CFP IRA Products And SIMPLE Plans Exam Study Guide

Transcription

1 CFP IRA Products And SIMPLE Plans Exam Study Guide This document contains the questions that will be on the exam. When you have studied the course materials, reviewed the questions in this document, and feel that you are ready to take the exam, return to the login page to take the online exam. A Center for Continuing Education 1465 Northside Drive, Suite 213 Atlanta, Georgia (404) (800) Fax: (404)

2 1. It is expected that in the next 20 years million workers are expected to retire. a. 35 b. 60 c. 74 d The twentieth century has seen an increase in the prevalence of retirement among: a. Men, only b. Women, only c. Both men and women d. Neither men nor women 3. Today, modern Americans earn an average income that is equal to approximately times the income of Americans who lived a hundred years ago. a. 2 b. 3.5 c. 8 d It is for modern American retirees to spend an extended amount of time in their post-working years, striving to live as independently as possible. a. Common b. Uncommon c. Regrettable d. Advisable 5. The rate of personal savings in the United States at the end of 2012 was about what percent of total income? a. 10% b. 8% c. 7.2% d. 6.4%

3 6. Europeans have a personal savings rate that is of the average American. a. Half that b. Equal to that c. Double that d. Triple that 7. Social Security was officially created in: a b c d Social Security was originally meant to: a. Be a means to provide benefits for poor, elderly Americans b. Replace all Americans needs to use personal savings for retirement c. Increase America s share in the global marketplace d. Encourage population growth 9. The first of the million-strong Baby Boomer generation began retiring in a. 60 b. 74 c. 82 d Experts believe that if no changes to the Social Security system are made by, the trust funds of Social Security will run out of money. a b c d Social Security benefits are assessed on the average of an individual s years of highest earned wages. a. 10 b. 24 c. 35 d. 45

4 12. Lisa was born in Under Social Security, what is her full retirement age? a. 65 b. 65 and 10 months c. 66 d Social Security payments are provided to those individuals who have not yet retired, but who have been disabled for over and are unable to work in any employment. a. 1 year b. 3 years c. 5 years d. 10 years 14. Social Security survivor benefits are distributed to a surviving spouse at full retirement age. They may also be distributed at a reduced benefit at age: a. 55 b. 60 c. 62 d Social Security survivor benefits may be distributed to children under age: a. 13 b. 18 c. 21 d Social Security survivor benefits may be distributed to dependent parents over age: a. 55 b. 60 c. 62 d. 70

5 17. Today, nearly what percent of postretirement income comes from qualified retirement plan assets? a. 10% b. 20% c. 50% d. 75% 18. A 62 year old placed $5000 in his Roth IRA in His income was $47,000. How much of this contribution is deductible in 2013 for federal income tax purpose? a. $0 b. $2500 c. $4000 d. $ When saving for retirement, inflation be considered. a. Must always b. Should usually c. Does not need to d. Should never 20. Which of the following is not one of the main risks that affect the money saved for retirement? a. Business risk b. Market risk c. Interest rate risk d. Fiduciary risk 21. Having a retirement savings plan can help protect against large losses, since the types of investments and savings are subject to different types of financial risks. a. Hedged b. Diversified c. Small d. Complementary

6 22. For older retiring couples, it is estimated that in savings is necessary just to pay for basic medical coverage during the retirement years. a. $50,000 to $75,000 b. $80,000 to $150,000 c. $200,000 to $300,000 d. $500,000 to $900, Which of the following federal acts created traditional IRAs? a. COBRA b. ERISA c. HIPAA d. EGTRRA 24. Which of the following statements regarding the popularity of IRAs is most accurate? a. IRAs were incredibly popular from their conception and increased in popularity in subsequent years. b. IRAs were about as popular at their conception as they are currently. c. IRAs were not popular at all at their conception, but increased in popularity in subsequent years. d. IRAs were not popular at all at their conception, and continue to struggle in current times. 25. The most recent creation in the line of IRAs is: a. The SEP IRA b. The SIMPLE IRA c. The Roth IRA d. The Universal IRA 26. Different types of IRAs may be established with which of the following organizations? a. Banks, only b. Banks or mutual fund companies, only c. Mutual fund companies, life insurance companies, or stockbrokers, only d. Banks, mutual fund companies, life insurance companies or stockbrokers

7 27. An individual retirement account is subject to all of the following requirements, except: a. Trustee or custodian usually cannot accept contributions over the deductible amount for the year b. Contributions (not including rollover contributions) must be in cash c. Plan owners must have nonforfeitable rights to the assets in the account for only the first year d. Assets in the account may not be used to buy life insurance, and generally may not be combined with other property 28. An individual retirement annuity may be issued in: a. The plan owner s name, only b. The plan owner s name or the primary beneficiary s name, only c. The plan owner s name or the plan owner s spouse s name, only d. The plan owner s name, the plan owner s spouse s name or the primary beneficiary s name 29. An individual retirement annuity is subject to all of the following requirements, except: a. The plan owner s entire contract interest must be nonforfeitable b. All contracts issued after November 6, 1978 are required to have flexible premiums that allow payment changes in the case of any compensation alteration c. Contributions may not be more than double the deductible amount for an IRA for the year d. Any refunded premiums must be used to pay future premiums or to purchase more benefits before the end of the calendar year after the year in which the refund was received 30. A(n) may be established by an employer, labor union, or other employee association to provide individual retirement accounts for employees or members. a. Annuity account b. Life insurance account c. Endowment account d. Trust account

