I’m seeking the creative minds of readers today, and I’m looking for some suggestions in coming up with retirement related trivia questions. Our annual benefits fair runs through the end of the week and I’ll be meeting with hundreds of employees and trying to educate and get people excited about and aware of their retirement plan.
One of the ideas I had was to engage people who stop at the booth by letting them draw a trivia card that has a question related to their specific retirement plan, or retirement planning/investing in general. If they get the question right, they receive one of the various goodies I have to give away: t-shirts, hats, magnets, pens, post-it note pads, etc.
I have come up with a few questions already that relate to the plan specifically. Things like “What percentage does the company match?” and “What is the name of the company that sponsors your plan” and so on. But I’m looking for even more ideas, questions that will get people to stop and think, and hopefully encourage people to enroll if they aren’t already.
Let Me Hear Your Ideas
So, I’m opening up the comments to ideas for questions. They can be really easy questions, or somewhat difficult questions as I may structure what type of prize is given based on the difficulty of the question. They can be fill in the blank, multiple choice, or just standard questions as well. Hopefully there are readers that are more creative than I am, as my questions are pretty dry!
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
You put $3,200 in your 401(k) plan and your employer contributes another $1,600. If at the end of the year your account has grown to $5500 in value. How much did you make?
The answer is B. While your account value has grown to $5,500 you actually only contributed $3,200. So your actual return is $5,500-$3,200/$3,200 to your account or 72%.
Reboboth, that's good stuff. I didn't know that, and I have a follow-on question....
Q: May an employer give an employee a higher match (up to the $45,000 contrib+match ceiling) in lieu of taxable salary?
A: [I don't know but I'll bet the IRS is listening.]
Meg hit my question with the max contribution to a 401K, but here's another good one...
Q: Do Employer 401k Contributions Count Toward the maximum contribution?
A: no, Total match has to be under $45,000 and how you get to that number doesn't matter. Company contributions can be up to 25% percent of your salary, $15,500 personal contribution and any combination of the two can be used to achieve the $45,000.
Questions that show how little they have to put into the plan depending on their age due to the wonders of compounding
Thanks for the help everyone. I'm wrapping up and printing the trivia cards now. These should be fantastic.
How about stuff like..
How long must you wait for your company's matching contributions to fully vest?
What is the primary difference between a normal 401(k) and a Roth 401(k)?
What is the penalty for withdrawing retirement funds early? How can the penalty be avoided?
Q: What can you do on an ongoing basis to make sure that your Plan is well-run and that your retirement assets are in the hands of good custodians?
A: One way is to request a copy of the Department of Labor Form 5500 that your defined contribution plan provider is required to file every year. Even if you don't read it, it helps to keep them honest knowing that plan participants *may* be carefully reading it, and asking questions!
Q: True or false: if I see recurring charges (on my periodic account statements) that I cannot understand, I shouldn't worry about them -- someone in HR or Finance is watching these things for me.
A: False; no one cares about your financial future more than you do. (mysterious recurring, or even one-time, charges should cause you to ask many hard questions of HR, the Plan Administrator, and any other stakeholders of the Plan)
Q: Do I have to file a fresh W-2 with my employer when I sign up for (or adjust my contribution amount to) a 401(k) plan?
A: No, but you should carefully consider it, especially if you want to keep more of your paycheck now (i.e. not get a huge refund next year), or if you want to make sure that you are not underpaying your income taxes by too much (e.g. if you reduce your contribution amount).
Q: True or false: with a good plan, you never pay any 401(k) administration fees.
A: False; even with otherwise good plans where you are told that you don't pay any fees, you may indirectly bear those costs via annual fund management fees that are just a few basis points higher than you would pay for the fund outside of a 401(k) plan in a retail account.
Q: May a traditional IRA be partially converted to a Roth IRA, or must the entire traditionally IRA be converted in one transaction?
A: Partial conversions allowed (though watch out for transaction fees, depending upon the transferring and receiving IRA administrators)
Q: May an individual contribute to both a 401(k) account and an IRA in the same tax year?
A: Yes! (income limits apply to Roth IRAs though, so high income savers may be "priced out" of Roth IRA contributions, but anyone may make non- deductible contributions to a traditional IRA)
What is the maximum amount you're allowed to contribute to a 401k? Bonus: That limit increases after you hit what age?
[multiple choice] What is the historic rate that stocks have returned over the last century? 4-7%? 7-10%? 10-13%?
What is the max you're allowed to contribute to a Roth IRA in 2007? What about in 2008? You can get really detailed with these questions as far as income limits, etc.
Name 1 advantage of investing in an index fund, as compared to a regular mutual fund. (answers: lower fees, higher returns, tax advantages due to lower investment turnover)
What is the "rule of thumb" that percentage of your retirement savings that is safe to withdraw each year? (answer: 4%)