Retirement PlanningStandard 6 Assessment

Directions: Circle the letter of the choice that BEST completes each statement.1. Which of the following events could make your retirement benefits LESS than

expected?a. Inflation occurs at a lower rate than you calculated.b. Your rate of return is lower than you had calculatedc. You earn a larger retirement benefit than you had calculatedd. You inherit money you had not anticipated.

2. Life expectancy refers to a. Your perception of how long you expect to liveb. An estimate of how much money you need for retirementc. A statistical estimate of the number of years you will live in retirementd. A statistical measure of the average life span of a specific population

3. When planning for retirement, you need to determinea. how much money you need to live in a nursing home or retirement centerb. how much money you want your children to inheritc. how much money you will need and how many years you will need itd. where you plan to live after you quit working

4. Most people plan to worka. more than they actually dob. until they are 60 years of agec. only until they qualify for their company retirementd. until they are fired or forced to retire

5. Which of the following statements about Social Security is MOST accurate?a. even if you do not start saving and planning for retirement, you will earn enough

money from Social Security to maintain your current lifestyleb. Social Security was originally designed to be a supplemental income for people over

the age of 65.c. Because Social Security is a government program, it is guaranteed to be there when

you retired. The average income from Social Security is about $40,000

6. If you are concerned about your investment losing money instead of appreciating, then you are worried about ___________ risk.a. marketb. inflationc. fraudd. financial

7. As a young person, saving for your retirement is an example of a ____________ goal.a. short-termb. medium-termc. value-addedd. long-term

8. Diversification refers to

a. the portion of your retirement investment in stocks versus bondsb. your ability to eliminate risk from your retirement planning strategiesc. a risk management strategy where you include a wide variety of investments within

your portfoliod. selecting investment options that you know the most about to increase your rate of

return.9. Why do people invest when risk is involved?

a. Because they do not understand that investing is risky.b. Because the talk about risk is really overstated; investing is a safe bet.c. Because the potential to make money is greater than the risk of losing it.d. Because they are greedy and believe they can beat the odds to become a

millionaire.10. The Primary difference between an annuity and a 401(k) is

a. Annuities provide a guaranteed amount of each month after retirement and income from a 401(k) is based on the earnings.

b. a 401(k) provides a guaranteed amount each month after retirement and annuities pay only what was earned from investments.

c. Most annuities generate more retirement income than most 401(k)s.d. Annuities are insured by the federal government and 401(k)s are not.

11. If your company has a retirement plana. You can wait until you are in your 40s to start participating without any costs.b. You should sign up as soon as possible so your investment will start growing.c. Only people who plan on retiring early need to participate in the company plan.d. You should wait until your bills are paid before saving money for retirement.

12. The potential risk that you will lose our money due to a company going bankrupt is called ________________ risk.a. marketb. fraudc. corporated. financial

13. The Best way to protect yourself from fraud risk it to a. Invest only with reputable companies.b. Ask your friends for suggestions before investing.c. Keep your money in a savings account at a local bank.d. Invest heavily in jewelry and gold.

14. Which of the following events will decrease your retirement funds?a. Inflation decreases to 2 percent, but your investment earnings continue drawing 10

percent.b. Inflation increases by 10 percent, making prices more expensive now than before.c. You make regular contributions to your retirement account.d. Your employer matches your contributions to your retirement account.

15. Which of the following statements is TRUE?a. Only people who work for employers with retirement benefits can plan for

retirement.

b. All companies contribute to retirement accounts for their employees.c. Participating in company-sponsored accounts is mandatory in all situations.d. Even though participating in company-sponsored accounts is voluntary, it is

something that all employees should do.16. IRAs are

a. Individual Retirement Accounts.b. Integrated Retirement Accountsc. Inflation Resistant Accountsd. Individual Retirement Authorities

17. The HIGHEST percentage of income for people over age 65 comes froma. Employment benefits.b. Retirement accounts.c. Social securityd. Other assets

18. Most IRAs are invested in a. Stocksb. Bondsc. Gold and silverd. Mutual funds

19. If you have an IRA, you are required to start drawing income from it at age a. 50b. 55c. 59 ½ d. 62 ½

20. If you have a retirement account,a. You can access the funds at any time, even though you pay a penalty to do so.b. You cannot access the funds until you officially retirec. It is a good strategy to borrow frequently from itd. Your opportunity cost for borrowing from it is very low.

21. The risk that you have been tricked or deceived when marking an investment is called a. Market price riskb. Financial riskc. Fraud riskd. Inflation risk

22. Which of the following is a characteristic of a Roth IRA?a. Money invested into a Roth is “after-tax” dollars.b. Money is deposited into a Roth by your employerc. Money invested into a Roth is “before-tax” dollars.d. Once money is deposited into a Roth IRA, it cannot be taken out until retirement.

23. When investing, the basic rule is this: the GREATER the potential to gain higher earnings, thea. Higher the level or riskb. Lower the level or riskc. Greater the potential for fraud

d. Less likely you are to invest24. A company sponsored plan where you determine how to invest your money is called a

(n)a. Annuityb. IRAc. Pension pland. 401(k) plan

25. Sometimes people run low on money during retirement. Which of the following should you do first?a. Sell your house and move into an apartmentb. Rethink your retirement goals and lifestylec. Find a job to increase your incomed. Invest in stocks because they have a higher rate of return