8 31. A traditional IRA trustee-to-trustee transfer is done at whose request? a. The IRA owner s, only b. The trustee s, only c. The IRA owner s or the trustee s, only d. The IRA owner s, the trustee s or the primary beneficiaries, only 32. A tax-free distribution of cash or other assets from one retirement plan to another is called a: a. Direct transfer b. Complete transfer c. Rollover d. Relocation 33. Which of the following statements regarding stocks is false? a. Stocks are a category of securities that indicates ownership in a corporation. b. Common stock does not generally allow the stockholder to have a vote in shareholders meetings. c. Common stockholders receive dividends. d. Preferred stockholders have a higher claim on assets and earnings than common stockholders. 34. An individual investing in a is loaning money to an entity that is borrowing those funds for a definite period at a fixed rate. a. Mutual fund b. Money market fund c. Stock d. Bond 35. Money market funds are investment vehicles that attempt to earn interest for shareholders while also generally maintaining net value asset per share. a. $1 b. $100 c. $500 d. $1,000

9 36. What is the value of the shaded box in the table below? Contribution Limits for Traditional IRAs Tax Year < Age $3, $4, $4, $4, , 2010, 2011, $5,500 a. $4,000 b. $4,500 c. $5,000 d. $6, An employer may make matching contributions to employees SIMPLE Plans until: a. the employer s tax filing due date for the year in which the employees contributions were made. b. December 31 of the year in which the employees contributions were made. c. January 31 of the year following the year in which the employees contributions were made. d. April 1 of the year following the year in which the employees contributions were made. 38. The catch-up IRA contribution was created by which of the following acts? a. COBRA b. ERISA c. HIPAA d. EGTRRA 39. Sam is a 55 years-old and does not earn any taxable income. He is married to Sylvia, a 53 year-old who has a taxable compensation of $35,000 in one year. She and Sam file a joint tax return. How much may Sam contribute to his own traditional IRA? a. $0 b. $4,000 c. $5,500 d. $6,500

10 40. If an individual contributes less than the maximum annual amount allowable to a traditional IRA during a certain year, that individual more to the IRA to make up the difference after the due date of his tax return for that year: a. if he or she is younger than 50, is allowed to contribute b. if he or she is older than 50, is allowed to contribute c. is always allowed to contribute d. is prohibited from contributing 41. If an individual contributes more than the maximum annual amount allowable to his traditional IRA, he apply the excess contribution to a later year. a. must b. may c. may not d. probably should not 42. Brokers commissions that are paid in connection with a traditional IRA subject to contribution limits and trustee s administrative fees subject to these limits. a. Are; are b. Are; are not c. Are not; are d. Are not; are not 43. Members of reserve components who were ordered or called to active duty after may be allowed to repay amounts to an IRA that are equal to any qualified reservist distributions they receive. a. March 31, 1995 b. January 1, 2000 c. September 11, 2001 d. June 7, 2005

11 44. An individual is considered to have received a qualified reservist distribution if he or she is ordered or called to active duty for a period of more than days, or for an indefinite period, because of membership of a reserve component. a. 99 b. 120 c. 179 d Contributions may be made to a traditional IRA: a. As soon as it is established b. No sooner than 14 days after it is established c. No sooner than 31 days after it is established d. No sooner than 60 days after it is established 46. Jim is 54 years old and makes contributions to a traditional IRA. If his annual compensation is $5,800, what is the maximum allowable amount that he may deduct in contributions in 2013? a. $4,000 b. $5,500 c. $5,800 d. $6, Brokers commissions that are paid in connection with a traditional IRA deductible as contributions. Trustee s administrative fees that are paid in connection with a traditional IRA deductible as contributions. a. Are; are b. Are; are not c. Are not; are d. Are not; are not 48. If an individual (or his or her spouse) was covered by an employer retirement plan for and made contributions to a traditional IRA, the IRA contribution amount may not be allowed to be deducted, or may only be allowed to be partially deducted. a. At least 30 days b. At least 60 days c. At least 90 days d. Any part of the year

12 49. Examples of defined contribution plans include all of the following, except: a. IRAs b. Stock bonus plans c. Profit sharing plans d. Annuity plans 50. For a defined benefit plan, who calculates the amount needed to provide the promised benefits and also those amounts that must be contributed to the plan? a. The employer providing the plan b. Each individual employee covered under the plan c. A committed appointed by each individual employee covered under the plan d. The administrator of the plan 51. An individual is seen as being covered by a defined benefit plan if he is eligible to participate in that plan for the plan year, even if the individual: a. Declined to participate in the defined benefit plan, only b. Did not make a required contribution, only c. Did not make a required contribution or did not perform the minimum service required to accumulate a benefit for the year, only d. Declined to participate in the defined benefit plan, did not make a required contribution, or did not perform the minimum service required to accumulate a benefit for the year 52. Eva is a U.S. Reservist who participates in an employer retirement plan solely because of her membership in a reserve unit. She is not considered to be covered by an employer retirement plan under traditional IRA rules if she served no more than days on active duty during the year (not including duty for training). a. 12 b. 31 c. 90 d. 120

