Retirement Planning and Employee Benefits Practice Exam

Retirement Planning and Employee Benefits Practice Exam

 

What is the primary purpose of a defined benefit plan?
A. To provide a fixed contribution from the employer
B. To provide a predictable retirement income
C. To allow employees to decide their investment options
D. To provide tax-free retirement income

 

Which of the following is considered an employee benefit?
A. Wages
B. Retirement plan
C. Bonus
D. Reimbursement for travel expenses

 

The maximum contribution to a 401(k) plan in 2024 is:
A. $15,000
B. $19,500
C. $22,500
D. $26,000

 

What is the primary difference between a traditional IRA and a Roth IRA?
A. Traditional IRAs are tax-deferred, while Roth IRAs offer tax-free withdrawals in retirement
B. Roth IRAs allow higher contribution limits than traditional IRAs
C. Traditional IRAs allow penalty-free withdrawals before age 59½
D. Roth IRAs require mandatory distributions after age 72

 

In a 403(b) plan, which group of employees is eligible to participate?
A. Employees of for-profit companies
B. Employees of government agencies and nonprofit organizations
C. Employees of public schools
D. Both B and C

 

Which of the following is a benefit of using a Health Savings Account (HSA)?
A. Contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free
B. Contributions are subject to payroll taxes, but withdrawals for medical expenses are tax-free
C. HSA balances must be used within the year or they are forfeited
D. Employers are required to contribute to employees’ HSAs

 

Which type of retirement plan is primarily designed to provide employees with a fixed income in retirement?
A. 401(k)
B. Defined Benefit Plan
C. Roth IRA
D. SEP IRA

 

When can you start taking penalty-free withdrawals from a 401(k) plan?
A. Age 55
B. Age 59½
C. Age 62
D. Age 65

 

A 403(b) plan is most commonly available to employees of:
A. Private for-profit corporations
B. Government agencies
C. Public universities and schools
D. Both B and C

 

What does “vesting” mean in the context of employee retirement plans?
A. The amount of the employer’s contribution to the employee’s retirement account
B. The employee’s right to the employer’s contributions after a certain period of time
C. The ability to withdraw money from the plan before retirement
D. The tax-free withdrawal from a retirement account

 

Which of the following retirement plans does NOT have required minimum distributions (RMDs)?
A. Traditional IRA
B. 401(k)
C. Roth IRA
D. SEP IRA

 

The “catch-up” contribution for individuals aged 50 and older to a 401(k) plan in 2024 is:
A. $5,500
B. $6,500
C. $7,500
D. $10,000

 

A pension plan that promises a specific benefit upon retirement is known as a:
A. Defined Contribution Plan
B. Defined Benefit Plan
C. 401(k) Plan
D. Roth IRA

 

The Employee Retirement Income Security Act (ERISA) primarily ensures that:
A. Employees are automatically enrolled in retirement plans
B. Retirement plan benefits are guaranteed by the federal government
C. Retirement plan participants receive adequate plan disclosures and protections
D. Employer contributions are tax-free

 

Which of the following is a feature of a defined contribution plan?
A. The employer guarantees a specific benefit upon retirement
B. Employee contributions are made, and the employer may match them
C. The employer selects the investments for the employee
D. Employees do not have any investment choices

 

 

Which of the following is true about Roth IRAs?
A. Contributions are tax-deductible, but withdrawals in retirement are taxed
B. Contributions are not tax-deductible, but qualified withdrawals are tax-free
C. Roth IRAs require mandatory minimum distributions at age 72
D. Contributions are made by the employer, not the employee

 

A qualified domestic relations order (QDRO) is used to:
A. Distribute 401(k) plan benefits after the death of the plan participant
B. Divide retirement plan assets in the event of divorce
C. Qualify an employee for early retirement
D. Allow a plan participant to take loans from their retirement account

 

The maximum contribution limit for an IRA in 2024 is:
A. $6,000
B. $7,000
C. $10,000
D. $12,000

 

Which of the following retirement plans allows employees to borrow funds from their retirement accounts?
A. 401(k)
B. Defined Benefit Plan
C. IRA
D. Pension Plan

 

An employee who retires early at age 55 can avoid early withdrawal penalties if they take funds from which type of plan?
A. Traditional IRA
B. 401(k) plan
C. Roth IRA
D. SEP IRA

 

Which of the following is a feature of a SIMPLE IRA?
A. Employees must make contributions, but employers are not required to match
B. Employers must match contributions made by employees, but the match is limited
C. Only employees are allowed to contribute
D. It is only available to government employees

 

In which situation can you take penalty-free withdrawals from a 401(k) plan before age 59½?
A. If you change jobs and rollover the funds into another 401(k)
B. If you are purchasing a first home
C. If you become permanently disabled
D. If you take the withdrawal to fund college tuition

 

The tax advantage of contributing to a traditional 401(k) plan is:
A. Contributions are tax-deferred, meaning they reduce taxable income in the year they are made
B. Contributions are tax-free, but withdrawals are taxed
C. Contributions are made with after-tax dollars, and withdrawals are tax-free
D. Contributions are tax-deductible, but the employer’s matching contributions are not

 

The “five-year rule” for Roth IRA withdrawals applies to:
A. Early withdrawals of any kind
B. Roth IRA contributions
C. Conversions from traditional IRAs to Roth IRAs
D. Qualified distributions from a Roth IRA

 

Which of the following is an example of a non-qualified retirement plan?
A. 401(k)
B. SEP IRA
C. 403(b)
D. Deferred Compensation Plan

 

Which of the following types of employee benefits is required by law?
A. Life insurance
B. Disability insurance
C. Health insurance
D. Unemployment benefits

 

Which of the following is true about 401(k) plan rollovers?
A. The employee can transfer the funds to another retirement plan without paying taxes, if done correctly
B. Rollovers are always subject to a 10% penalty tax
C. Only employees under 59½ can roll over their 401(k) funds
D. Rollovers are only allowed to traditional IRAs

 

A key difference between a defined benefit plan and a defined contribution plan is that:
A. A defined benefit plan provides a fixed payout at retirement, while a defined contribution plan depends on the contributions and investment performance
B. In a defined contribution plan, the employer guarantees a fixed benefit amount
C. A defined benefit plan allows employees to choose their investments
D. A defined contribution plan offers fixed monthly benefits at retirement

 

A 401(k) loan must be repaid within:
A. 3 years
B. 5 years
C. 10 years
D. 15 years

 

Which of the following statements about Social Security is true?
A. Social Security benefits are available only to individuals who have contributed to the system for at least 20 years
B. The amount of Social Security benefits depends on the individual’s average lifetime earnings
C. Social Security benefits are means-tested based on income levels
D. Social Security benefits are available only to retired individuals

 

The primary purpose of a 401(k) plan is to:
A. Provide a tax-free source of income for retirement
B. Offer a high return on investment
C. Allow employees to save for retirement on a tax-deferred basis
D. Provide health insurance benefits to employees in retirement

 

Which of the following is a characteristic of a nonqualified retirement plan?
A. It must meet federal government regulations
B. Contributions are taxed when they are made
C. The employer has more flexibility in the plan design
D. It provides guaranteed income for life

 

In a profit-sharing plan, the employer:
A. Must contribute a fixed percentage of the employee’s salary
B. Has the option to contribute to the employee’s retirement fund based on company profits
C. Must match the employee’s contributions dollar-for-dollar
D. Does not make any contributions to the plan

 

Which of the following benefits is tax-deferred in a 401(k) plan?
A. Contributions made by the employer
B. Employer matching contributions
C. Investment gains within the account
D. Distributions made in retirement

 

An employee’s 401(k) account is eligible for which of the following?
A. Tax-free withdrawals at retirement
B. Penalty-free withdrawals at any time
C. Employer contributions, which are typically matched
D. Employee contributions, which are tax-deductible

 

What is the maximum amount of salary that can be considered when calculating contributions to a 401(k) plan in 2024?
A. $105,000
B. $130,000
C. $175,000
D. $230,000

 

What is the main advantage of a Roth 401(k) over a traditional 401(k)?
A. Contributions are made after-tax, but qualified withdrawals are tax-free
B. Contributions are tax-deductible
C. Roth 401(k)s allow higher contribution limits than traditional 401(k)s
D. Roth 401(k)s are available only to high-income earners

 

The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows employees to:
A. Receive tax-free retirement distributions
B. Continue their health insurance coverage after leaving employment for a limited time
C. Receive unemployment benefits after leaving their job
D. Claim tax credits for health care expenses

 

Which of the following is true regarding employee stock ownership plans (ESOPs)?
A. They provide employees with ownership in the company
B. They allow employees to defer taxes on their stock holdings
C. They are not regulated by the IRS
D. They are considered defined benefit plans

 

What is the penalty for early withdrawal from a 401(k) before age 59½?
A. 10% penalty tax
B. 25% penalty tax
C. No penalty, but taxes will be applied
D. 50% penalty tax

 

 

What is the maximum contribution limit for a 401(k) plan in 2024 for individuals under 50 years old?
A. $19,500
B. $22,500
C. $23,500
D. $27,500

 

A 403(b) plan is most commonly offered by:
A. Private corporations
B. Governmental entities and nonprofit organizations
C. Self-employed individuals
D. Publicly traded companies

 

Which of the following is true regarding required minimum distributions (RMDs)?
A. RMDs must begin by age 70½ for most retirement accounts
B. RMDs are required for Roth IRAs
C. RMDs must begin by age 72 for traditional IRAs and 401(k)s
D. RMDs are based on the amount of the original contribution to the plan

 

A catch-up contribution is available for individuals age 50 or older. What is the catch-up contribution limit for 401(k) plans in 2024?
A. $1,000
B. $5,500
C. $6,500
D. $7,000

 

Which of the following statements is true about SEP IRAs?
A. They allow employee contributions but not employer contributions
B. They are available only to self-employed individuals
C. They require both employee and employer contributions
D. They have no contribution limits

 

Which of the following retirement plans is specifically designed for self-employed individuals and small business owners?
A. 401(k)
B. Traditional IRA
C. SIMPLE IRA
D. SEP IRA

Answer: D

An individual contributes $5,000 to their IRA in a year. If they are in the 25% tax bracket, what is their tax savings from this contribution?
A. $1,000
B. $1,250
C. $1,500
D. $2,000

 

A pension plan guarantees:
A. A fixed benefit amount for employees during retirement
B. Only employer contributions without guaranteed retirement income
C. Contributions from both the employer and employee
D. Tax-free withdrawals upon retirement

 

Which of the following describes the concept of vesting in retirement plans?
A. The ability to withdraw retirement funds early without penalty
B. The right to a retirement plan benefit after a certain number of years of service
C. The requirement to contribute a certain percentage of salary
D. The taxability of contributions to a retirement plan

 

A 401(k) plan participant may choose which of the following?
A. The company’s pension plan options
B. The specific investments in their 401(k) account
C. Whether to take a loan against their 401(k)
D. The exact timing of the required minimum distributions

 

The IRS limits on contributions to retirement accounts in 2024 are generally based on:
A. The participant’s age and income level
B. The participant’s employment status
C. The participant’s years of service
D. A flat contribution limit across all individuals

 

Which of the following is true about traditional IRAs and tax treatment?
A. Contributions are not tax-deductible, but withdrawals are tax-free
B. Contributions are tax-deductible, but withdrawals are taxed as income
C. Contributions are made with after-tax dollars, and withdrawals are taxed when made
D. Contributions are made with tax-free dollars, and withdrawals are not taxed

 

A 401(k) hardship withdrawal may be taken for which of the following reasons?
A. Home purchase
B. Education expenses
C. Medical expenses
D. All of the above

 

Which of the following accounts does not allow tax-free growth of investments?
A. Roth IRA
B. Health Savings Account (HSA)
C. Traditional IRA
D. 529 Education Savings Plan

 

Which of the following is a tax advantage of contributing to a 401(k) plan?
A. Contributions are made with after-tax income
B. Contributions reduce your taxable income in the year they are made
C. 401(k) plans have no tax-deferred growth
D. Contributions are taxable when made but tax-deductible at retirement

 

The purpose of a defined benefit pension plan is to:
A. Provide a fixed amount of retirement income based on a formula
B. Provide a retirement income based solely on investment returns
C. Allow employees to make their own contributions
D. Allow for early withdrawal penalties to be waived

