1. Which of the following statements accurately describes a reason for the suitability of an asset class in a qualified retirement plan portfolio?
Mutual funds provide diversification and offer a competitive rate of return.
Money market investments provide liquidity and a high real rate of return.
Common stocks offer capital appreciation and are relatively low risk.
Bonds are useful for funding future fixed obligations and offer protection against inflationary pressures.
2. Joe (age 52) has just started a consulting company. He currently employs 6 people, who range in age from 22 to 31 years old. Joe estimates that the average employment period for his employees will be approximately 3 years and would like to implement a retirement plan that will favor older participants while including an appropriate vesting schedule. In addition, Joe would like the employees to bear the risk of investment performance within the plan. Which of the following plans is most appropriate for Joe's company?
SEP plan
SIMPLE 401(k) plan
Target benefit plan
Cash balance plan
3. Which of the following retirement plans, maintained by an eligible employer, would also permit the employer to establish a SIMPLE IRA plan?
Traditional Section 401(k) plan
Section 403(b) plan
Money purchase pension plan
Section 457 plan
4. Which of the following retirement plan alternatives would allow Tom the greatest deductible contribution while providing him with only a small cash flow commitment each year based on 2011 plan contribution limits?
Defined benefit plan
Section 401(k) plan
SEP
Profit-sharing plan
5. Tom is interested in adopting a retirement plan for his business. His primary goals are to increase his tax deferred savings and to minimize the expense and paperwork associated with the plan. Which of the following retirement plans would you recommend for Tom's business?
Defined benefit plan
Profit-sharing plan
SIMPLE IRA
Simplified employee pension (SEP)
6. Assume the Holts made a $12,000 contribution ($6,000 each) to their traditional IRA accounts for 2011. What is the maximum amount of their deductible IRA contributions for 2011?
$12,000
$10,000
$6,000
$5,000
7. In 2011, Martha's Uncle Stirling dies and leaves her $1 million in an IRA as the named beneficiary. She is a little overwhelmed at the amount and wants to ensure she uses these funds wisely for her and Tom's retirement. Which of the following is an option for Martha?
She can elect 10-year forward averaging because Uncle Stirling was eligible to use it.
She can roll it over into an IRA and defer any minimum distributions until she is age 70½.
She can roll it over into an inherited IRA but must begin to take distributions over her remaining life expectancy.
She can roll it over into an IRA but may not begin taking distributions without a penalty until she is age 59½.
8. Martha has been impressed with the appreciation of the coin collection she received as a gift from her mother and would like to take advantage of this by using coins as an investment in the IRAs. Which of the following statements regarding coins as investments in IRAs is CORRECT?
Martha should approach her coin dealer and ask that a collection similar to the one her mother gave her be created as an investment for the IRAs.
No more than 25% of Martha's IRA assets may be invested in coins.
American Eagle gold coins are permitted IRA assets.
Any government-issued gold coin, such as Krugerrands and American Eagles, are appropriate for IRA investment.