 401K
Traditional vs. Roth - correct answer1. Traditional - pay taxes later; when retire
2. Roth - pay taxes now; fund with after-tax dollars
401K - correct answer1. Workplace retirement plans
2. Many companies match the first 2-5% of your contributions - or more
, 3. You can contribute up to $18,000 per year
Catch up rule - correct answerIf you're over 50 years of age you can put more than the
max amount into your 401K or your IRA
403(b) Plans - correct answerBasically a 401K but for people who work for non-profit
companies
Basics of retirement plans for employees - correct answer1. Start with company plan,
always take the company match
2. Put money into an IRA (traditional or Roth)
3. If the client still has extra money, put it in the company plan
4. Any remaining amounts would be saved in a taxable account
Withdrawing money from an IRA - correct answer1. In general you need a 59 1/2 years
old to withdrawal money, otherwise you will have to pay a 10% penalty and any taxes
due on the amount withdrawn
2. You must start taking minimum payments OUT of you *traditional IRA* by age 70 1/2
or you will get penalized 50%
Pensions - correct answer1. Pensions are a defined retirement plan
2. What types of employers are most likely to have pensions?
3. Vesting
A pension is a defined retirement plan - correct answer1. The risk of having enough
money to fund the pension is on the employer
2. The amount you receive is based on a formula
What types of employers are most likely to have pensions? - correct answer1.
Educational institutes
2. Police and firefighters
3. Union members
Vesting - correct answerThe point at which an employee is entitled to a stated amount
of non-revocable benefits from an employer
1. Most vesting periods do not exceed 6 years
Other facts about pensions - correct answer1. The US government has mandated that
plans to be nondiscriminatory by being open to all workers
2. The Employee Retirement Income Security Act requires that employers act as
fiduciaries managing investment assets in the employee's best interests
3. The Pension Benefit Guarantee Corporation, guarantees pension assets or income
when companies go bankrupt
Simple IRA - correct answerGood for small companies with *100 of fewer employees*