 

Which of the following is a feature of a defined contribution plan, like a 401(k)?
A. The employer guarantees a set benefit amount upon retirement
B. Contributions are based on a fixed percentage of salary
C. The value of the plan depends on employee contributions and investment returns
D. It is an employer-only funded plan

 

Which type of retirement plan requires employers to make minimum contributions on behalf of employees?
A. 403(b) Plan
B. SIMPLE IRA
C. SEP IRA
D. Defined Benefit Plan

 

Which of the following is true about rollovers from a 401(k) to an IRA?
A. Rollovers are only allowed from traditional 401(k) plans
B. The funds transferred from a 401(k) to an IRA will incur taxes at the time of transfer
C. Rollovers can preserve tax-deferred status if done correctly
D. Rollovers are only available for employees over age 59½

 

When can a Roth IRA account holder withdraw their contributions without penalty?
A. After 5 years of account holding
B. After 10 years of account holding
C. At any time, tax- and penalty-free
D. Only after reaching age 59½

 

The maximum contribution to a Health Savings Account (HSA) in 2024 for individuals with self-only coverage is:
A. $2,500
B. $3,000
C. $3,650
D. $4,000

 

The main advantage of a Roth 401(k) over a Traditional 401(k) is:
A. Contributions are made with pre-tax dollars
B. Contributions are tax-deferred
C. Qualified withdrawals in retirement are tax-free
D. Contributions are always deducted from salary

 

A 401(k) loan must be repaid within:
A. 3 years
B. 5 years
C. 7 years
D. 10 years

 

Which of the following types of retirement plans is NOT subject to ERISA?
A. 401(k)
B. Pension Plans
C. 403(b)
D. IRA

 

What is the purpose of the Employee Retirement Income Security Act (ERISA)?
A. To establish a mandatory contribution amount for retirement plans
B. To guarantee a fixed retirement income
C. To regulate retirement plans to ensure that employees’ benefits are protected
D. To exempt small businesses from offering retirement plans

 

Which of the following retirement savings vehicles allows you to contribute after-tax dollars with tax-free earnings?
A. Traditional IRA
B. Roth IRA
C. SEP IRA
D. 401(k)

 

What is one disadvantage of a Traditional IRA compared to a Roth IRA?
A. Contributions are taxed when made
B. Distributions in retirement are taxed
C. Contributions are only available to low-income earners
D. Distributions are limited by age

 

Which of the following statements about 403(b) plans is true?
A. They are available to self-employed individuals
B. They are designed for employees of public schools and certain tax-exempt organizations
C. They allow unlimited contributions
D. Employees must contribute to the plan in order to participate

 

What is the maximum contribution to an HSA in 2024 for a family plan?
A. $5,000
B. $6,750
C. $7,500
D. $8,000

 

What happens if you withdraw funds from a 401(k) before age 59½ and you do not qualify for an exception?
A. The withdrawal is tax-free
B. You will incur a 10% early withdrawal penalty in addition to regular income taxes
C. The funds are returned to the employer’s pension plan
D. The funds are transferred to a taxable brokerage account

 

 

Which of the following is true about 401(k) matching contributions made by an employer?
A. Employers must make matching contributions to all employees
B. Employer contributions are not taxable to the employee until they are withdrawn
C. Employer contributions are always made on a tax-free basis
D. Employer contributions are tax-deductible for the employee

 

The maximum annual contribution to a Health Savings Account (HSA) in 2024 for a family is:
A. $3,000
B. $3,500
C. $7,750
D. $8,000

 

Which of the following accounts allows tax-free withdrawals in retirement?
A. Traditional IRA
B. Roth IRA
C. SEP IRA
D. 401(k)

 

What is the penalty for early withdrawal from an IRA before age 59½, unless a qualified exception applies?
A. 5% penalty
B. 10% penalty
C. 15% penalty
D. 20% penalty

 

Which of the following is an example of an employer-sponsored retirement plan that is also available to small business owners and self-employed individuals?
A. 401(k)
B. SEP IRA
C. Traditional IRA
D. Roth IRA

 

The contribution limit for an individual to a traditional IRA in 2024 is:
A. $6,000
B. $6,500
C. $7,000
D. $7,500

 

Which of the following types of retirement plans allows contributions from both the employee and the employer?
A. Roth IRA
B. SEP IRA
C. 403(b)
D. 401(k)

Answer: D

In which of the following situations would a 401(k) plan participant NOT be allowed to take a loan from their plan?
A. The loan is for a qualified home purchase
B. The loan is for paying off medical bills
C. The participant is younger than 21 years old
D. The participant has already taken a loan in the past

 

Which of the following retirement accounts is best suited for a high-income earner looking to save after-tax dollars for retirement?
A. Roth IRA
B. Traditional IRA
C. SEP IRA
D. 401(k)

 

What is a SIMPLE IRA?
A. A retirement plan designed for high-income earners
B. A plan that only allows employee contributions
C. A retirement plan for small businesses with fewer than 100 employees
D. A plan that allows tax-free withdrawals in retirement

 

Which of the following is NOT a benefit of a Roth IRA?
A. Tax-free withdrawals in retirement
B. Contributions are tax-deductible in the year they are made
C. Contributions are made with after-tax dollars
D. There are no required minimum distributions (RMDs) during the account holder’s lifetime

 

A 401(k) plan participant is age 65 and is still working for the employer. What is the rule for required minimum distributions (RMDs)?
A. The participant must begin RMDs from their 401(k) once they reach age 65
B. RMDs must begin at age 72, even if the participant is still working
C. RMDs are not required if the participant is still working
D. RMDs can be delayed until the employee stops working

 

Which of the following is a feature of a defined benefit pension plan?
A. Employer contributions are optional
B. Employee contributions are required
C. The employer guarantees a fixed monthly benefit upon retirement
D. The retirement benefit depends on the performance of investments

 

The maximum annual contribution limit to a 403(b) plan in 2024 is:
A. $19,500
B. $22,500
C. $23,500
D. $27,500

 

What type of retirement account is primarily used by self-employed individuals or small business owners?
A. Traditional IRA
B. Roth IRA
C. SEP IRA
D. SIMPLE IRA

 

Which of the following can an employee do with their 401(k) balance after they leave their employer?
A. Withdraw the balance penalty-free
B. Keep the funds in the old employer’s 401(k) plan
C. Transfer the balance to a different employer’s 401(k) plan
D. All of the above

 

Which of the following is true about employer-sponsored retirement plans such as 401(k)s?
A. Employers are required to contribute a minimum amount to the plan
B. Employees are taxed on contributions at the time of contribution
C. Employer contributions are subject to payroll taxes
D. Contributions are typically deducted from the employee’s paycheck on a pre-tax basis

 

Which of the following describes a traditional IRA?
A. Contributions are made with after-tax dollars
B. Contributions are tax-deductible, and withdrawals are taxed as income
C. Contributions are tax-deductible, and withdrawals are tax-free
D. It allows tax-free growth but has income limits for eligibility

 

How often are required minimum distributions (RMDs) calculated for retirement accounts such as IRAs and 401(k)s?
A. Monthly
B. Annually
C. Every five years
D. Every two years

 

Which of the following is true about employer-provided health insurance benefits in retirement?
A. They are always taxable when received in retirement
B. They are usually not taxed if the retiree is over age 65
C. The employee does not have to pay premiums for these benefits once they retire
D. They are generally available only to employees of public sector organizations

 

If an individual is over age 50, what is the maximum catch-up contribution to a 401(k) plan in 2024?
A. $6,500
B. $7,500
C. $8,500
D. $10,000

 

Which of the following retirement plans allows employees to contribute both pre-tax and after-tax dollars?
A. SEP IRA
B. 401(k)
C. SIMPLE IRA
D. Roth IRA

 

A worker contributes to both a 401(k) and an IRA. Which of the following is true?
A. The total contributions to both plans cannot exceed $19,500
B. Contributions to the IRA may be tax-deductible, depending on the individual’s income level
C. Contributions to the 401(k) do not count toward the IRA contribution limit
D. There is no penalty for contributing to both plans in the same year

 

The income generated by investments in a Roth IRA is:
A. Taxable during the years it is earned
B. Tax-free if withdrawn in retirement
C. Subject to penalties if withdrawn before age 59½
D. Taxable but subject to reduced rates

 

What is the typical vesting schedule for employer contributions to a 401(k)?
A. Immediate vesting
B. 1 year
C. 3 to 6 years
D. 10 years

 

Which of the following plans provides the highest level of retirement income certainty?
A. Defined contribution plan
B. Defined benefit plan
C. 401(k)
D. SEP IRA

 

If an individual withdraws funds from a traditional IRA before age 59½, what is the typical tax penalty?
A. 5%
B. 10%
C. 15%
D. 20%

 

What is the maximum contribution limit for a SEP IRA in 2024 for an individual?
A. $19,500
B. $22,500
C. $66,000
D. $58,000

 

What is one advantage of a 401(k) plan over an IRA?
A. Larger contribution limits
B. Tax-free withdrawals in retirement
C. The ability to make catch-up contributions
D. All of the above

 

A defined contribution plan is primarily based on:
A. A fixed benefit that does not depend on contributions
B. Employee and employer contributions, and investment returns
C. Employer contributions only
D. A guaranteed income for life

 

 

Which of the following is a feature of a Roth 401(k)?
A. Contributions are made with pre-tax dollars
B. Withdrawals are tax-free in retirement
C. There is no limit on annual contributions
D. Required Minimum Distributions (RMDs) are not required during retirement

 

What is the key advantage of contributing to a traditional IRA?
A. Tax-free withdrawals in retirement
B. Contributions may be tax-deductible
C. Contributions are made with after-tax dollars
D. There are no required minimum distributions (RMDs)

 

Which of the following is NOT an example of an employee benefit plan?
A. Health insurance
B. Life insurance
C. Social Security
D. 401(k)

 

How often do employers need to file Form 5500 for their retirement plans?
A. Annually
B. Quarterly
C. Monthly
D. Every two years

 

Which of the following is true regarding a 403(b) plan?
A. It is only available to employees of for-profit companies
B. It allows employees to contribute a percentage of their income into a retirement savings account
C. Contributions are not tax-deferred
D. It requires mandatory employer contributions

 

Which of the following retirement plans has a higher contribution limit: a SIMPLE IRA or a SEP IRA?
A. SIMPLE IRA
B. SEP IRA
C. Both have the same contribution limit
D. Neither allows contributions

 

The maximum contribution limit for an individual to a SIMPLE IRA in 2024 is:
A. $6,000
B. $7,500
C. $10,000
D. $14,000

 

Which of the following is a requirement for an individual to contribute to a Roth IRA?
A. The individual must be at least 60 years old
B. The individual must have earned income
C. The individual must contribute to a 401(k) plan
D. The individual must be employed full-time

 

Which type of retirement account is designed specifically for employees of tax-exempt organizations, such as schools and non-profits?
A. 401(k)
B. 403(b)
C. SEP IRA
D. SIMPLE IRA

 

In a defined benefit pension plan, the retirement benefit is based on:
A. The employee’s salary and years of service
B. The employee’s account balance and investment returns
C. The employee’s Social Security benefits
D. The employee’s Roth IRA balance

 

What is the main difference between a traditional 401(k) and a Roth 401(k)?
A. Roth 401(k) contributions are made with after-tax dollars, while traditional 401(k) contributions are made with pre-tax dollars
B. Roth 401(k) withdrawals are taxable, while traditional 401(k) withdrawals are tax-free
C. Roth 401(k) plans do not allow employer contributions
D. There is no difference between the two

 

What is the penalty for withdrawing funds from a 401(k) plan before age 59½, unless a qualified exception applies?
A. 5%
B. 10%
C. 15%
D. 20%

 

What type of retirement plan allows employees to contribute a percentage of their salary, and employers to match a portion of those contributions?
A. 401(k)
B. Traditional IRA
C. SEP IRA
D. SIMPLE IRA

 

In which of the following situations would an individual be able to withdraw funds from a 401(k) without penalty before age 59½?
A. To pay off a mortgage
B. To pay for medical expenses exceeding 7.5% of adjusted gross income
C. To purchase a home
D. To pay for college tuition

 

