AFC Investment and Retirement Planning 2

Question 1

A client contributing 3% to their 401(k) has a 50% employer match on up to 6%. What should the counselor recommend?

Accepted Answer

Increase contributions to at least 6% to capture the full employer match

Answer

Maintain current contribution and focus on debt

Answer

Switch to a Roth IRA instead

Answer

Reduce contributions to fund an emergency account

Question 2

What is the key difference between a Traditional IRA and a Roth IRA regarding tax treatment?

Accepted Answer

Traditional IRA contributions may be tax-deductible with taxable withdrawals, while Roth contributions are after-tax with tax-free withdrawals

Answer

Traditional IRAs have higher contribution limits

Answer

Roth IRAs are only available through employers

Answer

Traditional IRAs require distributions at 65

Question 3

A 28-year-old asks whether to invest aggressively or conservatively for retirement. What principle should guide the recommendation?

Accepted Answer

Time horizon is critical - longer horizons generally support higher equity allocations

Answer

Always choose the highest historical returns

Answer

Conservative investments are always safer

Answer

Base the choice solely on current income

Question 4

What is dollar-cost averaging and why do counselors recommend it?

Accepted Answer

Investing a fixed dollar amount at regular intervals regardless of market conditions

Answer

Investing a lump sum at the market's lowest point

Answer

Diversifying equally across all asset classes

Answer

Adjusting investment amounts based on market performance

Question 5

A client nearing retirement has 90% of their portfolio in employer stock. What risk should the counselor highlight?

Accepted Answer

Concentration risk: both income and savings depend on one company

Answer

Tax inefficiency

Answer

Insufficient dividends

Answer

Employer stock typically underperforms

Question 6

At what age can an individual begin receiving reduced Social Security retirement benefits?

Accepted Answer

62

Answer

59 1/2

Answer

65

Answer

67