Question 1

A retirement savings goal is the total amount of accumulated savings and investments needed to meet your living expenses after retirement.

Accepted Answer

A retirement savings goal is indeed the total amount of accumulated savings and investments needed to meet your living expenses after retirement. This includes things like housing, healthcare, food, and other basic necessities that you'll need to pay for without a regular income. By setting a retirement savings goal, you can work backwards to figure out how much you need to save each year, month, or week to reach that goal by the time you retire.

Question 2

Putting money into tax-sheltered retirement plans is the single smartest idea in personal financial planning.

Accepted Answer

Tax-sheltered retirement plans, such as 401(k)s and IRAs, allow individuals to save money for retirement on a pre-tax basis, which can significantly lower their current tax liability. Additionally, the money in these plans grows tax-free until it is withdrawn in retirement. This can result in significant savings over the long-term and is generally considered one of the most effective ways to save for retirement.

Question 3

For Social Security purposes,the full-benefit retirement age is 67 for those born prior to 1960.

Accepted Answer

The full-benefit retirement age is 67 for those born in 1960 or later. For those born prior to 1960, the full retirement age varies from 65 to 66 and several months, depending on the year of birth.

Question 4

Electing to receive Social Security retirement benefits prior to age 67 can result in reduced benefits if your earmed income from other sources exceeds $15,120.

Accepted Answer

If you start receiving Social Security retirement benefits before your full retirement age (age 67 for those born in 1960 or later), your benefits may be reduced if your earned income exceeds a certain limit. For 2021, that limit is $18,960. However, it's important to note that once you reach your full retirement age, you can earn any amount without it affecting your Social Security benefits.

Question 5

Persons who are either fully insured or currently insured are eligible to receive Social Security retirement benefits.

Accepted Answer

Only individuals who are fully insured, not currently insured, are eligible to receive Social Security retirement benefits.

Question 6

Electing to receive Social Security retirement benefits prior to age 67 increases the monthly benefit received.

Accepted Answer

Electing to receive Social Security retirement benefits prior to full retirement age (which ranges from 66-67 depending on your birth year) results in a permanent reduction in the monthly benefit amount.

Question 7

It is very difficult to estimate your likely future Social Security retirement benefit.

Accepted Answer

The Social Security Administration provides tools such as the online Social Security Retirement Estimator and your Social Security statement, which give you an estimate of your future Social Security retirement benefits based on your actual earnings record.

Question 8

When a worker retires,other members of his or her immediate family may also be eligible to receive Social Security retirement benefits.

Accepted Answer

This is true. Spouses, ex-spouses (in some cases), and children may be eligible for benefits based on the retired worker's record.

Question 9

If you were born in 1994,you will reach your full-benefit retirement age for Social Security in 2061.

Accepted Answer

Full-benefit retirement age for Social Security is currently 67 for those born after 1960, which includes individuals born in 1994. Therefore, if you were born in 1994, you will reach your full-benefit retirement age for Social Security in 2061.

Question 10

Your earnings subject to Social Security taxes in your early years will be indexed for inflation when calculating your benefit amount at retirement.

Accepted Answer

This is true. The Social Security Administration uses an indexing formula to adjust your earnings for inflation before calculating your benefit amount at retirement. This means that earnings from earlier years will be worth more in today's dollars, which will increase your benefit amount.

Question 11

You immediately benefit from putting money in a tax-sheltered retirement account because you can make the deposits with after-tax money.

Accepted Answer

Contributions to tax-sheltered retirement accounts (such as traditional IRAs, 401(k)s, and 403(b)s) are typically made with pre-tax money, which reduces your taxable income in the year you make the contribution. The earnings in the account also grow tax-free until withdrawn in retirement, but you will pay taxes on the withdrawals. Some retirement accounts, such as Roth IRAs, do allow you to make contributions with after-tax money, but the benefit is in the tax-free growth and withdrawals in retirement, not the immediate tax savings.

Question 12

You can automatically save more for retirement as your income increases by setting your savings target as a percentage of income rather than a specific dollar amount.

Accepted Answer

If you set your savings target as a percentage of your income, you will automatically save more as your income increases. This is because the percentage will remain the same, but the dollar amount saved will increase with the higher income.

Question 13

Tax-sheltered retirement accounts allow a certain portion of your income to remain exempt from income taxes for the current year.

Accepted Answer

Tax-sheltered retirement accounts, such as 401(k)s and IRAs, offer tax benefits by allowing individuals to contribute pre-tax income, which reduces their taxable income for the current year. This means that a certain portion of the income remains exempt from income taxes.

Question 14

One can collect Social Security retirement benefits based on an ex-spouse's earnings if the marriage lasted at least ten years and both ex-spouses are at least 60 years old.

Accepted Answer

One can collect Social Security retirement benefits based on an ex-spouse's earnings if the marriage lasted at least ten years, but the requirement is that the individual is at least 62 years old, not 60.

Question 15

You can choose to start receiving retirement benefits as early as age 62,regardless of your full-benefit retirement age.If you do so,however,your basic retirement benefit will be permanently reduced by as much as thirty percent.

Accepted Answer

This statement is true. You can start receiving retirement benefits as early as age 62, but your basic retirement benefit will be permanently reduced if you choose to do so. The reduction can be as much as thirty percent depending on your full-benefit retirement age.

Question 16

For Social Security purposes,workers younger than age 72 who have fewer than six credits of work experience are transitionally insured.

Accepted Answer

For Social Security purposes, the concept of "transitionally insured" does not depend on being younger than age 72 or having fewer than six credits. Transitionally insured status typically refers to having enough credits for disability benefits but not necessarily for retirement benefits, and the specific criteria do not include an age limit of 72 or a credit minimum of six.

Question 17

For Social Security purposes,fully insured status implies that the worker will receive the maximum dollar amount of benefits allowable.

Accepted Answer

Fully insured status means that the worker has earned enough credits (usually at least 40) to be eligible for Social Security benefits, but it does not guarantee the maximum amount of benefits allowable. The actual benefit amount is determined by factors such as the worker's average earnings and age at the time of retirement or disability.

Question 18

Dennis Ackley,an innovator in retirement education,suggests looking at your retirement as something you "buy" on the layaway plan.

Accepted Answer

Dennis Ackley suggests looking at retirement as something you "buy" on the layaway plan, meaning you save for it gradually over time.

Question 19

All funds in a tax-sheltered retirement plan are taxed every five years.

Accepted Answer

Funds in tax-sheltered retirement plans (such as 401(k), IRA, etc.) are not taxed as long as they stay in the plan. The funds are only taxed when they are withdrawn from the plan, typically during retirement.

Question 20

When estimating your retirement savings goal in today's dollars,the amount saved must be higher to adjust for inflation.

Accepted Answer

Inflation causes the cost of goods and services to increase over time, so a dollar today will not have the same purchasing power in the future. Therefore, when estimating retirement savings goals, you need to account for inflation by saving a higher amount in today's dollars.

Quiz 17: Retirement and Estate Planning