Which of the following is NOT a common feature of a 401(k) plan?
A. Employer contributions
B. Employee-controlled investments
C. Required minimum distributions (RMDs)
D. Tax-free growth during the accumulation phase

Answer: D

Which type of retirement account allows both pre-tax and after-tax contributions?
A. Roth IRA
B. Traditional IRA
C. 401(k)
D. SEP IRA

 

In a 401(k) plan, what is a vesting schedule?
A. The rate at which an employee can access their 401(k) funds
B. The period of time over which an employee gains ownership of employer contributions
C. The rate at which an employee’s salary increases
D. The maximum amount an employee can contribute to their 401(k)

 

What is the maximum contribution limit for a Health Savings Account (HSA) for a single individual in 2024?
A. $3,500
B. $4,000
C. $6,000
D. $7,000

 

Which of the following retirement plans is designed for small businesses or self-employed individuals?
A. 401(k)
B. SEP IRA
C. 403(b)
D. Traditional IRA

 

The maximum catch-up contribution to a 401(k) plan in 2024 for employees over age 50 is:
A. $5,000
B. $6,500
C. $7,500
D. $10,000

 

Which of the following is NOT a benefit of a traditional IRA?
A. Contributions may be tax-deductible
B. Contributions grow tax-deferred until retirement
C. Withdrawals are tax-free after age 59½
D. There are no income limits for contributions

Answer: D

What is the tax treatment of a distribution from a Roth IRA if the account holder is over 59½ and the account has been open for more than five years?
A. The distribution is fully taxable
B. The distribution is tax-free
C. The distribution is subject to a 10% penalty
D. The distribution is subject to ordinary income tax

 

Which of the following is true about employer contributions to a 401(k)?
A. Employer contributions are always vested immediately
B. Employer contributions are taxable to the employee when contributed
C. Employer contributions are optional and not required by law
D. Employer contributions are always made in cash

 

What is the penalty for early withdrawal from a Health Savings Account (HSA) before age 65, unless for a qualified medical expense?
A. 10% penalty
B. 20% penalty
C. 15% penalty
D. 25% penalty

 

Which of the following is NOT an advantage of a Roth IRA?
A. Tax-free withdrawals in retirement
B. Contributions grow tax-deferred
C. Contributions are tax-deductible in the year they are made
D. No required minimum distributions

 

Which of the following retirement plans has the highest contribution limits?
A. SEP IRA
B. SIMPLE IRA
C. Traditional IRA
D. 401(k)

Answer: D

Which of the following statements about a 403(b) plan is true?
A. It is available to all employees in for-profit businesses
B. It is similar to a 401(k) but for employees of non-profit organizations
C. It only allows employer contributions
D. Contributions to a 403(b) plan are taxed at the time they are made

 

How does a defined benefit plan differ from a defined contribution plan?
A. A defined benefit plan is based on an individual’s contributions, while a defined contribution plan provides a predetermined benefit
B. A defined benefit plan provides a specific benefit in retirement, while a defined contribution plan depends on contributions and investment performance
C. A defined contribution plan guarantees a fixed income in retirement, while a defined benefit plan does not
D. A defined benefit plan is only available to government employees

 

What is the maximum contribution limit for an individual to a traditional IRA in 2024?
A. $5,500
B. $6,000
C. $6,500
D. $7,000

 

What type of retirement plan is designed to allow employees of small businesses to save for retirement and offers both employee and employer contributions?
A. 401(k)
B. SEP IRA
C. SIMPLE IRA
D. 403(b)

 

 

Which of the following is a tax advantage of contributing to a 401(k) plan?
A. Contributions are made with after-tax dollars
B. Contributions reduce taxable income in the year they are made
C. Withdrawals are tax-free
D. There is no penalty for early withdrawals

 

Which of the following retirement plans allows for both employee and employer contributions, and has high contribution limits?
A. 403(b)
B. 401(k)
C. SEP IRA
D. SIMPLE IRA

 

How does a Roth IRA differ from a traditional IRA in terms of tax treatment?
A. Roth IRA contributions are tax-deductible, and withdrawals are tax-free
B. Traditional IRA contributions are tax-deductible, and withdrawals are taxed
C. Both have the same tax treatment
D. Roth IRA contributions are tax-deductible, and withdrawals are taxed

 

What is the primary benefit of a Health Savings Account (HSA)?
A. Tax-free contributions
B. Tax-free withdrawals for qualified medical expenses
C. Tax-free withdrawals for any purpose
D. Contributions are made with after-tax dollars

 

What is the purpose of a vesting schedule in a retirement plan?
A. To determine the employer’s contribution to the employee’s plan
B. To determine when an employee can access their account
C. To determine when an employee fully owns employer-contributed funds
D. To track the employee’s income during retirement

 

Which of the following is a primary difference between a SIMPLE IRA and a SEP IRA?
A. SIMPLE IRAs have lower contribution limits than SEP IRAs
B. SEP IRAs are available only to employees of non-profit organizations
C. SIMPLE IRAs do not allow employer contributions
D. SEP IRAs are limited to small businesses with fewer than 100 employees

 

Which of the following is true regarding the withdrawal rules for a Roth IRA?
A. Withdrawals before age 59½ are always taxed
B. Earnings in a Roth IRA are always taxed
C. Contributions can be withdrawn at any time without tax or penalty
D. All withdrawals from a Roth IRA are taxed

 

What type of retirement plan is typically used by self-employed individuals or small business owners?
A. 403(b)
B. SEP IRA
C. 401(k)
D. SIMPLE IRA

 

What is the required minimum distribution (RMD) age for traditional IRAs and 401(k) plans as of 2024?
A. 70½
B. 72
C. 75
D. 65

 

Which of the following is a feature of a defined benefit plan?
A. Employee contributions determine retirement benefits
B. Employer guarantees a specific retirement benefit
C. Contributions are based on a percentage of salary
D. Employees manage their own investments

 

What is the maximum annual contribution to a 401(k) in 2024 for an employee under age 50?
A. $18,500
B. $19,500
C. $20,000
D. $22,500

 

What is the key feature of a 403(b) plan?
A. Available only to for-profit organizations
B. Employees can invest in stocks and bonds directly
C. Primarily for employees of tax-exempt organizations like schools and charities
D. Employees cannot make contributions to the plan

 

Which of the following is NOT an example of an employee benefit plan?
A. 401(k)
B. Health insurance
C. Paid vacation
D. Social Security benefits

 

What is the key difference between a traditional IRA and a Roth IRA?
A. Roth IRA contributions are tax-deductible
B. Traditional IRA withdrawals are tax-free
C. Roth IRA withdrawals are tax-free if the account is held for five years or more
D. There are no contribution limits for a Roth IRA

 

What is a primary benefit of contributing to a Health Savings Account (HSA)?
A. Contributions are tax-free
B. Contributions are made with after-tax dollars
C. The money in the account can be used for any purpose, tax-free
D. Funds accumulate tax-deferred and withdrawals for qualified medical expenses are tax-free

Answer: D

Which of the following best describes a 457(b) plan?
A. A retirement plan for self-employed individuals
B. A plan that allows tax-deferred retirement savings for government employees
C. A plan available only to employees of non-profit organizations
D. A plan that allows tax-free withdrawals for medical expenses

 

What is the penalty for withdrawing funds from a 401(k) before age 59½ without a qualifying exception?
A. 10% penalty
B. 15% penalty
C. 20% penalty
D. 25% penalty

 

What is a primary advantage of contributing to a 401(k) plan compared to a traditional IRA?
A. 401(k) plans have lower contribution limits
B. 401(k) plans often offer employer matching contributions
C. Traditional IRAs offer tax-free withdrawals
D. 401(k) plans do not have required minimum distributions

 

What is the contribution limit for a SIMPLE IRA in 2024 for employees under age 50?
A. $6,000
B. $10,000
C. $14,000
D. $16,000

 

Which of the following is true regarding Roth 401(k) plans?
A. Contributions are made with after-tax dollars
B. Withdrawals are subject to income tax in retirement
C. Roth 401(k) plans do not require minimum distributions (RMDs)
D. Contributions are tax-deductible in the year they are made

 

What is the maximum contribution limit for an individual to a SEP IRA in 2024?
A. $6,000
B. $12,000
C. $20,500
D. $66,000

 

What is the primary benefit of a defined contribution plan compared to a defined benefit plan?
A. The employee’s retirement benefit is guaranteed
B. The employee controls their contributions and investments
C. Employers are required to contribute to the employee’s plan
D. The employee receives a fixed amount each month in retirement

 

Which of the following is NOT a requirement for participating in a 401(k) plan?
A. You must be employed by a company offering the plan
B. You must be over the age of 50
C. You must have worked at the company for a specific period of time
D. You must be under a certain salary threshold

 

What is the primary advantage of employer-sponsored retirement plans?
A. They provide tax-free growth for the employee
B. Employers typically offer matching contributions
C. Employees can access the funds at any time
D. Contributions are not subject to annual limits

 

What happens to your 401(k) if you change employers?
A. The employer must liquidate your 401(k) account
B. You can roll over your 401(k) into an IRA or your new employer’s 401(k) plan
C. You must cash out the 401(k) within 60 days
D. Your 401(k) automatically moves to your new employer’s plan

 

What is a Roth IRA’s key tax feature?
A. Contributions are tax-deductible
B. Earnings are tax-deferred until retirement
C. Contributions are made with after-tax dollars, and withdrawals are tax-free in retirement
D. Withdrawals are subject to a 10% penalty before age 65

 

Which of the following is true regarding Social Security benefits?
A. Benefits are taxable only for low-income earners
B. Benefits are guaranteed by the employer
C. Social Security contributions are mandatory for most workers
D. Social Security benefits are available only to individuals over the age of 65

 

Which of the following is a primary advantage of a 403(b) plan over a traditional 401(k) plan?
A. 403(b) plans are for employees of government agencies only
B. 403(b) plans have higher contribution limits
C. 403(b) plans typically have lower administrative fees
D. 403(b) plans do not require employer contributions

 

What is the tax treatment of employer contributions to a 401(k) plan?
A. Employer contributions are not taxable to the employee until retirement
B. Employer contributions are taxed when made
C. Employer contributions are tax-free in retirement
D. Employer contributions are taxed at a lower rate than employee contributions

 

At what age can you begin taking penalty-free withdrawals from a 401(k) if you are still employed?
A. 55
B. 59½
C. 62
D. 65

 

 

What is the maximum contribution limit for an individual to a traditional or Roth IRA in 2024 for someone under age 50?
A. $6,000
B. $7,000
C. $9,000
D. $12,000

 

Which of the following is NOT a feature of a SIMPLE IRA?
A. It is available to small businesses with fewer than 100 employees
B. Employees can contribute up to $12,000 annually
C. Employers are required to make contributions
D. It is subject to required minimum distributions (RMDs)

 

Which of the following statements is true regarding the tax treatment of employer contributions to a 401(k) plan?
A. Employer contributions are made with after-tax dollars
B. Employer contributions are tax-free to the employee in the year they are made
C. Employer contributions are taxed at a higher rate than employee contributions
D. Employer contributions are not taxable until retirement

 

How are Social Security benefits taxed in retirement?
A. Social Security benefits are always tax-free
B. Social Security benefits are taxed only if the recipient has other sources of income
C. Social Security benefits are taxed at a flat rate
D. Social Security benefits are taxed at a rate higher than other income

 

What is the key feature of a defined benefit pension plan?
A. Employee contributions are required
B. Retirement benefits are determined by a set formula
C. The employee manages the investments
D. Contributions are made with after-tax dollars

 

Which of the following is true about a 401(k) plan’s “safe harbor” provision?
A. It requires employers to match employee contributions dollar for dollar
B. It allows employees to take loans from their 401(k) balances
C. It exempts certain 401(k) plans from annual nondiscrimination tests
D. It limits the amount employees can contribute to the plan

 

What is the penalty for early withdrawal from a Roth IRA before age 59½ if the account has not been held for five years?
A. No penalty
B. 10% penalty on earnings
C. 20% penalty on contributions
D. 25% penalty on withdrawals

 

Which of the following is true about the “catch-up” contribution rule for individuals age 50 or older in retirement accounts?
A. It only applies to traditional IRAs
B. It increases the annual contribution limit by $1,000 for IRAs
C. It only applies to defined benefit plans
D. It allows employees to make higher contributions to employer-sponsored plans, such as 401(k)s

