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Answers – Retirement Readiness Quiz

1. a. – 100% of all contributions to a traditional 401k plan, regardless if made by employer, or employee, are potentially taxable.

2. c. - 75%. When starting benefits at 1st age of eligibility at age 62, there is a permanent 25% reduction in benefits.

3. b. – Buying a fixed amount of an investment on a regular scheduled basis – This is the concept used when deducting the same % and/or amount out of a persons’ paycheck each pay period to go into a 401k.

4. c. – 70 ½. One exception to this rule is if you are still working for the employer sponsoring the 401k plan. Even if you are past age 70 ½, you do not have to take contributions from that plan, until you leave that employer.

5. e. – Withdrawals are not required to be taken from a ROTH IRA prior to death of the original owner. The heirs will be required to take withdrawals.

6. b. – Death benefits from life insurance policies are typically received income tax free.

7. g. -  All of these funds sources could be used for retirement income.

8. f. - Both b and d. Amounts converted to a ROTH are taxable in the year of the conversion. Taking a withdrawal to buy your first home may qualify you to avoid a pre-payment penalty, but you will not avoid reporting the amount as a taxable distribution.

9. e. - Both a. and c. A divorced former spouse who remarries can only claim on their current spouse. 

10. a. – The first $3,000 taken out of the contract is a return of interest earned which would be reportable as taxable interest. Non-Qualified annuity withdrawals utilize the Last-in, First-out doctrine.

11. b. – No. Systematic pension payments are not counted toward your taxable income base to determine how much of your Social Security may be taxed.

12. i. – All of the above. All of these are things that a qualified retirement income planner takes into consideration when constructing a retirement income plan.

13. a. – Yes. Because the trust is revocable, or changeable, these items are not sheltered from the value of one’s estate.

14. E. – Options, a,c,and d only. Each of these three types of plans can include benefits to help pay prescription drug costs.

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