13 53. Matt is a volunteer firefighter who participates in an employer retirement plan solely because of his status as a volunteer firefighter. He is not considered to be covered by an employer retirement plan under traditional IRA rules if retirement benefits accrued at the beginning of the year will not provide more than a year at retirement. a. $500 b. $1,800 c. $3,000 d. $5, Modified AGI is an individual s, as adjusted by certain allowable deductions. a. Net income b. Gross income c. Net taxes owed d. Gross taxes owed 55. Lisa is a married, but is filing separately from her spouse. In 2013, if she was covered by an employer retirement plan in addition to contributing to a traditional IRA, then the contribution deduction will not be reduced unless her modified AGI is: a. Less than $10,000 b. More than $59,000 but less than $69,000 c. More than $95,000 but less than $115,000 d. More than $93,000 but less than $159, Jim is a single individual. In 2013, if he was covered by an employer retirement plan in addition to contributing to a traditional IRA, then the contribution deduction will not be reduced unless his modified AGI is: a. Less than $10,000 b. More than $59,000 but less than $69,000 c. More than $95,000 but less than $115,000 d. More than $93,000 but less than $159,000

14 57. Chris is part of a married couple filing jointly. In 2013, if he was covered by an employer retirement plan in addition to contributing to a traditional IRA, then the contribution deduction will not be reduced unless his modified AGI is: a. Less than $10,000 b. More than $59,000 but less than $69,000 c. More than $95,000 but less than $115,000 d. More than $93,000 but less than $159, Nondeductible IRA contributions repayments of qualified reservist distributions. a. Are comprised solely of b. Always include c. May include d. Never include 59. The 10% tax is waived on a premature IRA distribution if an individual takes a distribution of no more than to buy, build, or rebuild a first home. a. $100,000 b. $110,000 c. $10,000 d. $15, Distributions from a traditional IRA must begin by of the year following the year in which an IRA owner turns 70 ½ or be subject to a tax. a. January 1 b. April 1 c. April 15 d. July Distributions from a traditional IRA that do not begin the year after the IRA owner turns 70 ½ are subject to a tax of: a. 6% b. 10% c. 32% d. 50%

15 62. The required minimum distribution from a traditional IRA for each year is calculated by dividing the balance of the IRA as of of the preceding year by the applicable distribution period or life expectancy. a. January 1 b. April 15 c. June 1 d. December Wendy is the owner of a traditional IRA. The balance in her IRA at the end of 2012 is $100,000. She turns 70 years old in If her life expectancy is 17.0, then her required minimum distribution for 2013 is: a. $1, ($100,000 / 70) b. $ ($100,000 / [70-17]) c. $5, ($100,000 / 17) d. $5,555/56 ($100,000/ 18) 64. Life expectancy is calculated differently for those IRA owners whose sole beneficiary spouse is more than years younger. a. 5 b. 10 c. 12 d If the sole beneficiary of a traditional IRA is a surviving spouse, then he or she: a. Must be treated as the beneficiary of the account, only b. Must be treated as the owner of the account c. May decide to either be treated as the beneficiary or the owner of the account, only d. May decide to be treated as both the beneficiary and the owner of the account, only

16 66. Jamie is the beneficiary of a traditional IRA. The owner of the IRA died on the required minimum distribution beginning date. On what must Jamie base the required minimum distributions from the traditional IRA? a. Her single life expectancy, only b. The IRA owner s life expectancy, only c. The longer of either her single life expectancy or the IRA owner s life expectancy d. The shorter of either her single life expectancy or the IRA owner s life expectancy 67. Michael is the beneficiary of his father Dan s traditional IRA. Upon Dan s death, the required minimum distributions that Michael must take from the IRA are determined by dividing the IRA account balance by: a. Michael s life expectancy b. Dan s life expectancy on the day before his death c. Dan s life expectancy on the day before his death, reduced by 1 d. The number of distributions Michael plans to take during the next year 68. In certain situations, beneficiaries who are individuals may be required to take the entire balance of the IRA by the end of the year after the year of the owner s death. a. 1 st b. 2 nd c. 5 th d. 7 th 69. Early distribution penalties from a traditional IRA apply to amounts received when retirement bonds are cashed in before age: a. 55 b. 59½ c. 65 d. 70

17 70. If early distributions taken from a traditional IRA are not more than the cost of an individual s medical insurance, then the early distribution tax does not apply. This rule applies if the individual received unemployment compensation paid under federal or state law for how many consecutive weeks because of a lost job? a. 4 b. 8 c. 12 d If early distributions taken from a traditional IRA are not more than the cost of an individual s medical insurance, then the early distribution tax does not apply. This applies if the distributions are received no later than how many days after reemployment? a. 7 b. 14 c. 30 d If early distributions taken from a traditional IRA are not more than payment for qualified higher education expenses, then the early distribution tax does not apply. This applies if the distributions are used to pay expenses for higher education for: a. The individual, only b. The individual or a spouse, only c. The individual, a spouse, or a child, only d. The individual, a spouse, a child or a grandchild, only 73. Distributions made without an IRA owner s consent from a state agency acting as the receiver of a failed financial institution taxable in the year they are received. a. Are b. Are generally not c. Are never d. Are not, but should be