 

Which of the following is an advantage of a 401(k) plan compared to a traditional pension plan?
A. Guaranteed income for life
B. Employees control their investments
C. Employers are required to make contributions
D. No contribution limits

 

Which of the following retirement accounts allows for both employee and employer contributions and has high contribution limits?
A. 403(b)
B. 401(k)
C. SIMPLE IRA
D. Traditional IRA

 

Which of the following types of retirement accounts offers tax-free withdrawals in retirement?
A. Traditional IRA
B. 401(k)
C. Roth IRA
D. SEP IRA

 

What is the primary advantage of a Health Savings Account (HSA)?
A. Contributions are tax-deductible
B. Withdrawals for qualified medical expenses are tax-free
C. It allows individuals to make penalty-free withdrawals for any purpose
D. Contributions grow tax-free, and there are no contribution limits

 

What is the primary difference between a Roth IRA and a Roth 401(k)?
A. Roth IRA contributions are tax-deductible, whereas Roth 401(k) contributions are not
B. Roth 401(k) plans have higher contribution limits than Roth IRAs
C. Roth IRAs are offered by employers, while Roth 401(k)s are not
D. Roth 401(k)s have no contribution limits, while Roth IRAs have strict limits

 

What is the penalty for withdrawing funds from a traditional IRA before age 59½, except in certain qualified circumstances?
A. 5% penalty
B. 10% penalty
C. 20% penalty
D. 25% penalty

 

Which of the following is the maximum contribution to a 401(k) in 2024 for an individual aged 50 or older?
A. $19,500
B. $22,500
C. $26,000
D. $30,000

 

What is the “matching” contribution in a 401(k) plan?
A. An employee’s contribution to the plan that is matched dollar-for-dollar by the employer
B. A contribution by the employer that matches the employee’s contribution, typically a percentage
C. A contribution made by the government to match employee contributions
D. A contribution made to a separate savings plan in addition to the 401(k)

 

What is the primary purpose of the Pension Benefit Guaranty Corporation (PBGC)?
A. To provide tax-free pension income
B. To insure the benefits of defined benefit pension plans
C. To administer the federal retirement program
D. To regulate 401(k) plans

 

What is the age at which an individual can begin withdrawing funds from a 401(k) without penalty if they are still employed with the plan sponsor?
A. 50
B. 55
C. 59½
D. 62

 

Which of the following is a characteristic of a 403(b) plan?
A. It is only available to employees of tax-exempt organizations
B. It is the same as a 401(k) plan, but with a different contribution limit
C. It requires employers to make matching contributions
D. It is only available to government employees

 

What is the purpose of a “QDRO” (Qualified Domestic Relations Order)?
A. To ensure that the retirement plan follows tax laws
B. To divide retirement plan assets in the event of a divorce
C. To allow a spouse to withdraw from a 401(k) without penalty
D. To protect retirement assets from creditors

 

What is the tax treatment of contributions to a traditional IRA?
A. Contributions are made with after-tax dollars and are not deductible
B. Contributions are made with pre-tax dollars and are tax-deductible
C. Contributions are made with pre-tax dollars but are not deductible
D. Contributions are not taxed at any time

 

What is the maximum annual contribution limit for an employee under 50 to a SIMPLE IRA in 2024?
A. $6,000
B. $14,000
C. $15,500
D. $18,000

 

What is the primary difference between a 401(k) and a 403(b) plan?
A. 401(k) plans are only for non-profit organizations, while 403(b) plans are for employees of private companies
B. 403(b) plans offer more tax advantages than 401(k) plans
C. 403(b) plans are only available to employees of tax-exempt organizations
D. There is no significant difference

 

Which of the following is true regarding employer contributions to a 401(k) plan?
A. They are always subject to immediate vesting
B. They may be subject to a vesting schedule
C. They are not subject to income tax at any time
D. They are deducted from the employee’s salary

 

Which of the following best describes a “safe harbor” 401(k) plan?
A. A plan where employees are guaranteed a minimum return
B. A plan that allows employers to avoid certain nondiscrimination testing if they make contributions to employees’ accounts
C. A plan that provides higher contribution limits for higher earners
D. A plan that is available only to employees of small businesses

 

What is the primary benefit of participating in an employer-sponsored 401(k) plan?
A. Employer contributions are tax-free
B. Employees can choose investments that provide guaranteed returns
C. Contributions to the plan are tax-deferred, reducing taxable income
D. Employees can access their 401(k) funds at any time without penalty

 

What type of employer-sponsored retirement plan is typically used by employees of public schools, non-profits, and certain other tax-exempt organizations?
A. 401(k)
B. 403(b)
C. 457(b)
D. SIMPLE IRA

 

What is a major benefit of a Roth IRA over a traditional IRA?
A. Contributions are tax-deductible
B. Qualified withdrawals are tax-free
C. Roth IRAs have higher contribution limits
D. Roth IRAs do not require minimum distributions

 

At what age can you begin taking penalty-free withdrawals from a 401(k) after retirement?
A. 50
B. 55
C. 59½
D. 65

 

What is the maximum contribution to a SEP IRA in 2024 for someone under 50?
A. $6,000
B. $19,500
C. $66,000
D. $105,000

 

 

Which of the following statements is true regarding required minimum distributions (RMDs) from a traditional IRA?
A. RMDs must begin at age 65
B. RMDs must begin at age 72
C. RMDs are only required if the IRA account exceeds $100,000
D. RMDs are optional for individuals over age 70½

 

Which of the following is a primary advantage of a Roth IRA over a traditional IRA?
A. Contributions are tax-deductible
B. Withdrawals are tax-free after retirement
C. It has a higher contribution limit than traditional IRAs
D. Contributions can be made beyond age 70½

 

What is the maximum contribution limit for an individual to a 403(b) plan in 2024?
A. $19,500
B. $22,500
C. $26,000
D. $30,000

 

What is the “vesting” period in a 401(k) plan?
A. The time an employee must wait before accessing contributions
B. The time an employee must wait before their employer’s contributions become fully owned by them
C. The time an employee has to pay taxes on employer contributions
D. The time an employee is required to stay with the company to receive pension benefits

 

Which of the following is true about 457(b) retirement plans?
A. They are available only to government employees
B. They allow contributions that are tax-deductible
C. They do not require RMDs until the employee turns 75
D. They have no contribution limit for highly compensated employees

 

Which of the following retirement plans allows both employer and employee contributions, but the employee manages the investment?
A. Defined Benefit Pension Plan
B. 401(k) Plan
C. Simplified Employee Pension (SEP) IRA
D. 403(b) Plan

 

What is the penalty for early withdrawal from a 401(k) plan before age 59½?
A. 5% penalty
B. 10% penalty
C. 15% penalty
D. 25% penalty

 

Which of the following is NOT a characteristic of a defined contribution pension plan?
A. Benefits are determined by contributions and investment performance
B. Employees bear the investment risk
C. Employers guarantee a set monthly benefit
D. Contributions are typically made by both the employer and employee

 

At what age can an individual begin taking distributions from a 457(b) plan without penalty?
A. 55
B. 59½
C. 62
D. 70½

 

Which of the following is an example of a non-qualified retirement plan?
A. 401(k)
B. 403(b)
C. 457(b)
D. Deferred Compensation Plan

Answer: D

Which of the following statements is true about employee benefits under a cafeteria plan?
A. Employees are given a set of benefit options, and they can choose the benefits that best suit their needs
B. Employers are required to contribute to the cafeteria plan
C. Employees cannot change their elections during the year
D. Cafeteria plans are available only to government employees

 

Which of the following is a tax advantage of a 401(k) plan?
A. Contributions are tax-free
B. Earnings grow tax-deferred until retirement
C. Employees do not have to pay taxes on employer contributions
D. There are no contribution limits

 

What is the “catch-up” contribution rule for individuals aged 50 or older in a 401(k) plan?
A. They can contribute an additional $3,500 beyond the normal contribution limit
B. They can contribute an additional $6,500 beyond the normal contribution limit
C. They are exempt from the contribution limits
D. They must reduce their contributions by 10%

 

What is the primary benefit of a “Roth” 401(k) compared to a traditional 401(k)?
A. Contributions are tax-deductible
B. Contributions and earnings grow tax-free
C. Employees are not required to make contributions
D. There is no income limit for eligibility

 

Which of the following is the maximum contribution limit to a SIMPLE IRA in 2024?
A. $12,000
B. $14,000
C. $17,000
D. $22,500

 

What is a “qualified plan” in the context of retirement planning?
A. A plan that does not offer tax benefits
B. A plan that meets IRS requirements for tax advantages
C. A plan that guarantees a certain return on investment
D. A plan that is available only to government employees

 

Which of the following is a common disadvantage of a defined benefit pension plan?
A. It guarantees a fixed monthly retirement income
B. Employees bear the risk of investment losses
C. The plan may not be portable if the employee leaves the company
D. Employees can manage their investments

 

Which of the following is true about a 401(k) loan?
A. The loan must be paid off within 5 years
B. Loans are allowed only for first-time home purchases
C. Loans are taxed when taken out
D. Loans are not allowed in 401(k) plans

 

Which of the following is the maximum contribution limit to a traditional IRA for individuals aged 50 or older in 2024?
A. $6,000
B. $7,000
C. $10,000
D. $12,000

 

Which of the following retirement plans is most commonly used by employees of public schools?
A. 401(k)
B. 403(b)
C. 457(b)
D. Defined Benefit Pension Plan

 

What is a primary difference between a traditional 401(k) plan and a Roth 401(k) plan?
A. A Roth 401(k) offers tax-free withdrawals while a traditional 401(k) is taxed at retirement
B. A traditional 401(k) has higher contribution limits than a Roth 401(k)
C. A Roth 401(k) does not require employer matching
D. Contributions to a Roth 401(k) are tax-deductible while those to a traditional 401(k) are not

 

What happens to the contributions in a 401(k) if an employee leaves the company?
A. The employee can cash out the 401(k) immediately
B. The employee can roll over the 401(k) to an IRA or a new employer’s plan
C. The employee must leave the 401(k) with the previous employer
D. The employer keeps the contributions

 

At what age can an individual begin taking Social Security benefits without penalty?
A. 62
B. 65
C. 66
D. 70

 

What is the maximum contribution limit for a 401(k) in 2024 for someone aged 50 or older?
A. $19,500
B. $22,500
C. $26,000
D. $30,000

 

Which of the following is true about the tax treatment of employer contributions to a 401(k) plan?
A. Employer contributions are subject to immediate taxation
B. Employer contributions are made with after-tax dollars
C. Employer contributions are made with pre-tax dollars and grow tax-deferred
D. Employer contributions are subject to Social Security and Medicare taxes

 

What is the “safe harbor” provision in a 401(k) plan?
A. It allows for higher contribution limits for highly compensated employees
B. It exempts certain 401(k) plans from annual nondiscrimination testing
C. It guarantees a fixed retirement benefit
D. It allows employees to access 401(k) funds without penalty at any age

 

How are contributions to a SEP IRA treated for tax purposes?
A. Contributions are tax-free when made
B. Contributions are tax-deductible for the employer
C. Contributions are taxed when withdrawn
D. Contributions are made with after-tax dollars

 

What is the “stretch” provision in relation to an inherited IRA?
A. It allows the beneficiary to withdraw the entire IRA balance immediately
B. It allows the beneficiary to take RMDs over their lifetime
C. It provides tax-free distributions for beneficiaries under age 30
D. It allows the original account holder to designate the beneficiary’s contribution limits

 

Which of the following retirement plans is typically used by self-employed individuals?
A. 401(k)
B. 403(b)
C. SEP IRA
D. Defined Benefit Plan

 

What is the tax treatment of employer contributions to a Roth 401(k)?
A. They are made with after-tax dollars
B. They are made with pre-tax dollars
C. They are tax-free when withdrawn
D. They are taxed immediately upon contribution

 

 

What is the primary benefit of using a Health Savings Account (HSA) alongside a high-deductible health plan (HDHP)?
A. Contributions are tax-free
B. Withdrawals for qualified medical expenses are tax-free
C. Both contributions and withdrawals are tax-free
D. Contributions grow tax-deferred

 

