Social security and pensions are crucial components of a client's financial situation, as they provide a source of income during retirement. Understanding these benefits will help you make informed decisions about the client's investment needs and risk tolerance.
Which of the following is a type of pension plan where the employer guarantees a specific retirement benefit based on a formula?
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A) Defined Benefit Plan: A type of pension plan where the employer guarantees a specific retirement benefit based on a formula, usually involving the employee's salary and years of service. B) Defined Contribution Plan: A retirement plan where the employee and employer contribute to an individual account, and the retirement benefit is based on the account balance at retirement. C) Individual Retirement Account: A tax-advantaged retirement savings account not tied to an employer. D) 401(k) Plan: A defined contribution plan offered by employers, allowing employees to contribute a portion of their salary to a retirement account on a pre-tax basis.
What is the minimum age at which an individual must begin taking Required Minimum Distributions (RMDs) from certain retirement accounts?
A) 59.5: The age at which individuals can begin withdrawing from retirement accounts without incurring an early withdrawal penalty. B) 65: The age at which individuals typically become eligible for Medicare. C) 70.5: The previous age at which RMDs were required before the passage of the SECURE Act in 2019. D) 72: The current age at which individuals must take RMDs from certain retirement accounts.
Which of the following Social Security benefits is available to a surviving spouse or dependent based on the deceased worker's work history and contributions?
A) Spousal Benefits: Social Security benefits available to a spouse based on their partner's work history and contributions. B) Survivor Benefits: Social Security benefits available to a surviving spouse or dependent based on the deceased worker's work history and contributions. C) Disability Benefits: Social Security benefits are available to individuals unable to work due to a qualifying disability. D) Retirement Benefits: Social Security benefits are available to individuals based on their work history and contributions, typically starting at age 62.
In the 1980s, many companies began shifting from defined benefit pension plans to defined contribution plans, such as 401(k) plans. This shift was driven by the desire to reduce traditional pension plans' financial risk and long-term liabilities. As a result, employees have become more responsible for their retirement savings and investment decisions.
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Example Series 65 Example Practice Question
A 65-year-old client is planning to retire in the next year. They have a pension from their employer, providing a monthly income of $2,000. They are also eligible for Social Security benefits, which provide $1,500 per month. Understanding these sources of income will help you determine the appropriate investment strategy for the client, considering their need for additional income and their risk tolerance.