18 74. Distributions from a traditional IRA are fully taxable when received if: a. Only deductible contributions were made b. Only nondeductible contributions were made c. Both deductible and nondeductible contributions were made simultaneously d. Deductible contributions were made first, followed immediately by nondeductible contributions 75. If nondeductible traditional IRA contributions are made, then the IRA owner receives a cost basis that the amount of those nondeductible contributions. a. Is less than b. Equals c. Is slightly greater than d. Is significantly great than 76. If a traditional IRA owner directs the trustee or custodian of his account to use the amount in the account to buy an annuity contract, when will taxes be levied? a. When the owner receives the annuity contract b. When payments are received under the contract c. When the primary beneficiary of the IRA dies d. Taxes will never be levied 77. If an individual has his IRA contribution recharacterized, he must treat the contribution as having been made to the second IRA it was made to the first IRA. a. On the date that b. No more than 7 days after c. No more than 14 days after d. No more than 30 days after 78. If an individual has his IRA contribution recharacterized, contributions made to the first IRA: a. Are allowed to be deducted b. Usually are allowed to be deducted c. Usually are not allowed to be deducted d. Are not allowed to be deducted

19 79. In order to recharacterize an IRA contribution, which trustee must be notified of the recharacterization? a. The trustee of the first IRA, only b. The trustee of the second IRA, only c. Both the trustee of the first IRA and the trustee of the second IRA d. Neither the trustee of the first IRA nor the trustee of the second IRA 80. Rollover contributions from an IRA deducted for tax purposes. a. Are allowed to be b. Are usually allowed to be c. Usually are not allowed to be d. Are not allowed to be 81. All of the assets from one traditional IRA may be withdrawn and reinvested in the same or another traditional IRA tax free, as long as the reinvestment occurs within: a. 10 days b. 14 days c. 28 days d. 60 days 82. Assets may be withdrawn from a traditional IRA and part of those assets may be rolled over tax free, while the rest of the assets may be retained. The amount of the assets that are retained will: a. Generally be taxable b. Generally not be taxable c. Be both taxable and nontaxable d. Never be taxable 83. If an eligible rollover distribution is paid directly to an employee, an employer is generally required to withhold a certain percentage of it, even if the employee plans to roll the distribution into a traditional IRA. This can be avoided if the distribution and all previous eligible rollover distributions the employee received during the tax year from the same plan equals less than: a. $200 b. $500 c. $1,000 d. $3,000

20 84. If a tax-free rollover of any part of a distribution from a traditional IRA is made, an individual is generally not allowed to make another tax-free rollover of a later distribution from that same IRA with a: a. 6-month period b. 1-year period c. 2-year period d. 5-year period 85. An exception to the IRA rollover waiting period applies only if all of the following requirements are met, except: a. The distribution was made from a failed financial institution by the Federal Deposit Insurance Corporation as its receiver b. The rollover was not initiated by the custodial institution or the depositor c. The rollover was made because the custodial institution is insolvent and the receiver is unable to find a buyer for the institution d. The rollover involved less than $10,000 in funds 86. Interest in a traditional IRA could be transferred from an individual s spouse (or former spouse) by a divorce. The interest, starting from, is then treated as the individual s IRA. a. The date of the transfer b. 3 days after the date of the transfer c. 10 days after the date of the transfer d. 14 days after the date of the transfer 87. The two most commonly used methods of transfers due to a divorce are changing the name on the IRA and: a. Making a direct transfer of the assets in the IRA b. Rolling the IRA over into a different kind of IRA c. Replacing the trustee of the IRA d. Cashing out the IRA

21 88. Assets in a traditional IRA may be transferred due to a divorce by changing the name of the IRA from an individual s name, to the name of his spouse (or former spouse). This is done only if the assets from the IRA are to be transferred. a. At least 10% of b. At least 50% of c. At least 80% of d. 100% of 89. Before was passed, qualified retirement plans were allowed to make immediate cash out distributions to participants who terminated employment with the company that maintained the plan. a. COBRA b. ERISA c. HIPAA d. EGTRRA 90. The Roth IRA is named for a: a. Legal case b. Attorney c. Senator d. Latin term meaning: after tax 91. The enactment of legislation that authorized the Roth IRA was created under the: a. The Tax Reform Act of 1986 b. The Omnibus Budget Reconciliation Act of 1990 c. Tax Payer Relief Act of 1997 d. Economic Growth and Tax Relief Reconciliation Act of In what year did Congress reverse the deductibility of IRAs for many people? a b c d. 2001

22 93. Contributions made to what kind of IRAs are made from after-tax dollars? a. Traditional IRAs, only b. Roth IRAs, only c. Both traditional and Roth IRAs d. Neither traditional nor Roth IRAs 94. Qualified distributions from a Roth IRA are: a. Taxable in the year in which they are received b. Taxable in the year after they are received c. Taxable two years after they are received d. Tax-free 95. Contribution amounts may be left in a Roth IRA: a. Until an individual reaches age 59½ b. Until an individual reaches age 65 c. Until an individual reaches age 70½ d. For as long as an individual is alive 96. Mary s tax filing status is a married individual filing jointly. In 2013, she can contribute to a Roth IRA, but will have a reduced contribution amount if her modified AGI is: a. At least $178,000 but less than $188,000 b. At least $112,000 but less than $127,000 c. At least $128,000 but less than $148,000 d. More than $0 but not less than $10, James is a married individual filing separately who lived with his spouse during the year. In 2013, he may not contribute to a Roth IRA if he has a modified AGI of: a. $188,000 or more b. $127,000 or more c. $90,000 or more d. $10,000 or more