Which of the following statements is true about the Qualified Domestic Relations Order (QDRO)?
A. It is a court order that divides retirement assets between a spouse and a third party
B. It is used to ensure employees’ retirement plans are taxed at the highest rate
C. It provides immediate access to retirement funds before age 59½
D. It allows early withdrawal from an IRA for qualifying medical expenses

 

What is the maximum contribution limit for an individual aged 50 or older to a SIMPLE IRA in 2024?
A. $12,000
B. $14,000
C. $17,000
D. $22,500

 

How are traditional IRA contributions treated for tax purposes?
A. Contributions are tax-free when made and taxed upon withdrawal
B. Contributions are tax-deductible in the year they are made, but taxes are paid upon withdrawal
C. Contributions are taxed when made but are tax-free when withdrawn
D. Contributions are made with after-tax dollars and withdrawals are tax-free

 

What happens if a 401(k) plan participant takes an early distribution before age 59½?
A. They will not face any penalties
B. They will face a 10% early withdrawal penalty
C. They will face a 15% early withdrawal penalty
D. They will face a 25% early withdrawal penalty

 

Which of the following is the main reason why employees participate in employer-sponsored retirement plans like 401(k)s?
A. The employer matches contributions, which provides additional savings
B. The government provides tax incentives for these plans
C. Employees can borrow against their retirement funds
D. Employees are required to participate

 

What is the purpose of the Pension Benefit Guaranty Corporation (PBGC)?
A. To guarantee the income from 401(k) plans
B. To insure defined benefit pension plans and protect participants’ benefits
C. To manage Social Security benefits
D. To oversee the taxation of retirement plan contributions

 

What is the maximum contribution limit for a 401(k) in 2024 for an individual under the age of 50?
A. $19,500
B. $22,500
C. $26,000
D. $30,000

 

What type of retirement plan does not require employers to make contributions?
A. 401(k) Plan
B. Defined Benefit Plan
C. SEP IRA
D. Profit-Sharing Plan

 

Which of the following plans allows employees to take loans from their retirement savings?
A. Roth IRA
B. SEP IRA
C. 401(k)
D. Defined Benefit Plan

 

What is the “spousal rollover” option in retirement planning?
A. It allows a spouse to inherit an IRA and continue the same tax-deferred growth
B. It permits a spouse to withdraw all funds from an IRA without penalty
C. It allows a spouse to transfer retirement plan funds into a taxable account
D. It permits a spouse to double the contribution limits for their own retirement accounts

 

Which of the following is a disadvantage of a traditional pension plan (defined benefit plan)?
A. Employees have control over investment choices
B. The plan’s future benefits are guaranteed
C. The employer bears the investment risk
D. Employees can take loans from the plan

 

How are Roth IRA contributions treated for tax purposes?
A. Contributions are tax-deductible in the year they are made
B. Contributions are taxed when made but grow tax-free
C. Contributions are made with pre-tax dollars and taxed upon withdrawal
D. Contributions are not taxed upon withdrawal

 

Which of the following statements is true about 403(b) plans?
A. They are available to all employees, including those in private industry
B. They allow after-tax contributions but provide tax-free withdrawals
C. They are available to employees of tax-exempt organizations and public schools
D. They have higher contribution limits than 401(k) plans

 

At what age does an individual need to start taking Required Minimum Distributions (RMDs) from their retirement accounts, such as IRAs and 401(k)s?
A. 59½
B. 65
C. 70½
D. 72

Answer: D

What is the tax advantage of contributing to a traditional IRA?
A. Contributions are tax-free at the time of withdrawal
B. Contributions are tax-deductible in the year they are made
C. Contributions are tax-deductible in the year they are withdrawn
D. Contributions grow tax-free

 

What is the penalty for failing to take Required Minimum Distributions (RMDs) from retirement accounts?
A. A 5% penalty on the total distribution amount
B. A 10% penalty on the total distribution amount
C. A 25% penalty on the amount not withdrawn
D. A 50% penalty on the amount not withdrawn

Answer: D

What is the primary benefit of a 403(b) plan over a 401(k) plan?
A. Higher contribution limits
B. Available only to employees of tax-exempt organizations
C. More investment options
D. Employer contributions are always tax-free

 

Which of the following statements is true about an employee stock ownership plan (ESOP)?
A. It allows employees to borrow funds to purchase shares of the company
B. Employees can only sell the shares to the company once they leave
C. Employees are required to invest their retirement savings in the company stock
D. ESOPs are only available to employees who work at publicly traded companies

 

In a defined benefit plan, how is the retirement benefit calculated?
A. Based on the amount of contributions made by the employee
B. Based on a fixed percentage of the employee’s salary and years of service
C. Based on the employee’s age at retirement
D. Based on the return on investment in the retirement fund

 

What is the “front-loading” option in some retirement plans?
A. Allowing employees to contribute only at the beginning of the year
B. Allowing the employer to contribute extra funds at the start of the year
C. Permitting employees to contribute larger amounts early in the year to maximize tax savings
D. Permitting employees to withdraw all contributions without penalty

 

Which of the following is the primary tax advantage of a Roth 401(k) plan?
A. Contributions are tax-deductible
B. Withdrawals are tax-free in retirement
C. Contributions are taxed upon withdrawal
D. Employer contributions are tax-free

 

What is the primary purpose of a SIMPLE IRA plan?
A. To provide retirement benefits with minimal administrative costs for small businesses
B. To allow employees to invest in stocks, bonds, and real estate
C. To provide guaranteed benefits to all employees
D. To allow employees to contribute without any limits on income

 

What is the maximum contribution limit for a Roth IRA in 2024?
A. $5,500
B. $6,000
C. $7,000
D. $8,000

 

Which of the following is true about the Saver’s Credit?
A. It applies only to contributions made to Roth IRAs
B. It offers a tax credit to low- and moderate-income individuals who contribute to retirement accounts
C. It allows individuals to avoid paying taxes on their retirement distributions
D. It provides an employer match for employee contributions to IRAs

 

Which of the following is NOT an eligible expense for a distribution from a Health Savings Account (HSA)?
A. Prescription medications
B. Over-the-counter medications
C. Cosmetic surgery
D. Doctor’s office visit

 

What is the main feature of a pension plan’s “defined benefit” structure?
A. The employer determines the contribution amount based on company profits
B. The employer guarantees a specific retirement benefit
C. The employee selects their retirement benefit based on investment choices
D. The employee’s contributions determine the retirement benefit

 

What happens to unused funds in a flexible spending account (FSA) at the end of the year?
A. They are rolled over into the next year
B. They are returned to the employee’s paycheck
C. They are forfeited, unless the employer offers a grace period
D. They are transferred into a retirement account

 

What is the “automatic enrollment” feature in 401(k) plans?
A. Employees are automatically enrolled in the plan but can choose to opt-out
B. Employees can only contribute a set amount to the plan
C. The employer automatically invests employees’ contributions in the company stock
D. Employees must make all investment decisions for the 401(k) plan

 

Which of the following is NOT an example of an employer-sponsored retirement plan?
A. 401(k)
B. IRA
C. 403(b)
D. Defined Benefit Plan

 

 

What is the purpose of a Qualified Retirement Plan?
A. To minimize an individual’s income taxes
B. To allow employers to contribute to employees’ retirement savings on a tax-deferred basis
C. To guarantee a fixed income for the employee after retirement
D. To allow employees to invest in any type of asset without restrictions

 

What is the primary advantage of a Roth IRA over a traditional IRA?
A. Roth IRAs offer a higher contribution limit
B. Roth IRAs provide tax-free withdrawals in retirement
C. Roth IRAs allow more investment options
D. Roth IRAs provide guaranteed returns

 

What is the “Catch-up” contribution option for retirement plans?
A. It allows individuals under age 50 to make additional contributions to retirement plans
B. It allows individuals aged 50 and over to make additional contributions to retirement plans
C. It allows individuals to withdraw funds from their retirement plans without penalty
D. It requires a higher level of employer contribution

 

Which of the following is a feature of a 401(k) plan?
A. Employees contribute with after-tax dollars, and withdrawals are tax-free
B. Contributions are tax-deferred, and withdrawals are taxed as income
C. Employers are not allowed to make contributions to the plan
D. It provides guaranteed retirement benefits based on years of service

 

What is the penalty for early withdrawal from a 401(k) plan before age 59½?
A. 5% of the withdrawal amount
B. 10% of the withdrawal amount
C. 15% of the withdrawal amount
D. 20% of the withdrawal amount

 

What is the main difference between a traditional pension plan and a 401(k) plan?
A. A traditional pension plan is funded by the employee, while a 401(k) plan is employer-funded
B. A 401(k) plan provides guaranteed income, while a pension plan does not
C. A pension plan guarantees a specific retirement benefit, while a 401(k) plan depends on employee contributions and investment returns
D. A pension plan allows employees to choose their investments, while a 401(k) plan does not

 

What is a 403(b) plan?
A. A retirement plan for employees of private sector companies
B. A retirement plan for self-employed individuals
C. A retirement plan for employees of tax-exempt organizations, like schools and charities
D. A retirement plan for employees who work in government sectors only

 

Which of the following types of retirement accounts allows for tax-free growth and tax-free withdrawals in retirement?
A. Traditional IRA
B. 401(k)
C. Roth IRA
D. SEP IRA

 

What does the “vesting” schedule refer to in a retirement plan?
A. The rate at which the employee’s contributions grow
B. The minimum time an employee must work to earn the right to employer contributions
C. The maximum contribution an employee can make each year
D. The age at which the employee can begin withdrawing from the retirement account

 

Which of the following statements about a Simplified Employee Pension (SEP) IRA is true?
A. Only employees can contribute to the SEP IRA
B. SEP IRAs are designed for small businesses and self-employed individuals
C. The contribution limits are lower than those of traditional IRAs
D. Employers and employees are both allowed to make tax-free contributions

 

What is the tax treatment of a 401(k) plan contribution?
A. Contributions are taxed when made, and withdrawals are tax-free
B. Contributions are made with after-tax dollars, and withdrawals are tax-deferred
C. Contributions are made with pre-tax dollars, and withdrawals are taxed as ordinary income
D. Contributions are made with pre-tax dollars, and withdrawals are also tax-free

 

What is the maximum contribution limit for an individual aged 50 or older in a 401(k) plan in 2024?
A. $22,500
B. $24,000
C. $27,000
D. $30,000

 

What is the role of the Pension Benefit Guaranty Corporation (PBGC)?
A. To oversee the investment choices in pension funds
B. To insure defined benefit pension plans and protect employees’ pension benefits
C. To regulate contributions to 401(k) plans
D. To enforce tax penalties on retirement plan withdrawals

 

How does an employee stock ownership plan (ESOP) benefit employees?
A. It allows employees to purchase stocks in their company at a discounted price
B. It guarantees retirement income to employees
C. It allows employees to invest in the stock market outside their company’s shares
D. It offers employees stock ownership through employer contributions, often with tax advantages

Answer: D

What is the maximum contribution limit for an individual under the age of 50 in a Traditional IRA for 2024?
A. $5,500
B. $6,000
C. $6,500
D. $7,000

 

What is a primary advantage of contributing to a Health Savings Account (HSA)?
A. Contributions grow tax-deferred
B. Withdrawals for qualified medical expenses are tax-free
C. It is available to all employees, regardless of their health insurance plan
D. It has a higher contribution limit than a 401(k)

 

What is the key benefit of a “target-date fund” in a retirement plan?
A. It adjusts the investment mix automatically as the target retirement date approaches
B. It guarantees a specific return by the target date
C. It allows for more control over individual investments
D. It offers no risk, regardless of market conditions

 

How does the Required Minimum Distribution (RMD) rule affect retirement accounts?
A. It mandates that individuals must start withdrawing a percentage of their retirement savings after age 59½
B. It requires individuals to withdraw funds from their retirement accounts after age 70½ or 72, depending on the plan
C. It requires individuals to make contributions to their retirement accounts starting at age 70½
D. It allows individuals to continue making contributions to their retirement accounts after age 72

 

What is the tax treatment of contributions to a 401(k) plan?
A. Contributions are made with after-tax dollars, and withdrawals are taxed
B. Contributions are made with pre-tax dollars, and withdrawals are tax-free
C. Contributions are made with pre-tax dollars, and withdrawals are taxed
D. Contributions are taxed when made, and withdrawals are tax-free

 

