Competency 1

Question 1

In the financial services industry, there is a clear agreement as to the objectives of retirement income planning.

Answer 1

False. This is a new field. There is no clear agreement.

Question 2

Clients may find it difficult to visualize what their lives will look like in the future making it difficult to clarify goals and objectives’s.

Answer 2

True

Question 3

Determining goals and clarifying the budget can be difficult steps in the process of building a retirement plan.

Answer 3

True.

Question 4

Retirement income planning involves a new risk not present in the accumulation process related to the sequencing of returns in the portfolio that includes systematic withdrawals.

Answer 4

True

Question 5

Retirement income practice could expose and advisor two more liability, and mistakes can have a significant impact on retired clients.

Answer 5

True

Question 6

Retirement income planning is only about converting assets into income.

Answer 6

False. It’s much more than that as it also involves risk assessment text planning and addressing other concerns.

Question 7

Retirement income planning is different than retirement savings plan for a younger client because the client has less time to recover from investment losses or planning errors.

Answer 7

True

Question 8

Retirement income planning is a well-established field with clearly established procedures and best processes.

Answer 8

False retirement income planning is a new discipline is still struggling to identify processes and best practices.

Question 9

For those with limited resources the retirement decisions include when to retire and went to claim Social Security benefits.

Answer 9

True

Question 10

A key question for an individual with limited resources is “can I continue to live in this house?”.

Answer 10

True

Question 11

Income and available assets are relevant consideration when determining whether it is appropriate to purchase long-term care insurance.

Answer 11

True.

Question 12

As income and assets increase tax and estate planning considerations become a more important part of the retirement income plan.

Answer 12

True.

Question 13

Tax efficiency can be improved by holding bonds it tax-free 401(k) or IRA accounts and stocks in taxable accounts.

Answer 13

True

Question 14

Buns are very text inefficient as coupons or text each year as ordinary income.

Answer 14

True

Question 15

?? percent of single women over the age of 65 have Social Security as their sole means of support.

Answer 15

50%

Question 16

For a couple to have 50% probability of meeting expenses with medium prescription drug expenses, the cost is???.

Answer 16

$151,000

Question 17

With a 50% probability and prescription drugs at the 75th percentile the cost is???

Answer 17

$170,000

Question 18

With a 50% probability of prescription drugs at the 90th percentile the cost is???

Answer 18

$220,000

Question 19

Male with 50% probability and medium prescription drug expenses equals $?? or as much as $?? if they have the really expensive drug utilization.

Answer 19

$65,000 or as much as $96,000

Question 20

Female with a 50% probability and median prescription drug expenses equals $?? Or as much as $?? With the 90th percentile prescription drug expense.

Answer 20

$86,000 or as much as $124,000

Question 21

?? Percent of those age 65 and older will need some long-term care in their lives

Answer 21

70%

Question 22

Classic replacement ratio to maintain a pre-retirement standard of living equals ? To ? %.

Answer 22

70 to 85%

Question 23

Sufficient funds to meet basic expenses
high income male
65 / 50% sure then ??% replacement rate, 90% sure then ??% replacement rate

Answer 23

52% and 119%.

Question 24

Sufficient funds to meet basic expenses
high income female
65 / 50% sure then ??% replacement rate, 90% sure then ??% replacement rate

Answer 24

59% and 129%.

Question 25

In 2012, about?? Percent of all early boomer households are likely to run short of money in retirement which is better result than in 2003 when?? % were at risk

Answer 25

44% and 51%

Question 26

Into thousand and three employers offered defined contribution plans through voluntary enrollment. The participation rates were as low as?? Percent among the young and low income groups

Answer 26

40%

Question 27

The shift from voluntary enrollment to automatic enrollment commonly change the percentage from?? to?? or more for the low income group.

Answer 27

40% to 80%

Question 28

For early boomers in the lowest income court time equals?? Percent are at risk of running short of money in retirement.

Answer 28

86%

Question 29

Early bloomers in the highest income quartile equals?? Percent are at risk of running short of money in retirement.

Answer 29

12%

Question 30

Those with 0 years of eligibility to participate in the 401(k) plan had a ??%chance of running short of money.

Answer 30

60%

Question 31

Those with 20 years of eligibility to participate in the 401(k) plan had a ??%chance of running short of money.

Answer 31

18%

Question 32

.?? % of private sector workers or offered a plan and ??% participate.

Answer 32

48% and 39%.

Question 33

.?? % of public sector workers or offered a plan and ??% participate.

Answer 33

79% and 71%.

Question 34

Retirement readiness: single male will need about $,000 at age 65.

Answer 34

$94,000

Question 35

How much more money would you need to have to cover the shortfall that is projected:single female will need about $,000 at age 65.

Answer 35

$104,000.

Question 36

How much more money would you need to have to cover the shortfall that is projected: family will need about $,000 at age 65.

Answer 36

$70,000

Question 37

There was agreement that it was not simply handing a client a software printout showing that their plan
has an 83 percent chance of success.

Answer 37

True

Question 38

The 2013 Genworth study shows the national average for the cost of care.

(1) Cost of assisted living facility is $3,450 monthly ($41,400 annually)
(2) Cost of a nursing home in a private room is $ a day ($ annually)
(3) Cost of a home health care aid averages $ an hour

Answer 38

3450 Mo
230 Daily (83,950 ann)
19 hr

Question 39

The traditional replacement ratio approach does not take into consideration contingencies such as the possibility of needing nursing care for an extended period of time

Answer 39

True

Question 40

The amount of money required to be saved for health expenses is relatively stable for all retirees

Answer 40

False. The amount varies significantly depending upon the life trajectory

Question 41

The EBRI Retirement Readiness survey tests whether individuals will have sufficient resources to maintain their pre-retirement lifestyle.

