Ch 11 - Retirement and Savings Plan

Match the term to its definition

• grows tax-free

• SEPP

• the typical retirement plan found in most corporations

• 403(b)

• used for college savings

• ESA

• the typical retirement plan found in nonprofit groups such as schools and hospitals

• roth IRA

• retirement plan for self-employed people

• 401(k)

Match the terms to its definition

• law that extends the definition of gifts to include real estate, paintings, royalties, and patents

• UGMA

• deferred or putting off compensation

• 529 plan

• legislation that provides a tax effective manner of transferring property to minors

• 457 plan

• paying for college ahead of time by accumulating units of tuition

• pre-paid tuition

• used to save for college

• UTMA

Match the term to its definition

• one who is responsible for an account listed in someone else's name

• custodian

• money at the present time is worth more than the same amount in the future

• pre-tax

• movement of tax-deferred retirement plan money from one qualified plan to another

• direct transfer

• movement of funds from a tax deferred retirement plan from one qualified plan to another

• tax-favored dollars

• the government is letting you invest money before taxes have been taken out

• rollover

Pre-tax contribution are ones the government lets you invest money in before taxes have been taken out of your income

• true

• false

Savings bonds are a good way to save for college

• true

• false

Answer explanation

Savings bonds are not a good way to save for college because the rate of return is very low

Never borrow money from your retirement plan

• true

• false

Answer explanation

unless you are trying to avoid bankruptcy

When you leave a company, don't move your money from that retirement account

• true

• false

Answer explanation

When you leave a company, you should always do a direct transfer of the money you have in y our retirement account to an IRA. You will have more options to invest in, plus you will not have to worry about the status of your old company

An IRA is a specific type of investment

• true

• false

Answer explanation

An IRA is the tax treatment placed on an investment

The ​ (a)   IRA grows tax-free

• Roth
• original
• life insurance
• traditional

An Educational Savings Account (ESA) is used for

• college

• a new car

• an emergency fund

• retirement