What is an individual’s eligibility for a Health Savings Account (HSA)?
A. They must have a health insurance plan with a high deductible
B. They must be employed full-time by a tax-exempt organization
C. They must be covered under Medicaid
D. They must contribute to their retirement plan

 

What type of retirement plan is often used by self-employed individuals to save for retirement?
A. SEP IRA
B. 403(b) Plan
C. 401(k) Plan
D. Defined Benefit Plan

 

What happens if an individual fails to take a Required Minimum Distribution (RMD) from their retirement account?
A. They are subject to a 10% tax penalty on the RMD amount
B. They lose the tax-deferred growth of their contributions
C. They can avoid the penalty by submitting a late RMD request
D. They face a 50% penalty on the amount that should have been withdrawn

Answer: D

What is a primary disadvantage of a defined contribution plan (such as a 401(k))?
A. Employees are guaranteed a specific benefit amount
B. The employer bears the investment risk
C. Contributions are tax-deferred, and withdrawals are tax-free
D. Employees bear the investment risk and benefit from the returns on their contributions

Answer: D

What is the penalty for withdrawing funds from a Roth IRA before age 59½?
A. A 10% penalty on contributions and earnings
B. A 10% penalty on earnings only
C. A 20% penalty on contributions and earnings
D. No penalty if the funds are used for qualified education expenses

 

How are employer contributions to a 401(k) plan treated for tax purposes?
A. They are not taxed when made, but taxed when withdrawn
B. They are taxed when made, but not taxed when withdrawn
C. They are not taxed when made and not taxed when withdrawn
D. They are tax-deductible when made, and withdrawals are tax-free

 

 

What is the purpose of the Federal Insurance Contributions Act (FICA)?
A. To establish tax benefits for retirees
B. To provide a federal framework for Social Security and Medicare funding
C. To regulate employer-provided pension plans
D. To offer tax-free retirement savings accounts

 

Which of the following retirement plans offers tax-deferred contributions and earnings?
A. Roth IRA
B. Traditional IRA
C. Health Savings Account (HSA)
D. 529 Plan

 

What is the main benefit of a SIMPLE IRA plan for employees?
A. It allows for unlimited employer contributions
B. It requires no minimum distributions once the employee reaches retirement age
C. It provides tax-deferred growth on contributions
D. It provides guaranteed retirement income

 

What is the most significant difference between a pension plan and a 401(k) plan?
A. Pension plans are funded by the employer, while 401(k) plans are funded by the employee
B. Pension plans guarantee retirement income, while 401(k) plans depend on contributions and investment returns
C. Pension plans are tax-deferred, while 401(k) plans are tax-free
D. Pension plans are for government employees only

 

What is the maximum contribution limit for an individual in a Roth IRA in 2024?
A. $5,000
B. $6,000
C. $6,500
D. $7,000

 

How does the tax treatment of a Traditional IRA differ from a Roth IRA?
A. Contributions to a Traditional IRA are taxed when withdrawn, while Roth IRA withdrawals are tax-free
B. Contributions to a Roth IRA are tax-deductible, while Traditional IRA withdrawals are taxed
C. Contributions to a Traditional IRA are tax-deductible, and Roth IRA withdrawals are tax-free
D. Roth IRAs are only available to individuals over age 50, while Traditional IRAs have no such restriction

 

Which of the following is true about a 401(k) plan?
A. The employee owns the plan entirely once it is established
B. Employer contributions to a 401(k) are always discretionary
C. The employee controls the investment choices in a 401(k) plan
D. 401(k) plans are only available to individuals employed in the private sector

 

What is the contribution limit for a Health Savings Account (HSA) in 2024 for individuals under age 55?
A. $2,500
B. $3,850
C. $4,500
D. $7,000

 

What is the purpose of a 457(b) plan?
A. To allow employees of nonprofit organizations to defer income tax on their retirement contributions
B. To allow employees of state and local governments to save for retirement while deferring income tax
C. To guarantee a fixed retirement benefit for government employees
D. To allow business owners to avoid payroll taxes

 

At what age can individuals start taking penalty-free withdrawals from their 401(k) or Traditional IRA?
A. 55
B. 59½
C. 62
D. 65

 

What does “compounding” refer to in a retirement savings context?
A. The practice of withdrawing from the retirement account to avoid taxation
B. The process of earning interest on both the initial contribution and the accumulated earnings
C. The strategy of diversifying investments in a retirement portfolio
D. The mandatory distribution of funds upon retirement

 

What is an employer’s primary responsibility when managing a retirement plan?
A. To guarantee all plan participants will meet retirement goals
B. To ensure that the plan is in compliance with legal requirements
C. To contribute at least 5% of each employee’s salary to the plan
D. To personally manage employees’ retirement investments

 

What is the maximum contribution for an individual under age 50 to a 401(k) plan in 2024?
A. $19,500
B. $20,500
C. $22,500
D. $26,000

 

What is the role of a fiduciary in the context of a retirement plan?
A. To make investment decisions in the plan’s best interest
B. To guarantee the amount of retirement income for each participant
C. To determine the vesting schedule for employer contributions
D. To provide tax advice to employees participating in the plan

 

Which of the following is NOT a requirement for a retirement plan to be considered “qualified” under IRS rules?
A. The plan must be written and communicated to all eligible employees
B. Employees must make contributions to the plan
C. The plan must meet certain contribution and benefit limits
D. The plan must provide for nondiscriminatory treatment of employees

 

What is an annuity?
A. A retirement plan that guarantees a fixed monthly income for life
B. A type of employer-sponsored retirement account
C. A tax-deferred investment vehicle available only to the self-employed
D. A retirement plan that requires mandatory withdrawals at age 65

 

How does a SIMPLE IRA plan differ from a 401(k) plan?
A. SIMPLE IRA plans are only available to employers with more than 100 employees
B. Employees of a SIMPLE IRA plan can contribute a higher percentage of their salary compared to a 401(k)
C. SIMPLE IRA plans require mandatory employer contributions
D. SIMPLE IRA plans allow employers to automatically withdraw from employee salaries

 

What is the benefit of using a target-date fund within a 401(k) plan?
A. It guarantees a fixed retirement income
B. It automatically adjusts the investment mix as the target retirement date approaches
C. It requires no employee input after initial setup
D. It provides tax-free growth and tax-free withdrawals

 

What does the term “vested” mean in the context of a retirement plan?
A. An employee has the right to receive employer contributions after a specific period of service
B. An employee has full ownership of all contributions to the retirement plan
C. The plan administrator is vested with the responsibility for managing the retirement funds
D. An employee is required to invest a certain percentage of their salary into the plan

 

Which of the following is true about a traditional pension plan?
A. It is entirely funded by employee contributions
B. It provides a fixed monthly payment based on salary and years of service
C. It allows employees to invest their funds in a variety of assets
D. It is typically managed by the employee rather than the employer

 

What is the key tax advantage of a Roth 401(k) over a traditional 401(k)?
A. Contributions to a Roth 401(k) are tax-deductible, and withdrawals are tax-free
B. Contributions to a Roth 401(k) are made with after-tax dollars, and withdrawals are tax-free
C. Roth 401(k) plans offer higher contribution limits
D. Roth 401(k) plans guarantee a higher return on investments

 

At what age can you begin withdrawing from a Health Savings Account (HSA) for non-medical expenses without a penalty?
A. 50
B. 55
C. 59½
D. 65

Answer: D

How are Social Security benefits taxed?
A. They are taxed as ordinary income, but there are income thresholds that determine taxation
B. They are not taxed at all
C. They are taxed at a flat rate of 15%
D. They are only taxed if you are self-employed

 

What is the key advantage of using a defined contribution plan for retirement savings?
A. The employer assumes all investment risk
B. The employee can contribute a fixed amount each year, regardless of income
C. Contributions and earnings grow tax-deferred
D. It guarantees a specific monthly benefit for retirement

 

What is the primary purpose of the Required Minimum Distribution (RMD) rule?
A. To ensure that individuals withdraw their retirement savings after reaching a certain age
B. To prevent individuals from over-contributing to their retirement accounts
C. To allow individuals to make tax-free withdrawals after age 59½
D. To help retirees determine how much to invest each year in their retirement accounts

 

 

What is the maximum contribution limit to a 401(k) plan for an individual under age 50 in 2024?
A. $19,000
B. $20,500
C. $22,000
D. $23,000

 

Which of the following retirement plans allows for both employer and employee contributions?
A. Roth IRA
B. SIMPLE IRA
C. Traditional IRA
D. SEP IRA

 

Which of the following is NOT a feature of a 403(b) plan?
A. It is available to employees of nonprofit organizations
B. Employee contributions are made pre-tax
C. Employer contributions are mandatory
D. It allows employees to invest in annuities

 

What is the primary difference between a 401(k) plan and a 403(b) plan?
A. 401(k) plans are only available to government employees, while 403(b) plans are for nonprofit employees
B. 403(b) plans do not allow employer contributions
C. 401(k) plans allow more flexible investment options compared to 403(b) plans
D. 403(b) plans have higher contribution limits than 401(k) plans

 

What is the contribution limit for a catch-up contribution to a 401(k) plan for individuals over age 50 in 2024?
A. $5,000
B. $6,500
C. $7,000
D. $10,000

 

Which of the following is true about a Roth IRA?
A. Contributions are tax-deductible
B. Contributions must be made before age 59½
C. Withdrawals in retirement are tax-free
D. Withdrawals are required starting at age 70½

 

What is the primary benefit of investing in a health savings account (HSA)?
A. Contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free
B. Contributions grow tax-deferred, and withdrawals are tax-free for retirement
C. Contributions are not taxed, and withdrawals can be used for non-medical expenses without penalties
D. Contributions are tax-deductible, and there is no penalty for non-medical withdrawals

 

In a traditional pension plan, what determines the amount of retirement benefits an employee will receive?
A. The amount the employee contributes to the plan
B. The amount of social security the employee qualifies for
C. A formula based on the employee’s salary and years of service
D. The amount of the employer’s contribution to the pension fund

 

Which of the following retirement plans offers employees more control over investment decisions?
A. Traditional pension plan
B. 401(k) plan
C. Defined benefit plan
D. Annuity plan

 

How is a defined contribution retirement plan different from a defined benefit plan?
A. In a defined contribution plan, the employer guarantees a fixed monthly income in retirement, whereas in a defined benefit plan, the contribution is based on the employee’s salary and years of service
B. A defined contribution plan involves investment risk borne by the employer, while a defined benefit plan involves risk borne by the employee
C. A defined contribution plan specifies a fixed contribution amount, while a defined benefit plan specifies a fixed retirement benefit
D. A defined benefit plan allows employees to choose their own investments, while a defined contribution plan does not

 

What is the earliest age at which you can begin withdrawing from a traditional IRA without penalty?
A. 59½
B. 60
C. 62
D. 65

 

Which of the following retirement plans allows contributions by both the employer and employee?
A. Roth IRA
B. 401(k) plan
C. Simple IRA
D. Traditional IRA

 

Which of the following best describes the Required Minimum Distribution (RMD)?
A. A rule that mandates individuals over 70½ years old to withdraw a portion of their retirement savings each year
B. A rule that mandates employers to contribute a minimum amount to a retirement plan
C. A rule that allows individuals to take penalty-free withdrawals from retirement accounts after age 59½
D. A rule that prevents individuals from making contributions to retirement accounts after age 70½

 

Which of the following is true about a 457(b) plan?
A. It is available only to government employees
B. Contributions are tax-free, and withdrawals are subject to tax
C. It is an employer-sponsored plan that allows both employee and employer contributions
D. Contributions are subject to the same limits as 401(k) plans

 

What does the term “vesting” refer to in a retirement plan?
A. The time an employee must work to be entitled to employer contributions
B. The investment performance of the plan
C. The total value of the retirement fund
D. The tax treatment of the retirement plan

 

Which of the following retirement plans is designed specifically for self-employed individuals?
A. 401(k) plan
B. SIMPLE IRA
C. SEP IRA
D. Roth IRA

 

What is the maximum contribution limit for an individual under age 50 to a Roth IRA in 2024?
A. $5,000
B. $6,000
C. $7,000
D. $8,000

 

