Retirement Practice

What does it mean when something is tax exempt?

• You don't have to pay taxes on it.

• You must pay all taxes in advance.

• You pay taxes later (years later)

What does it mean when something is tax deferred?

• It means taxes are eliminated entirely.
• It means taxes are paid immediately.
• It means taxes are postponed until a later date.

Why is it important to start saving for retirement when you're young (ex: early 20s)?

• To benefit from compounding. The earlier you start saving, the more $ you'll have decades from now.

• Trick question. Starting to save in your 40s is just as effective as starting in your 20s.

• All retirement accounts help reduce your income taxes now.

Does everyone qualify for Social Security retirement benefits?

• Yes - once you hit a certain age

• No - you must pay FICA for at least 10 years AND hit a certain age.

When is the earliest you can start withdrawing money from your retirement accounts (Traditional IRA, 401k) without an income tax penalty from the IRS?

• 59 1/2 years old

• 62 years old

• 65 years old

What is OUR full retirement age for Social Security retirement benefits?
[There will be no reduction in benefits]

• 59 1/2 years

• 62 years

• 65 years

• 67 years

True or False: Social Security retirement benefits are enough to live off of when we're retired.

• True

• False

You want to pay less in income taxes NOW. So, you contribute to a(n) ______.

• Roth IRA

• IRA

• Annuity

David Lee Roth earned millions of dollars in the 1980s and could afford to pay his taxes then. If he didn't want to pay taxes during retirement, he should have invested in a(n) ____.

• annuity

• Roth IRA

• 401(k)

• Individual Retirement Account (IRA)

Which of these retirement plans is employer-sponsored?
[You must sign up for it with your employer]

• annuity

• 401(k)

• Individual Retirement Account (IRA)