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Retirement Intermediate: Tax-Deferred Retirement Plans

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1.
Once you contribute to a 401(k) plan, you must remain in the plan until you retire.
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False. You can take the money out and put it into a different retirement account if you change jobs.
2.
Who may sell an annuity?
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An insurance agent. An annuity is an insurance contract offered by licensed insurance agents.
3.
Keogh plans have the same limits on annual contributions that traditional IRAs do.
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False. Keogh plan participants can contribute much larger amounts.
4.
A traditional IRA is like a 401(k) plan in that _______.
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It is a tax-deferred plan. Both traditional IRAs and 401(k) plans are tax-deferred, but income you contribute to an IRA may be taxed under certain circumstances.
5.
Employee income invested in a SIMPLE or SEP is subject to taxes.
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False. Employee contributions to SIMPLEs and SEPs are made pre-tax, up to certain limits.
6.
An ordinary savings account offers no tax protection for retirement savings.
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True. You must pay tax on both the income you earn before depositing into a savings account and on the interest your deposits earn.
7.
An advantage of keeping money in a tax-deferred retirement plan is that you might pay lower taxes on the money when you eventually take it out. This is because _______.
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You may be in a lower tax bracket in retirement. Most retirees take in less income in retirement, which typically puts them into a lower tax bracket. This is not a given for everyone, though.