Answer 41

False. The study identifies those that may have insufficient resources to pay basic expenses

Question 42

Under the latest EBRI Retirement Readiness survey, almost half are at risk of having a retirement income shortfall

Answer 42

True.

Question 43

The EBRI Retirement Readiness surveys have shown a decline in the percentage of workers at risk of a retirement income shortfall

Answer 43

True

Question 44

The EBRI Retirement Readiness survey shows that pension coverage reduces the risk of shortfall for generation X from 60 percent to 18 percent.

Answer 44

True

Question 45

The EBRI Retirement Readiness survey shows that people who guess their retirement needs have a 10 percent decrease in their retirement readiness rating

Answer 45

False. Those who guess show a 6-8 percent decrease in their retirement readiness rating. (LO

Question 46

The type of employee most likely to be a participant in an employer sponsored retirement plan is
A. An employee of a small private employer
B. An employee of a public employer
C. An employee of a large private employer

Answer 46

The answer is B. Large private employers do have a high percentage of participation, but the percentage is even higher with public employers. (LO 1-2-2)

Question 47

15.The EBRI confidence survey shows that three in four workers are not at all confident that they have sufficient assets for retirement

Answer 47

False. The survey shows that about one in four are not at all confident

Question 48

The EBRI confidence survey in 2013 shows that people who are not well prepared for retirement are much more aware of the situation, but awareness has not translated into action

Answer 48

True

Question 49

17.The EBRI confidence survey shows that people are aware of the risk of long-term care expenses and are taking steps to address this need

Answer 49

False. The survey shows that many are aware of the need but are not taking steps to prepare for this risk

Question 50

18.The EBRI confidence survey shows that those that plan are more confident that they are prepared for retirement.

Answer 50

True

Question 51

Current spending habits are identified on the statement of net worth

Answer 51

False. Current spending habits are shown on the personal cash flow statement.

Question 52

Reviewing current spending can help identify potential conflicts with retirement goals and projections of future spending

Answer 52

True

Question 53

A statement of net worth can identify liabilities that may not be paid off prior to the anticipated retirement age

Answer 53

True

Question 54

Clients often need help visualizing what life in retirement will look like, especially the later years of retirement

Answer 54

T

Question 55

Most retirement planning software programs calculating retirement needs will provide similar results.

Answer 55

False. Results will vary significantly as there are a number of ways at modeling the issue.

Question 56

The best way to clarify a financial planning client relationship is a written engagement letter clarifying when the relationship begins, the scope of the relationship and the responsibilities of both the advisor and client

Answer 56

T

Question 57

General data gathered in the review typically includes several years of tax returns, brokerage statements and retirement plan statements

Answer 57

T

Question 58

Client confidentiality rules generally do not apply to sharing client data with other professionals working on behalf of the client

Answer 58

False. Client confidentiality rules require permission from the client to share data with other professionals.

Question 59

To make sure that the client understands the recommendations being provided, it is important to engage the client by requesting regular feedback

Answer 59

T

Question 60

Practicing within professional and regulatory standards applies to all of the steps of the financial planning process

Answer 60

T

Question 61

Family members should never be a part of the retirement income planning team because they are not retirement income experts

Answer 61

False. While there can be some negatives associated with having a family member as part of the retirement income planning team, the client and his or her family will be crucial to developing a happy retirement. Especially when planning for couples, the spouse will need to be involved in many, if not all, of the conversations. (LO 1

Question 62

12.A retirement income planning team should be comprised of a variety of professionals, each bringing specialized expertise to meet the client’s needs

Answer 62

T

Question 63

The client should be the person to identify a coach or coordinator of his or her retirement planning team

Answer 63

T

Question 64

The financial advisor is often the best-suited person to be the retirement income planning team leader.

Answer 64

T

Question 65

The financial advisor should help the client coordinate his or her retirement plan with all of the client’s other advisors

Answer 65

T

Question 66

While there is no financial incentive for the advisor in developing a well-coordinated retirement income planning team for a client, it is the right thing to do because it is in the best interest of the client

Answer 66

False. A better-coordinated retirement income planning team for a client can have multiple positive effects: 1 – a happier client is more likely to recommend the advisor, 2 – working with other professionals is a good way to drive business back to yourself, 3 – the client will have a better performing plan. (LO 1-3-3)

Question 67

Goal-based software may help determine that your clients need to save $500 a month for retirement while cash flow software may help you understand whether the client could afford to meet that goal.

Answer 67

T

Question 68

One use of retirement software is to illustrate the probability of success for a specific withdrawal rate from a retirement portfolio.

Answer 68

True

Question 69

A strength of Monte Carlo analysis is that it can simplify a situation by providing probabilities of success for two or more different alternative courses of action

Answer 69

T

Question 70

Monte Carlo analysis is a good predictor of future market behavior as simulations generally use historical data on returns.

Answer 70

False. This is a limitation of Monte Carlo analysis as historical data may not predict future market behavior

Question 71

As people age, “meaning” tends to become less important and “money” becomes more important.

Answer 71

False. As people age they report that “meaning” becomes more important

Question 72

An important goal in financial services is to take emotions out of the decision making process.

Answer 72

False. Decisions are made with both sides of the brain, and emotions need to be accommodated.

Question 73

With retirement income planning, clients are likely to be able to better relate to a discussion of income versus assets.

Answer 73

T