23 98. Prior to, amounts from certain plans were not allowed to be rolled over into a Roth IRA. However, due to certain rule changes, rollover amounts are allowed from qualified pension, profit-sharing or stock bonus plans, annuity plans, tax-sheltered annuity plans, government deferred compensation plans and IRAs. a b c d If the amount from a traditional IRA converted to a Roth IRA is not recharacterized as a Roth IRA contribution because the contribution to the traditional IRA was made in the same tax year, the contribution will be seen as a regular contribution to the Roth IRA and subject to: a. A 1% tax every year that applies to any excess contribution not withdrawn from the Roth IRA b. A 6% tax every year that applies to any excess contribution not withdrawn from the Roth IRA c. A 18% tax every year that applies to any excess contribution not withdrawn from the Roth IRA d. A 30% tax every year that applies to any excess contribution not withdrawn from the Roth IRA 100. A rollover from a Roth IRA to an employer retirement plan is: a. Always allowed b. Only allowed under very limited certain circumstances c. Unadvisable d. Prohibited 101. A rollover from one Roth IRA to another Roth IRA is: a. Always allowed b. Only allowed under very limited certain circumstances c. Unadvisable d. Prohibited

24 102. A qualified distribution is a distribution from a Roth IRA that is made under any of the following circumstances, except: a. On or after an individual turns 70 ½ b. Because of a disability c. To a beneficiary or an estate after the IRA owner s death d. For the purchase of a first home 103. There is a specific order in which contributions and earnings are considered to be distributed from a Roth IRA. Which of the following is always considered first? a. Conversion contributions b. Regular contributions c. Earnings on contributions d. Rollovers from contributions from other Roth IRAs 104. There is a specific order in which contributions and earnings are considered to be distributed from a Roth IRA. Which of the following is always considered last? a. Conversion contributions b. Regular contributions c. Earnings on contributions d. Rollovers from contributions from other Roth IRAs 105. Minimum distribution rules apply to what kind of IRAs while the IRA owner is alive? a. Traditional IRAs, only b. Roth IRAs, only c. Both traditional and Roth IRAs d. Neither traditional nor Roth IRAs 106. After the death of a Roth IRA owner, of the minimum distribution rules that apply to a traditional IRA also apply to the Roth IRA. a. All b. Some c. Very few d. None

25 107. CDs are insured by the up to certain amounts. a. FEMA b. FDIC c. IEC d. IRS 108. For CDs, the risk of losing an investment is: a. Very high b. Somewhat high c. Somewhat low d. Very low 109. CD maturities generally stretch from: a. 1 month to 6 months b. 1 month to 12 months c. 1 month to 2 years d. 1 month to 5 or 10 years 110. The amount required to open a CD: a. Varies b. Is usually around $50 c. Is usually are $500 d. Is usually around $1, CDs are subject to an administrative fee. a. Always b. Usually c. Usually not d. Never 112. The penalty for early withdrawals if a CD is closed or liquidated before it reaches maturity is typically: a. 1 month of interest b. From 3 to 6 months of interest c. $10,000 d. $25,000

26 113. How many banks waive withdrawal charges on regular IRA CD withdrawals for those customers over age 59 ½? a. All banks b. Some banks c. Very few banks d. No banks 114. Mutual funds are managed by: a. Individual investors in the funds b. Money managers c. Life insurance companies d. The FDIC 115. One of the biggest advantages of mutual funds is: a. Cost basis b. Availability c. Diversification d. Transferability 116. For mutual funds, a is a fee that is charged to pay commissions for distributors and sellers of a fund. a. Load b. Bill c. Charge d. Grade 117. For mutual funds, fees related to administration duties are usually from: a. $10 to $25 annually b. $100 to $200 annually c. $250 to $500 annually d. $800 to $1,000 annually 118. How many mutual funds charge a fee against the assets in the fund for administration rather than a separate administrative charge to each mutual fund account holder? a. All funds b. Some funds c. Very few funds d. No funds

27 119. Money market funds are considered to have: a. Very high risk b. Moderately high risk c. Intermediate risk d. Low risk 120. Money market funds are considered to have: a. Very high return b. Moderately high return c. Intermediate return d. Low return 121. When a fixed annuity begins making annuitization payments, the owner can generally choose from a minimum of a -year payment period, up through a period of 20 years or more. a. 2 b. 5 c. 10 d When a fixed annuity begins making annuitization payments, they may be made in combinations of fixed periods and life. If a 20 year certain and life annuitization selection is made and the annuitant lives for more than 20 years, the payments will: a. Continue through the annuitant s lifetime b. Stop at the end of the 20-year period c. Stop 5 years after the end of the 20-year period d. Stop 10 years after the end of the 20-year period 123. When a fixed annuity begins making annuitization payments, they may be made in combinations of fixed periods and life. If a 20 year certain and life annuitization selection is made and the annuitant dies before twenty years are up, the payments will: a. Stop immediately b. Continue to a beneficiary until the end of the 20-year period c. Continue to a beneficiary for an additional 10-year period d. Continue to a beneficiary for an additional 20-year period

