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1.
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 _______.
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.
2.
Of the following, the retirement savings option that gives protection from taxes in the current year is ______.
Pre-tax/tax-deferred. With pre-tax, tax-deferred plans, you do not pay taxes on the income you contribute, and your earnings grow tax-free.
3.
Annuities don't offer the same tax protection as 401(k) plans.
True. While annuities are tax-deferred, there is no tax protection on the income you invest in them–unlike in 401(k) plans.
4.
Once you contribute to a 401(k) plan, you must remain in the plan until you retire.
False. You can take the money out and put it into a different retirement account if you change jobs.
5.
Keogh plans have the same limits on annual contributions that traditional IRAs do.
False. Keogh plan participants can contribute much larger amounts.
6.
How do the contribution limits of SIMPLE and SEP plans compare to the contribution limits of traditional IRAs?
They are higher. An advantage of both plans is that they allow participants to contribute much more than a traditional IRA allows.
7.
If you are still contributing to your IRA plan when you are 76 years old, you must therefore have _______.
Either of the above. Roth IRAs do not compel you to stop making contributions at age 73, and due to recent tax law changes, neither do traditional IRAs.