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HS 353 > Competency 5 > Flashcards

Competency 5 Flashcards

1
Q

Recent studies show the consumers are becoming more aware of how long they will live in retirement

A

True true

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2
Q

The living to 100 calculator provides an estimate of life expectancy based on personal factors such as family health history.

A

True

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3
Q

One way to provide long Jevity provide protection is to defer Social Security benefits to maximize benefits

A

True

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4
Q

A 10 year option under a reverse mortgage under the H EM C program pays for his long as the borrowers are alive.

A

Faults. The tenure option pace until the last borrower has left the home

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5
Q

Dealing with financial effects of inflation during the working years is much harder than during the retirement years.

A

False. During the working years, we just will increase along with inflationary pressures. In retirement, planning is trickier.

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6
Q

When it vantage of different Social Security benefits is that once benefits begin, a greater percentage of the retirees retirement income has inflation protection.

A

True

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7
Q

Pre-paying funeral and other expenses can be a way to limit the impact of inflation.

A

True

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8
Q

A globally diversified stock portfolio has most effectively protected from what Bernstein calls the shallow risk of inflation.

A

Faults. A globally diversified stock portfolio exasperates shallow risk. However, it is the best way to protect against deep risk.

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9
Q

Choosing a withdrawal rate for an individual will depend on a number of factors including the individuals risk tolerance.

A

Truth

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10
Q

Withdrawal rate risk can be reduced by reducing withdrawals during a down market.

A

True

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11
Q

Making a portfolio last is in part simply a willingness to create and stick with the plan.

A

True

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12
Q

Health care risk is the risk of being unable to take care of oneself in retirement

A

False. Health care risk is the risk of facing increasing and unexpected medical expenses in retirement.

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13
Q

The average retired couple believes they will need roughly $75,000 for health care expenses in retirement, just slightly less than $80,000 most people end up needing.

A

False. Average U.S. couples believe they will need roughly $50,000, while in actuality they will need $220,000. (LO 5-2-1)

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14
Q

The majority of medical expenses in retirement are paid through a combination of private insurance and out of pocket costs.

A

False. Medicare pays for 62% of retirees’ medical expenses.

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15
Q

Women typically need more money for health care in retirement than men

A

True. Women need on average $86,000 and men need on average $65,000. (LO 5-

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16
Q

If you begin collecting Social Security at age 62, you can also enroll for reduced Medicare coverage at this time.

A

False. Unless you are on Social Security disability, you cannot enroll in Medicare before age 65

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17
Q

Joe, an employee of Mega-Corp, decides to retire at age 62. He was receiving health insurance through the company and is eligible for COBRA. Joe is looking at other private insurance policies, but he should consider COBRA to cover the entire gap between age 62 and when he can enroll in Medicare, as it could be the best option for his situation

A

False. COBRA can only extend coverage for 18 months. As such, Joe will need other help to cover the entire 3-year period between his retirement and Medicare eligibility

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18
Q

Long-term care risk is the risk that you might not be able to take care of yourself anymore

A

T

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19
Q

Most people understand they will likely need long-term care at some point during their retirement

A

False. People often realize the importance of long-term care, but do not think they will personally need long-term care services

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20
Q

Roughly 70% of people will need long-term care at some point and 70% of long-term care services are provided informally by family members

A

T

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21
Q

Men are typically more prone to debilitating diseases requiring long-term care and, as a result, need long-term care services more than women

A

False. On average, men need 2.2 years of long-term care and women need 3.7 years. (L

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22
Q

Alzheimer’s disease is the number one leading cause of needing long-term care services

A

T

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23
Q

Some people should manage long-term care costs with a mixture of long-term care insurance, self-funding, and government programs

A

True. Long-term care costs are not always best dealt with by a one shot fixes all solution. While long-term care insurance can provide this coverage, it is usually prudent to develop a mixture of solutions to deal with long-term care risks

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24
Q

Frailty risk is the risk that deteriorating mental health will no longer allow the individual to continue the activities they wanted to pursue in retirement

A

False. Frailty risk is the risk that as a result of deteriorating mental or physical health, a retiree may not be able to execute sound judgment in managing his/her financial affairs and/or may become unable to care for his or her home.

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25
Q

Roughly 2/3 of people at age 65 suffer from frailty.

A

False. Only 1/3 of people at age 65 suffer from frailty. (LO 5-2-3

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26
Q

A springing durable power of attorney is the best type of power of attorney for dealing specifically with frailty and declining competency issues.

A

True. Springing durable power of attorney is better suited for frailty issues because it comes into force when the person becomes frail or incompetent and not before. (

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27
Q

House sharing may be a way to combat issues associated with frailty

A

T

28
Q

Financial elder abuse is most often perpetrated by total strangers

A

False. Typically, the perpetrator is a close friend, family member, or other known person. (

29
Q

Men in their 60s are the main target for financial elder abuse because they often have multiple sources of income from pensions and Social Security.

