Question 1

Social Security is a plan where current workers' contributions pay for current retiree's benefits.

Accepted Answer

Social Security is a pay-as-you-go system where the taxes paid by current workers fund the benefits paid to current retirees.

Question 2

Robin was born after 1960,therefore,the retirement age for her to receive full Social Security benefits is 65.

Accepted Answer

The retirement age for those born after 1960 is actually 67 to receive full Social Security benefits.

Question 3

Social Security is a mandatory insurance program that provides a base level of protection for all of the following occurrences except one.Choose that one.

Accepted Answer

Social Security provides benefits for death, disability, and retirement, but it does not provide benefits for job loss; that is covered by unemployment insurance, which is a separate program.

Question 4

Most employees in the United States today are covered by an employer funded defined-benefit plan.

Accepted Answer

Most employees in the United States today are not covered by an employer funded defined-benefit plan. The prevalence of defined-benefit plans has declined over the years, with many employers instead offering defined-contribution plans like 401(k)s.

Question 5

To be eligible for Social Security benefits,you receive one credit for every $1,200 in wages that you earn,up to 4 credits per year.How many total credits do you need to qualify for benefits?

Accepted Answer

To qualify for Social Security benefits, you need a total of 40 credits. You can earn up to 4 credits per year, so it typically takes 10 years of work to become eligible.

Question 6

How is the size of a person's Social Security retirement benefits determined?

Accepted Answer

The size of a person's Social Security retirement benefits is determined by a combination of factors, including the number of credits earned (which reflects years worked), the average level of earnings over a person's lifetime, and the number of years a person has paid into Social Security.

Question 7

The Federal Insurance Contributions Act isn't an investment,but rather a mandatory insurance plan that one pays into through salary deductions.

Accepted Answer

The Federal Insurance Contributions Act (FICA) is a mandatory payroll tax that funds Social Security and Medicare. It is not an investment, but rather a social insurance program that workers pay into through salary deductions.

Question 8

Social Security is a health care,retirement,disability income,and life insurance plan.

Accepted Answer

Social Security provides health care services, retirement benefits, disability income, and life insurance coverage to eligible individuals in the United States.

Question 9

Many older companies have changed from a defined-benefit plan to a(n)________,which is a retirement plan where workers are credited with a percentage of their pay each year,plus a predetermined rate of interest.

Accepted Answer

The description matches that of a cash balance plan, which is a popular alternative to traditional defined benefit plans. It offers portability and flexibility, and provides the opportunity for employees to plan investment and retirement income. The other options- funded pension plan, unfunded pension plan, and percentage plus inflation plan - do not match the given description.

Question 10

Which of the following statements is true regarding Social Security retirement benefits?

Accepted Answer

A)This is true, as Social Security retirement benefits are calculated based on your average earnings over your 35 highest-earning years and are designed to replace about 40% of the average retiree's pre-retirement income.
B)This is also true, some public employees, such as teachers and certain state and local government employees, may not be covered by Social Security and may have their own retirement plan instead.
C)This is true, as Social Security benefits may be taxable if your combined income exceeds certain thresholds.
D)This is true, but if you choose to retire at age 62, your benefits will be permanently reduced compared to if you waited until full retirement age (which varies between 66 and 67, depending on your birth year).

Question 11

The system of Social Security is based on young working people paying taxes to support older retired people.The dependency ratio is the number of workers to retirees.Forty years ago it was 16 workers for every one retiree.What will happen to this ratio by the year 2048?

Accepted Answer

The ratio of workers to retirees is expected to decline to 2 workers for every 1 retiree by 2048 due to an aging population and a decrease in birth rates. This means fewer young people will be entering the workforce and paying taxes to support the growing number of retirees.

Question 12

Under a defined benefit plan you receive a promised or "defined" benefit payout at retirement.

Accepted Answer

Under a defined benefit plan, you receive a guaranteed payout based on a specific formula that takes into account your salary and years of service. This is different from a defined contribution plan where your retirement benefits are based on contributions made to your account and the performance of those investments.

Question 13

Today,the typical American worker will receive a defined-benefit retirement plan from their employer.

Accepted Answer

Today, the typical American worker is more likely to receive a defined-contribution retirement plan (such as a 401(k)) from their employer rather than a defined-benefit plan. Defined-benefit plans have become less common in recent years due to their cost and liability for employers.

Question 14

The size of your Social Security benefits are determined by your number of years of earnings,your average level of earnings,and an adjustment for inflation.

Accepted Answer

The calculation of Social Security benefits takes into account the number of years of earnings, the average level of earnings, and an adjustment for inflation. Therefore, the statement is true.

Question 15

Social Security is a system where current workers' pay taxes that are used to pay current retirees' benefits.How is Social Security funded?

Accepted Answer

Social Security is primarily funded through payroll taxes on both employees and employers, up to a certain salary cap. This system is known as the Federal Insurance Contributions Act (FICA) tax. Income taxes do not directly fund Social Security benefits.

Question 16

For most people,there is really no reason to save for retirement since Social Security will provide retirement benefits until you die.

Accepted Answer

This statement is false. Social Security may provide some retirement benefits, but it is not always enough to support a comfortable retirement. It is important to save for retirement in addition to relying on Social Security.

Question 17

Which of the following benefits is not provided by Social Security?

Accepted Answer

Social Security does not provide education benefits.

Question 18

An employee's Social Security contributions are invested in a general fund account and will be made available for the employee at retirement.

Accepted Answer

The question states that the employee's Social Security contributions are invested in a general fund account and will be made available for the employee at retirement. This means that the employee's contributions are being invested and will be available to them when they retire.

Question 19

One of the drawbacks to defined-benefit plans are their lack of portability,meaning that if you leave the company the value of the pension is not likely to go with you.

Accepted Answer

Defined-benefit plans are typically tied to a specific employer and are not portable, meaning that an employee who leaves the company may not be able to take the value of the pension with them.

Question 20

Under a funded pension plan,the employer makes regular contributions to a trustee who collects and invests the retirement funds.

Accepted Answer

In a funded pension plan, the employer makes contributions to a trustee who then invests the funds on behalf of the employee to provide retirement benefits.

Quiz 15: Retirement Planning