How does a 401(k) plan typically differ from a SIMPLE IRA plan?
A. SIMPLE IRAs have higher contribution limits than 401(k) plans
B. 401(k) plans are employer-sponsored and allow for employee contributions, while SIMPLE IRAs are for self-employed individuals
C. 401(k) plans usually offer more investment options and higher contribution limits than SIMPLE IRAs
D. SIMPLE IRAs are designed for government employees, while 401(k) plans are for private-sector employees

 

Which of the following retirement plans allows for tax-deferred contributions and tax-free withdrawals in retirement?
A. 401(k)
B. Traditional IRA
C. Roth IRA
D. SIMPLE IRA

 

What is the purpose of a defined benefit plan?
A. To provide guaranteed retirement benefits based on salary and years of service
B. To allow employees to invest in stocks and bonds for retirement
C. To offer tax-deferred growth on employee contributions
D. To provide employer-matched contributions to employees’ retirement savings

 

Which of the following is true about a SEP IRA?
A. It is available only to employers with 100 or fewer employees
B. Only the employer can contribute to the plan
C. Contributions are made by both the employee and employer
D. It is available only to employees of government agencies

 

What is the main benefit of a Roth 401(k) compared to a traditional 401(k)?
A. Roth 401(k) contributions are tax-deductible, and withdrawals are taxable
B. Contributions to a Roth 401(k) are made with after-tax dollars, and withdrawals are tax-free
C. Roth 401(k) plans offer guaranteed retirement benefits
D. Roth 401(k) plans do not require any employer contributions

 

What is the primary advantage of using a Target Date Fund in a retirement portfolio?
A. It guarantees a specific return for retirement
B. It automatically adjusts the allocation of assets as the target retirement date approaches
C. It allows employees to control all investment decisions
D. It offers tax-free growth and tax-free withdrawals

 

Which of the following is a requirement for participating in a 401(k) plan?
A. The employee must be at least 50 years old
B. The employee must contribute a fixed percentage of their salary each year
C. The employee must work for an employer that offers the plan
D. The employee must invest in bonds rather than stocks

 

What is the penalty for early withdrawal from a 401(k) plan before age 59½?
A. 10% penalty
B. 15% penalty
C. 20% penalty
D. No penalty

 

At what age can you begin making penalty-free withdrawals from a Roth IRA?
A. 59½
B. 60
C. 62
D. 65

 

What is the purpose of an annuity in retirement planning?
A. To provide a fixed income stream during retirement
B. To accumulate funds for retirement through investments
C. To guarantee social security payments
D. To allow tax-deferred growth for retirement savings

 

What is the main advantage of using a SIMPLE IRA over a 401(k) plan?
A. SIMPLE IRA plans require no employer contributions
B. SIMPLE IRA plans have lower contribution limits but fewer administrative fees
C. SIMPLE IRA plans offer more investment options than 401(k) plans
D. SIMPLE IRA plans guarantee fixed retirement income

 

Which of the following is a key difference between a traditional IRA and a Roth IRA?
A. Contributions to a Roth IRA are tax-deductible, while traditional IRA withdrawals are tax-free
B. Contributions to a traditional IRA are tax-deductible, while Roth IRA withdrawals are tax-free
C. Roth IRAs are only available to those under age 59½
D. Roth IRAs require mandatory withdrawals at age 72

 

What does “early withdrawal” mean in the context of retirement plans?
A. Withdrawing funds before the normal retirement age, typically 59½, subject to penalties
B. Withdrawing funds once the individual reaches retirement age
C. Withdrawing funds after the employee is terminated from employment
D. Withdrawing funds without paying any taxes or penalties

 

 

What is the primary advantage of a traditional 401(k) over a Roth 401(k)?
A. Contributions to a Roth 401(k) are tax-deductible
B. Roth 401(k) distributions are subject to taxes
C. Traditional 401(k) contributions are made with pre-tax dollars
D. Traditional 401(k) plans allow tax-free withdrawals in retirement

 

Which of the following is a feature of a 403(b) plan?
A. Available only to employees of for-profit organizations
B. Employer contributions are mandatory
C. It is a tax-exempt investment account for nonprofit employees
D. It offers lower contribution limits than 401(k) plans

 

How does a defined benefit plan differ from a defined contribution plan?
A. A defined benefit plan specifies a guaranteed benefit at retirement, while a defined contribution plan depends on employee and employer contributions
B. A defined benefit plan allows employees to choose their investments, while a defined contribution plan has a fixed investment structure
C. A defined contribution plan guarantees a fixed retirement benefit, while a defined benefit plan does not
D. A defined benefit plan allows higher contribution limits than a defined contribution plan

 

At what age must individuals start taking Required Minimum Distributions (RMDs) from their 401(k) plan?
A. 59½
B. 62
C. 65
D. 73

Answer: D

Which of the following retirement plans offers the most flexibility in terms of investment options for employees?
A. Pension plan
B. 401(k) plan
C. Traditional IRA
D. Roth IRA

 

What is the tax treatment of contributions to a Roth IRA?
A. Contributions are tax-deductible when made
B. Contributions are made with after-tax dollars, and withdrawals are tax-free in retirement
C. Contributions are tax-deductible, but withdrawals are taxed in retirement
D. Contributions are made with pre-tax dollars, but withdrawals are taxed

 

Which of the following is true about a SEP IRA?
A. It is a plan primarily used by self-employed individuals and small business owners
B. Only the employee can contribute to the SEP IRA
C. Contributions to the SEP IRA are made after tax
D. It is an employer-sponsored plan, but only the employee can contribute

 

Which of the following retirement accounts has the highest contribution limit for self-employed individuals in 2024?
A. SIMPLE IRA
B. Traditional IRA
C. SEP IRA
D. Roth IRA

 

Which of the following is NOT a type of qualified retirement plan?
A. 401(k)
B. SIMPLE IRA
C. Roth IRA
D. Pension plan

 

What is the key feature of a Target Date Fund in retirement planning?
A. It automatically adjusts the asset allocation as the target retirement date approaches
B. It is a fixed-income investment that guarantees returns
C. It allows you to make penalty-free withdrawals starting at a certain age
D. It is only available in employer-sponsored retirement plans

 

Which of the following is a requirement for participation in a 401(k) plan?
A. The employee must be a full-time worker
B. The employer must match employee contributions
C. The employee must contribute a fixed percentage of their salary each year
D. The employee must be employed by a government agency

 

Which of the following is a disadvantage of a Roth IRA?
A. Contributions are made with pre-tax dollars
B. There are required minimum distributions (RMDs) starting at age 72
C. It has income limits for eligibility
D. Withdrawals in retirement are taxable

 

In a 401(k) plan, who is responsible for investment decisions?
A. The employer
B. The employee
C. A third-party administrator
D. The plan sponsor

 

How does a SIMPLE IRA plan work?
A. Employees must contribute a percentage of their salary to the plan, and employers match the contributions
B. Employers contribute a fixed percentage to employees’ accounts, but employees cannot contribute
C. It is a type of defined benefit plan with guaranteed retirement income
D. It allows employees to contribute pre-tax money and employers make mandatory contributions

 

What is the maximum annual contribution to a Roth IRA for an individual under 50 in 2024?
A. $6,000
B. $7,000
C. $5,500
D. $8,000

 

What is the maximum contribution limit to a 401(k) plan in 2024 for an individual over 50?
A. $20,000
B. $22,500
C. $25,000
D. $27,000

 

Which of the following retirement accounts allows for tax-free growth and tax-free withdrawals in retirement?
A. Traditional IRA
B. 401(k)
C. Roth IRA
D. SEP IRA

 

What is a characteristic of a defined contribution retirement plan?
A. The employer guarantees a specific benefit amount upon retirement
B. The employee’s retirement benefit is determined by the contributions and investment performance
C. The plan guarantees the same payout regardless of contributions
D. It requires the employee to contribute a minimum of 10% of their salary

 

What is a key advantage of a 401(k) plan over a traditional IRA?
A. 401(k) plans allow tax-free withdrawals, while traditional IRAs do not
B. 401(k) plans typically have higher contribution limits than traditional IRAs
C. Traditional IRAs do not allow tax-deductible contributions
D. 401(k) plans require lower administrative fees than IRAs

 

What type of retirement plan is often used by small business owners who are self-employed?
A. SEP IRA
B. 401(k)
C. SIMPLE IRA
D. Pension plan

 

How are contributions to a 401(k) plan taxed?
A. Contributions are made with after-tax dollars and grow tax-free
B. Contributions are made with pre-tax dollars, reducing taxable income for the current year
C. Contributions are made with pre-tax dollars, and withdrawals are tax-free
D. Contributions are made with after-tax dollars, and withdrawals are taxed

 

What is the earliest age at which you can begin taking penalty-free withdrawals from a 401(k) plan?
A. 59½
B. 62
C. 65
D. 70½

 

What does “vesting” mean in a retirement plan context?
A. The process of an employee receiving a portion of their employer’s contributions after a certain period
B. The percentage of salary that an employee can contribute to their retirement plan
C. The amount of money an employer matches to an employee’s contributions
D. The process of withdrawing retirement savings

 

Which of the following retirement plans allows for contributions by both the employee and the employer?
A. Roth IRA
B. SIMPLE IRA
C. SEP IRA
D. 401(k)

Answer: D

What is the penalty for early withdrawal from a traditional IRA before age 59½?
A. 5%
B. 10%
C. 20%
D. 25%

 

What is the main disadvantage of a traditional pension plan for employees?
A. Employees have full control over investment decisions
B. Benefits are usually based on a fixed formula rather than investment performance
C. The employer does not bear investment risks
D. Contributions are made with after-tax dollars

 

At what age can you begin taking penalty-free withdrawals from a Roth IRA?
A. 59½
B. 60
C. 62
D. 65

 

What is a primary advantage of using an HSA in retirement planning?
A. It allows for tax-free growth and tax-free withdrawals for medical expenses
B. It offers guaranteed income in retirement
C. It has higher contribution limits than a traditional IRA
D. It is only available to self-employed individuals

 

Which of the following is NOT a feature of a 457(b) plan?
A. Contributions are tax-deferred
B. There are no early withdrawal penalties for distributions taken before age 59½
C. It is available to government employees and some nonprofit organizations
D. Employer contributions are mandatory

Answer: D

What is the tax treatment of a contribution to a traditional IRA?
A. Contributions are made with pre-tax dollars, and withdrawals are taxed at retirement
B. Contributions are made with after-tax dollars, and withdrawals are taxed at retirement
C. Contributions are made with pre-tax dollars, and withdrawals are tax-free
D. Contributions are made with after-tax dollars, and withdrawals are tax-free

 

 

What is the primary benefit of contributing to a 401(k) plan?
A. Tax-free withdrawals at retirement
B. Contributions reduce taxable income for the current year
C. Contributions are made with after-tax dollars
D. Employer matches contributions dollar-for-dollar

 

Which of the following best describes the catch-up contribution option for individuals aged 50 and older?
A. It allows employees to contribute additional funds to their retirement plan beyond the regular contribution limit
B. It allows individuals to begin withdrawing from retirement accounts without penalties
C. It is a tax credit available for older individuals who do not contribute enough to their retirement plans
D. It is only available for contributions to a Roth IRA

 

What is a key advantage of a Roth IRA over a traditional IRA?
A. Contributions are tax-deductible
B. Contributions grow tax-deferred, but distributions are tax-free in retirement
C. Contributions are made with pre-tax dollars
D. Roth IRAs allow larger contributions than traditional IRAs

 

At what age can you begin taking distributions from a traditional IRA without incurring a penalty?
A. 59½
B. 62
C. 65
D. 70½

 

Which of the following retirement plans allows for contributions by both the employee and the employer?
A. 401(k)
B. SEP IRA
C. SIMPLE IRA
D. Roth IRA

 

What is the penalty for early withdrawals from a 401(k) plan before age 59½?
A. 5%
B. 10%
C. 20%
D. 25%

 

What is a typical characteristic of a defined benefit plan?
A. Employee contributions are optional
B. Benefits are based on a formula involving salary and years of service
C. The employee chooses their investment options
D. The plan guarantees a fixed amount of retirement savings for the employee

 

What does the term “vesting” mean in relation to retirement plans?
A. The amount an employee can contribute to their retirement plan
B. The percentage of employer contributions an employee owns after working a certain amount of time
C. The number of years an employee must work to receive retirement benefits
D. The age at which an employee can begin receiving retirement benefits

