AFK AFK Retirement Planning 3

Question 1

What is the primary advantage of a SEP IRA for a self-employed individual compared to a traditional IRA?

Accepted Answer

Much higher contribution limits

Answer

Tax-free withdrawals in retirement

Answer

No required minimum distributions

Answer

Contributions funded by employees only

Question 2

What is the 4% rule in retirement planning?

Accepted Answer

Withdraw 4% of the portfolio in year one, then adjust for inflation each year

Answer

Invest 4% of income annually

Answer

Keep 4% of assets in cash reserves

Answer

Allocate 4% to alternative investments

Question 3

Which account type is NOT subject to required minimum distributions during the original owner's lifetime?

Accepted Answer

Roth IRA

Answer

Traditional IRA

Answer

401(k)

Answer

SEP IRA

Question 4

A SIMPLE IRA is designed for employers with how many employees or fewer?

Accepted Answer

100

Answer

10

Answer

25

Answer

250

Question 5

What is a Roth conversion, and what is its primary tax consequence?

Accepted Answer

Transferring traditional IRA funds to a Roth IRA; the converted amount is taxable as ordinary income

Answer

Moving funds from a Roth to a traditional IRA; generates a tax deduction

Answer

Rolling over a 401(k) to a Roth 401(k); no tax consequence

Answer

Converting after-tax brokerage funds; gains are tax-free

Question 6

Which of the following best describes sequence-of-returns risk in retirement?

Accepted Answer

The danger that poor early returns deplete a portfolio before recovery can offset withdrawals

Answer

The risk that inflation will erode purchasing power over time

Answer

The risk of outliving retirement assets due to longevity

Answer

The chance that Social Security benefits will be reduced