28 124. The primary benefit of a fixed annuity as an IRA vehicle is: a. Their complete tax-free status b. That they are considered to be the most aggressive growth IRA investments c. That they are considered to be among the most conservative and safe in the arena of IRA investments d. The provision of changing the payments once they have begun 125. Insurance companies the returns of fixed annuities. Insurance companies to make the annuitization payments as the annuity contract specifies. a. Guarantee; guarantee b. Guarantee; do not guarantee c. Do not guarantee; guarantee d. Do not guarantee; do not guarantee 126. The investments in what kind of annuities grow tax-deferred? a. Fixed annuities, only b. Variable annuities, only c. Both fixed and variable annuities d. Neither fixed nor variable annuities 127. Variable annuities are preferred by retirees who: a. Are willing to take on more risk than those who prefer fixed annuities b. Are not willing to take on more risk than those who prefer fixed annuities c. Want to take on the same amount of risk as those who prefer fixed annuities d. Do not want to take on any amount of risk

29 128. Which one of the following statements regarding self-directed IRAs is false? a. Self-directed IRAs allow the investor to include in one IRA plan a variety of investments. b. Self-directed IRAs do not give the owner much flexibility in making investment choices. c. Self-directed IRAs have the benefits of the owner receiving one statement and having one servicing contact for the various needs that come up in the holding of an IRA. d. Under self-directed IRAs, individual stocks and bonds, CDs, annuities, mutual funds and real estate may be purchased The fees associated with the administration of self-directed IRAs tend to be much greater than those charged by: a. A bank, only b. A bank or a mutual fund company, only c. An insurance company, only d. A bank, a mutual fund company or an insurance company 130. Traditional IRAs are available to: a. Only those individuals in the top income bracket b. Only those individuals in the middle income bracket c. Only those individuals of a certain income level, dependent upon filing status d. Almost all individuals, regardless of income level 131. Roth IRAs are available to: a. Only those individuals in the top income bracket b. Only those individuals in the middle income bracket c. Only those individuals of a certain income level, dependent upon tax filing status d. Almost all individuals, regardless of income level 132. The main differences between traditional and Roth IRAs are the of each. a. Tax ramifications b. Distribution requirements c. Early withdrawal penalties d. Contribution limits

30 133. Tax rates on ordinary income are the rates for capital gains. a. Higher than b. Equal to c. Slightly lower than d. Significantly lower than 134. When a traditional IRA is converted to a Roth IRA, income taxes are levied on: a. Any earnings in the traditional IRA, only b. Any pretax contributions in the traditional IRA, only c. Any earnings and pretax contributions in the traditional IRA d. Neither any earnings nor any pretax contributions in the traditional IRA 135. When a traditional IRA is converted to a Roth IRA, funds in which type of IRA should be used to pay the conversion tax? a. Funds in the traditional IRA, only b. Funds in the Roth IRA, only c. Funds in both the traditional and the Roth IRA d. Funds in neither the traditional nor the Roth IRA 136. A Roth IRA conversion could force a traditional IRA owner into a tax bracket, because of the IRA amount being included in his income. a. Higher b. Slightly lower c. Significantly lower d. Disadvantaged 137. Income tax is paid on a Roth IRA conversion at: a. An individual s tax rate at retirement b. An individual s current tax rate c. The highest tax rate d. The lowest tax rate

31 138. By converting to a Roth IRA, an individual s taxable estate will be the amount of conversion tax he pays. a. Reduced by b. Increased by c. Multiplied by d. Divided by 139. The SIMPLE IRA employee-count eligibility requirement must include all employees who: a. Were eligible to participate in the plan during at least 6 months in the proceeding year, only b. Were eligible to participate in the plan during at least 8 months in the proceeding year, only c. Were employed at any time during the preceding year, but only if they were eligible to participate in the plan d. Were employed at any time during the preceding year, regardless of whether or not they were eligible to participate in the plan 140. For SIMPLE IRAs, leased employees are those employees who perform services for the employer substantially full time for at least: a. 3 months b. 6 months c. 12 months d. 18 months 141. A grace period applies to employers who do not meet the 100-employee limit of a SIMPLE IRA plan under certain conditions. It applies if the employer has maintained the SIMPLE IRA plan for at least : a. 3 months b. 6 months c. 12 months d. 18 months

32 142. An employer fails to meet the SIMPLE IRA employee limit due to an acquisition. The employer will be eligible for the employee limit grace period only if coverage under the plan during the grace period. a. Has not changed at all b. Has not significantly changed c. Has significantly changed d. Has changed at all 143. In order to set up a SIMPLE IRA plan, an employer must have no other qualified retirement plan than a SIMPLE IRA to which: a. He makes substantial contributions, only b. He makes contributions, only c. Benefits accumulate, only d. He makes contributions, or to which benefits accumulate 144. Employers are allowed to set up qualified plans maintained for employees in addition to a SIMPLE IRA plan. a. Leased b. Collective bargaining c. High-earning d. Valuable 145. SIMPLE IRAs can be set up so that employee contributions are deposited into: a. Individual retirement accounts, only b. Individual retirement annuities, only c. Individual retirement accounts or annuities, only d. Individual retirement accounts, annuities or life insurance accounts 146. An employer must set up a SIMPLE IRA for each eligible employee. a contribution is required to be deposited into an employee s IRA. a. Before the first date, b. Three days before the first date, c. Seven days before the first date, d. Twenty days before the first date,