 

Which of the following retirement plans is designed specifically for self-employed individuals?
A. SEP IRA
B. 401(k)
C. SIMPLE IRA
D. 403(b)

 

How is a 401(k) plan different from a pension plan?
A. A 401(k) plan is a defined benefit plan, while a pension plan is a defined contribution plan
B. A 401(k) plan guarantees a specific payout at retirement, while a pension plan depends on investment performance
C. A 401(k) plan depends on employee contributions and investment performance, while a pension plan guarantees a specific benefit amount
D. A 401(k) plan requires mandatory employee contributions, while a pension plan does not

 

What is the maximum contribution limit for a 401(k) plan in 2024 for individuals under the age of 50?
A. $19,500
B. $20,500
C. $22,500
D. $23,500

 

Which of the following best describes a Target Date Fund?
A. It is a low-risk fund that guarantees the same return every year
B. It automatically adjusts its asset allocation as the target retirement date approaches
C. It only invests in stocks of companies that are 10 years away from retirement
D. It requires the investor to manually adjust their portfolio each year

 

What is the tax treatment of contributions to a Roth 401(k)?
A. Contributions are tax-deductible, and withdrawals are taxed
B. Contributions are made with after-tax dollars, and withdrawals are tax-free in retirement
C. Contributions are made with pre-tax dollars, and withdrawals are taxed
D. Contributions are made with after-tax dollars, and earnings are taxed at withdrawal

 

Which of the following is true about a 403(b) plan?
A. It is a retirement plan for employees of for-profit businesses
B. It is often used by employees of public schools, hospitals, and nonprofit organizations
C. Contributions are not tax-deferred
D. It allows unlimited contributions without any income restrictions

 

Which of the following is a requirement for participating in a 401(k) plan?
A. The employee must be employed full-time
B. The employer must make matching contributions
C. Employees must contribute at least 15% of their salary
D. The employee must have worked for the employer for at least 10 years

 

Which of the following best describes a SIMPLE IRA plan?
A. It is a retirement plan that only allows employer contributions
B. It is a plan for small businesses that allows both employer and employee contributions
C. It is a defined benefit plan with fixed retirement benefits
D. It has no contribution limits

 

Which of the following retirement accounts has the highest contribution limit in 2024 for individuals aged 50 and over?
A. SIMPLE IRA
B. Roth IRA
C. SEP IRA
D. Traditional IRA

 

How does a traditional IRA differ from a Roth IRA?
A. Traditional IRAs allow tax-free withdrawals, while Roth IRAs do not
B. Roth IRAs allow tax-free withdrawals, while traditional IRAs provide tax-deductible contributions
C. Roth IRAs have higher contribution limits than traditional IRAs
D. Traditional IRAs require mandatory distributions at age 70½, while Roth IRAs do not

Answer: D

Which of the following is NOT considered a qualified retirement plan?
A. 401(k)
B. 403(b)
C. Roth IRA
D. Pension plan

 

What is the maximum contribution limit for an individual to a SIMPLE IRA in 2024?
A. $13,000
B. $15,500
C. $18,000
D. $20,500

 

Which of the following is an advantage of a Roth IRA over a traditional IRA?
A. Tax-free withdrawals in retirement
B. Contributions are tax-deductible
C. There are no income limits for contributions
D. It has a higher contribution limit than a traditional IRA

 

At what age can you begin taking penalty-free withdrawals from a Roth IRA?
A. 59½
B. 62
C. 65
D. 70½

 

Which of the following best describes a 457(b) plan?
A. A retirement plan available to government employees and certain nonprofit workers
B. A retirement plan designed for self-employed individuals
C. A tax-advantaged investment account available for high-income earners
D. A plan with mandatory employer contributions

 

What is the primary advantage of a traditional 401(k) plan over a Roth 401(k) plan?
A. Roth 401(k) plans have lower contribution limits
B. Traditional 401(k) contributions are made with pre-tax dollars, reducing current taxable income
C. Roth 401(k) plans offer more investment options
D. Traditional 401(k) plans allow for tax-free withdrawals at retirement

 

Which of the following best describes a pension plan?
A. A retirement plan where contributions are determined by the employee’s salary
B. A retirement plan where the employer guarantees a fixed benefit upon retirement
C. A retirement plan where both employer and employee contributions are optional
D. A plan where employees control their investment decisions

 

What is the primary difference between a SEP IRA and a SIMPLE IRA?
A. SEP IRAs only allow employee contributions, while SIMPLE IRAs allow both employee and employer contributions
B. SIMPLE IRAs are for self-employed individuals, while SEP IRAs are for small businesses
C. SEP IRAs have higher contribution limits than SIMPLE IRAs
D. SIMPLE IRAs are tax-exempt, while SEP IRAs are taxable

 

What is the minimum age for penalty-free withdrawals from a 401(k) plan?
A. 59½
B. 60
C. 62
D. 65

 

What is the tax advantage of contributing to a traditional IRA?
A. Contributions are tax-deductible, reducing your taxable income for the year
B. Contributions are taxed at a lower rate than ordinary income
C. Distributions are tax-free in retirement
D. There is no tax benefit from contributing to a traditional IRA

 

Which of the following is a requirement for participating in a 401(k) plan?
A. The employee must be over 40 years old
B. The employer must match employee contributions
C. The employee must be employed by a non-profit organization
D. The employee must meet minimum service requirements set by the employer

Answer: D

What is the main purpose of the “catch-up” contribution option for individuals 50 and older?
A. To allow individuals to contribute additional funds to their retirement account beyond the regular limit
B. To allow individuals to take earlier withdrawals from their retirement accounts
C. To give individuals tax breaks on withdrawals from their retirement accounts
D. To allow individuals to reduce taxable income for the current year

 

 

What is the primary purpose of a Health Savings Account (HSA)?
A. To provide tax-free income during retirement
B. To cover qualified medical expenses tax-free
C. To offer tax deductions on employer health insurance premiums
D. To save for long-term care expenses

 

Which of the following is NOT eligible for inclusion in an employer-sponsored 401(k) plan?
A. Cash compensation
B. Stock options
C. Employer contributions
D. Employee contributions

 

What is the tax benefit of contributing to a traditional 401(k) plan?
A. Contributions are tax-deductible, reducing current taxable income
B. Contributions are taxed at a lower rate than regular income
C. Contributions are tax-free at the time of withdrawal
D. Contributions are tax-free during the year they are made

 

Which of the following is a requirement for a retirement plan to be considered a “qualified plan” under the Internal Revenue Code?
A. It must provide tax-deferred growth of contributions
B. It must be available to all employees, regardless of tenure
C. It must guarantee a fixed benefit upon retirement
D. It must allow contributions only from highly compensated employees

 

At what age must required minimum distributions (RMDs) begin for a traditional IRA?
A. 59½
B. 62
C. 70½
D. 72

Answer: D

Which of the following is an advantage of a defined contribution plan over a defined benefit plan?
A. It guarantees a fixed monthly income after retirement
B. It allows employees to make voluntary contributions
C. It places the investment risk on the employer
D. It offers higher contribution limits

 

What is the primary disadvantage of a defined benefit pension plan?
A. It provides unpredictable retirement income
B. It requires contributions from both employer and employee
C. It can place a financial burden on the employer if the plan becomes underfunded
D. It allows employees to choose their investment options

 

Which of the following is TRUE regarding a SIMPLE IRA?
A. It allows for both employee and employer contributions
B. It has no contribution limits
C. It is a type of Roth IRA
D. Employer contributions are optional

 

In which of the following retirement plans is the employee responsible for choosing the investments?
A. Defined benefit pension plan
B. 401(k) plan
C. Social Security
D. SIMPLE IRA

 

What is the key feature of a “cash balance” pension plan?
A. Employees have control over their retirement investments
B. The plan is based on a predetermined percentage of salary
C. The plan defines the amount of annual contributions but not the final payout
D. It provides a lump-sum payout at retirement rather than monthly distributions

 

Which of the following statements about a Roth IRA is FALSE?
A. Contributions are made with after-tax dollars
B. Withdrawals of contributions are tax-free
C. Earnings grow tax-deferred
D. Required minimum distributions begin at age 70½

Answer: D

Which type of retirement plan is most commonly used by self-employed individuals?
A. 403(b)
B. SEP IRA
C. 401(k)
D. Pension plan

 

What is the primary benefit of contributing to a Health Savings Account (HSA)?
A. Tax-free income for retirement
B. Tax-free growth of contributions
C. Deductible contributions for taxes
D. Exemption from required minimum distributions

 

How do employer contributions to a 401(k) plan affect the employee’s taxable income?
A. Employer contributions are taxable to the employee in the year they are made
B. Employer contributions are tax-deductible to the employee but not the employer
C. Employer contributions do not affect the employee’s taxable income for the year
D. Employer contributions are tax-free to the employee upon withdrawal

 

Which of the following is the maximum contribution limit for a Roth IRA in 2024 for individuals under 50?
A. $5,000
B. $6,000
C. $7,000
D. $8,000

 

Which of the following is TRUE about a 401(k) plan?
A. Contributions are made with after-tax dollars
B. It allows for both pre-tax and after-tax contributions
C. Employees are only allowed to contribute up to $5,000 per year
D. The employer must contribute to the employee’s account

 

What happens if you withdraw funds from a traditional IRA before age 59½?
A. You are subject to a 10% early withdrawal penalty
B. You pay ordinary income taxes on the withdrawn amount but no penalty
C. The withdrawal is tax-free if used for a first-time home purchase
D. There is no penalty for early withdrawals

 

Which of the following retirement plans is available to employees of public schools, charities, and nonprofit organizations?
A. 401(k)
B. 403(b)
C. SIMPLE IRA
D. Pension plan

 

Which of the following retirement plans provides a fixed monthly income based on the employee’s salary and years of service?
A. Defined contribution plan
B. 401(k)
C. Pension plan
D. SEP IRA

 

What does a 403(b) plan have in common with a 401(k) plan?
A. Both are retirement plans offered to employees of private businesses
B. Both are available to employees of nonprofit organizations
C. Both have contribution limits and tax benefits
D. Both plans require mandatory employer contributions

 

At what age can you begin taking penalty-free withdrawals from a 401(k) plan if you leave your job?
A. 55
B. 59½
C. 62
D. 65

 

How is the contribution limit determined for a 401(k) plan?
A. By the employer’s profit-sharing policy
B. By the IRS limit for annual contributions to tax-deferred plans
C. By the amount the employee can afford to contribute
D. By the plan administrator

 

What happens to the funds in a 401(k) if the employee leaves their job?
A. The funds are automatically transferred to a pension plan
B. The employee is required to withdraw the funds immediately
C. The employee can leave the funds in the plan or transfer them to an IRA
D. The funds are forfeited to the employer

 

What is the primary difference between a SEP IRA and a SIMPLE IRA?
A. A SEP IRA has higher contribution limits than a SIMPLE IRA
B. SIMPLE IRAs are for small businesses, while SEP IRAs are for self-employed individuals
C. A SEP IRA allows employee contributions, while a SIMPLE IRA does not
D. SIMPLE IRAs require employer contributions, while SEP IRAs do not

 

What is the maximum contribution limit for an employer-sponsored 401(k) plan in 2024?
A. $19,500
B. $22,500
C. $26,000
D. $30,000

 

Which of the following best describes a “Safe Harbor” 401(k) plan?
A. A plan that allows for employee and employer contributions but has no contribution limits
B. A 401(k) plan that automatically enrolls employees and requires employer contributions
C. A plan that provides tax-free withdrawals at retirement
D. A pension plan that guarantees a fixed retirement income

 

What is the key benefit of contributing to a 457(b) plan for government employees?
A. Contributions grow tax-free
B. No early withdrawal penalties
C. High contribution limits
D. Employer must match contributions

 

What is the tax advantage of a traditional IRA?
A. Contributions are made with after-tax dollars, but withdrawals are tax-free
B. Contributions are tax-deductible, and earnings grow tax-deferred
C. Contributions grow tax-free and can be withdrawn at any age without penalty
D. Contributions are taxed at a lower rate than regular income

 

Which of the following retirement plans allows for tax-free withdrawals of both contributions and earnings?
A. 401(k)
B. Traditional IRA
C. Roth IRA
D. Pension plan

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