33 147. An employer who establishes a SIMPLE IRA plan must provide written notice that an employee s balance may be transferred: a. Only with certain cost b. Only with certain penalty c. Without cost or penalty, if that employer uses a designated financial institution d. Without cost or penalty, regardless of whether or not that employer uses a designated financial institution 148. Employees eligible under a SIMPLE IRA plan are those who have received at least in compensation during any 2 years preceding the current year. a. $1,000 b. $3,000 c. $5,000 d. $7, An employer MAY require annual compensation of which of the following amounts during any preceding year as an eligibility requirement for his SIMPLE IRA plan? a. $2,000 b. $5,500 c. $6,000 d. $7, Certain employees are excluded from eligibility under a SIMPLE IRA plan. These include: a. Union employees, only b. Nonresident aliens, only c. Union employees and nonresident aliens, only d. Union employees, nonresident aliens and highly compensated employees, only 151. As relating to SIMPLE IRAs, compensation for self-employed individuals is defined as earnings from self-employment subtracting any contributions made to a SIMPLE IRA on the individual s behalf. a. Net; before b. Net; after c. Gross; before d. Gross; after

34 152. For SIMPLE IRAs, a salary reduction contribution is a contribution that an employee chooses to have an employer contribute on his behalf. By default, these contributions are expressed as: a. A percentage of an individual employee s compensation b. A percentage of all employees compensation, in total c. A percentage of an employer s gross income d. A specific dollar amount 153. An employer may not place any restrictions on the SIMPLE IRA salary reduction contribution amount: a. Under any circumstance b. Unless it is to comply with the approved contribution limit c. Unless it is to make the contribution amount less than the approved contribution limit d. Unless it is to make the contribution amount greater than the approved contribution limit 154. An employee could participate in another employer plan in addition to a SIMPLE IRA plan during the year: a. And receive only elective salary reductions under that other plan b. And receive only deferred compensation under that other plan c. And receive elective salary reductions or deferred compensation under that other plan d. But receive neither elective salary reductions nor deferred compensation under that other plan 155. Salary reduction contributions must be made to a SIMPLE IRA within days after the end of the month in which the amounts contributed would otherwise have been payable to the employee. a. 7 b. 14 c. 30 d. 60

35 156. In 2013, the overall annual limit on the exclusion of salary reduction contributions and other elective deferrals is: a. $7,000 b. $9,200 c. $11,500 d. $17, Employees age 50 or older are allowed to make catch-up contributions under a SIMPLE IRA plan. In 2013, the catch-up contribution limit is: a. $2,000 b. $2,500 c. $3,000 d. $4, Under a SIMPLE IRA plan, an employer is usually required to match an employee s salary reduction contributions (unless he makes nonelective contributions) on a dollar-for-dollar basis of no less than of an employee s compensation. a. 1% b. 3% c. 5% d. 7% 159. Under a SIMPLE IRA plan, an employer matching an employee s salary reduction contributions may not choose to match less than of the employee s compensation for more than 2 years during a 5-year period. a. 1% b. 3% c. 5% d. 7% 160. In 2013, SIMPLE IRA employer matching contributions must be made by: a. The date an employer must file his federal income tax return for 2013 b. The date an employee must files his federal income tax return for 2013 c. Exactly one year after the date an employer must file his federal income tax return for 2013 d. Exactly one year after the date an employee must file his federal income tax return for 2013

36 161. An employer may choose to make nonelective contributions instead of matching contributions to an employee s SIMPLE IRA plan. Nonelective contributions may be made of of compensation for each eligible employee. a. 1% b. 2% c. 3% d. 5% 162. If an employer chooses to make nonelective contributions to an employee s SIMPLE IRA plan, he must make them: a. Only if the employee chooses to make salary reduction contributions b. Only if the employee chooses to make salary reduction contributions in excess of $10,000 c. Only if the employee chooses not to make salary reduction contributions d. Regardless of whether or not the employee chooses to make salary reduction contributions 163. Only of an employee s compensation may be used to calculate the employer nonelective contribution amount under a SIMPLE IRA plan. a. $50,000 b. $100,000 c. $255,000 d. $370, In 2013, SIMPLE IRA employer nonelective contributions must be made by: a. The date an employer must file his federal income tax return for 2013 b. The date an employee must files his federal income tax return for 2013 c. Exactly one year after the date an employer must file his federal income tax return for 2013 d. Exactly one year after the date an employee must file his federal income tax return for 2013

37 165. An employer deduct his contributions to a SIMPLE IRA plan. a. Is allowed to b. Is usually allowed to c. Is usually not allowed to d. Is never allowed to 166. An employee under a SIMPLE IRA plan exclude contributions from his or her gross income. a. Is allowed to b. Is usually allowed to c. Is usually not allowed to d. Is never allowed to 167. Contributions to SIMPLE IRA plans subject to federal income tax withholding. a. Are always b. Are usually c. Are not usually d. Are not 168. Salary reduction contributions to SIMPLE IRA plans are subject to: a. Social Security taxes, only b. Medicare and Medicare taxes, only c. Social Security, Medicare and Federal Unemployment taxes d. Neither Social Security, Medicare nor Federal Unemployment taxes 169. Employers matching contributions to SIMPLE IRA plans are subject to: a. Social Security taxes, only b. Medicare and Medicare taxes, only c. Social Security, Medicare and Federal Unemployment taxes d. Neither Social Security, Medicare nor Federal Unemployment taxes 170. Employer nonelective contributions to SIMPLE IRA plans are subject to: a. Social Security taxes, only b. Medicare and Medicare taxes, only c. Social Security, Medicare and Federal Unemployment taxes d. Neither Social Security, Medicare nor Federal Unemployment taxes

38 171. The distributions made from SIMPLE IRAs subject to the same rules as traditional IRAs. a. Are always b. Are usually c. Are rarely d. Are never 172. The distributions made in 2013 from SIMPLE IRAs are includible in income for what year? a b c d. The distributions are never includable in income 173. Rollovers from one SIMPLE IRA to another may be made: a. Tax-deferred b. Tax-free c. Only tax-deferred initially, then tax-free d. Neither tax-deferred nor tax-free 174. Rollovers from one SIMPLE IRA to a non-simple IRA may only be made after a -year participation in the SIMPLE IRA plan. a. 1 b. 2 c. 5 d If funds from a SIMPLE plan are withdrawn within 2 years of the start of participation, a additional tax applies. a. 6% b. 10% c. 25% d. 50% 176. SEP IRA stands for: a. Simplified Employee Pension IRA b. Systematic Entry Position IRA c. Straightforward Exit Pact IRA d. Solvent Equitability Point IRA

39 177. An employer is allowed to make tax-deductible contributions to a SEP IRA on behalf of eligible employees: a. Only if the employer is not self-employed b. Only if the employer is self-employed c. Regardless of whether or not the employer is self-employed d. Under no circumstance 178. Employees may make tax-free contributions to their SEP plans, deferring taxation until: a. The plan has been in place for 2 years b. The plan has been in place for 5 years c. The amounts in the plan are distributed d. The employer passes away 179. A SEP plan is established first as a traditional IRA. An deposits SEP contributions into the IRA (which is owned and controlled by an ) via the financial institution where the SEP IRA is maintained. a. Employer; employer b. Employer; employee c. Employee; employer d. Employee; employee 180. How many institutions require that the IRA into which SEP contributions are first deposited be classified as a SEP IRA, rather than a traditional IRA, before contributions will be accepted? a. All institutions b. Some institutions c. Few institutions d. No institutions 181. Because of the fact that a SEP plan uses a traditional IRA as a funding instrument, contributions made to the SEP Plan become traditional IRA assets for tax purposes. a. All b. Most c. Some d. Few

40 182. A SEP IRA may be established by an employer with: a. 1 or more employees b. 25 or more employees c. Less than 50 employee d. Less than 100 employees 183. All of the following entities are allowed to establish a SEP plan, except: a. Sole proprietorships b. Partnerships c. Corporations d. Individual employees 184. Certain employees are excluded from eligibility under a SEP IRA plan. These include: a. Union employees, only b. Nonresident aliens, only c. Union employees and nonresident aliens, only d. Union employees, nonresident aliens and highly compensated employees, only 185. A SEP plan may be established for 2013 as late as: a. The due date of an employer s tax return for 2013 b. The due date of an employee s tax return for 2013 c. January 1, 2014 d. April 15, A formal written agreement must be executed to provide benefits to eligible employees under a SEP plan. a. All b. All, highly-compensated, c. The majority of d. At least 10% of

41 187. The formal written agreement that must be executed to provide benefits to employees under a SEP plan can be accomplished by adopting an IRS model SEP using Form 5305-SEP. In this case, which of the following is needed? a. Prior IRS approval, only b. A determination letter, only c. Both prior IRS approval and a determination letter d. Neither prior IRS approval nor a determination letter 188. The formal written agreement that must be executed to provide benefits to employees under a SEP plan can be accomplished by adopting an IRS model SEP using Form 5305-SEP. In this case an employer will usually have to file annual retirement plan information returns with: a. The IRS, only b. The Department of Labor, only c. Both the IRS and the Department of Labor d. Neither the IRS nor the Department of Labor 189. The formal written agreement that must be executed to provide benefits to employees under a SEP plan can be accomplished by adopting an IRS model SEP using Form 5305-SEP. However, there are certain instances when a Form 5305-SEP cannot be used. Which of the following is not one of those instances? a. When the employer currently maintains another SEP b. When employer has any eligible employees for whom IRAs have not been established c. When the employer used the services of a leased employee d. When the employer does not pay the cost of the contributions to the SEP 190. A SEP plan is not considered to have been established until an employer has given what to each eligible employee? a. A copy of Form 5305-SEP, only b. A copy of Form 5305-SEP and its instructions, only c. A copy of Form 5305-SEP, its instructions and other information listed in the Form, only d. A copy of Form 5305-SEP, its instructions and other information listed in the Form, and the SEP advocate s toll-free hotline

42 191. An employer who sets up a SEP plan claims a tax credit as part of the ordinary and necessary costs of starting that plan. The credit will cover up to a maximum of each year for the first 3 years of the plan. a. $300 b. $500 c. $1,000 d. $2, An employer who sets up a SEP plan claims a tax credit as part of the ordinary and necessary costs of starting that plan. If the plan becomes effective in tax year 2013, of the following, what is the earliest tax year the credit can be claimed in? a b c d An employer who sets up a SEP plan wants to claim a tax credit as part of the ordinary and necessary costs of starting that plan. In order for the employer to claim this credit, the employees covered by the plan usually cannot be substantially the same employees for whom contributions were made or benefits accrued under a plan in the -tax-year period immediately before the first year to which the credit applies. a. 2 b. 3 c. 5 d An employer who sets up a SEP plan wants to claim a tax credit as part of the ordinary and necessary costs of starting that plan. In order for the employer to claim this credit, at least how many non-highly compensated employees must be a participant of the plan? a. At least 1 b. At least 3 c. At least 6 d. At least 10