A

False. Women in their 70s and 80s are often the main targets. (

30
Q

Financial elder abuse rarely goes unreported because there are strong watch groups and laws in place protecting the elderly

A

False. Financial elder abuse often goes unreported for a variety of reasons. Financial elder abuse goes unreported because people are embarrassed, they do not want to send a family member to jail, they fear losing their care, or that perpetrator may harm them more if they decide to act

31
Q

Powers of attorney can be used both to prevent elder abuse and to perpetrate elder abuse.

A

T

32
Q

Market risk is important as two individuals with the same saving behavior over a 30-year period will have very different ending balances depending upon the specific 30-year period in which they were saving

A

T

33
Q

The investment returns early in one’s career have the greatest impact on the ending balance at retirement age

A

False. The returns nearest retirement age have the biggest impact on the ending balance at retirement age

34
Q

One way to reduce the impact of market risk on a retirement portfolio is to reduce equity exposure in the several years up to and following retirement.

A

T

35
Q

Interest rate risk is a concern if interest rates are low and are expected to rise

A

T

36
Q

Interest rate risk is not a concern if bonds are held to maturity and are liquidated to meet income needs

A

T

37
Q

Liquidity is a concern with life annuities and assets that are hard to sell quickly

A

T

38
Q

The fact that the order of returns impacts how long a portfolio in the distribution stage with a fixed withdrawal each year will last is called liquidity risk.

A

False. This is called sequence of returns risk.

39
Q

Sequence of returns risk can be reduced by reducing the withdrawal in a down market.

A

T

40
Q

Sequence of returns risk can be reduced by providing downside protection in the portfolio through the purchase of derivatives

A

T

41
Q

It’s fairly unusual for an individual to retire earlier than planned.

A

False. Study after study show that more than 40 percent of individuals retire earlier than planned.

42
Q

The most common reason for retiring earlier than planned is hating the boss

A

False. Health status is the most common reason.

43
Q

Planning for the possibility of an earlier than planned retirement may involve setting up a plan that allows for a somewhat reduced but acceptable lifestyle if the individual is forced to retire before the planned age

A

T

44
Q

The data consistently shows a much larger percentage of pre-retirees reporting that they were planning to work in retirement than the percentage of retirees that actually work in retirement

A

T

45
Q

Working part-time in retirement may mean a reduction in pay but an increase in job satisfaction.

A

T

46
Q

An EBRI study on why retirees work showed that the majority had no financial reason to work, and they were working entirely for nonfinancial reasons

A

False. Even though many retirees report that they work for nonfinancial reasons, 90 percent report that they also have a financial reason to work.

47
Q

If substantial income is needed from work in retirement, in some cases it may be better for an individual to consider postponing retirement from a well-paying career

A

T

48
Q

If a private employer goes bankrupt, the creditors can attach the assets held in the company’s qualified defined-benefit plan

A

False. Assets are held in an irrevocable trust and are outside the reach of the employer’s creditors.

49
Q

Today, diversification requirements require that publically traded companies with 401(k) plans with matching contributions in employer stock must give the participants the right to choose alternative investments

A

T

50
Q

Benefits provided in defined-benefit plans sponsored by a municipal government are not at risk because these plans are covered by the PBGC insurance program

A

False. Municipal government plans are not subject to the PBGC and benefits are at more risk than plans of other types of plan sponsors.

51
Q

Private employers are allowed to use assets of a defined-benefit plan for other business purposes

A

False. Assets are held

52
Q

Government sponsored 457 plans are protected from creditors as assets have to be held in an irrevocable trust

A

T

53
Q

A death of a spouse often means that the surviving spouse is more likely to need institutional care because they lost a caregiver

A

T

54
Q

With careful planning, Social Security benefits will not be reduced when the first spouse dies

A

False. Careful planning can help maximize the survivor benefit, but there is always a reduction in Social Security benefits at the first death. (LO 5-5-1

55
Q

Using home equity to support the needs of a surviving spouse can be an effective contingency plan

A

T

56
Q

Electing a joint and survivor form of annuity is a way to address the income needs of a surviving spouse

A

T

57
Q

Only about 25 percent of those over age 50 provide financial support for their families

A

False. The percentage is over 60 percent.

58
Q

The downside of providing too much financial support to family members is becoming financially dependent on them later in life

A

T

59
Q

One of the best ways to help a retiree make a decision about providing financial support for family members when unexpected events arise is to have a comprehensive retirement income plan

A

T

60
Q

Sequence of returns risk is one of those timing risks that could have an impact on a retirement income plan.

A

T

61
Q

Addressing timing risks for some may mean pre-purchasing income needs prior to retirement if it can be afforded.

A

T

62
Q

One way to address timing risk is to monitor the plan regularly, and be ready to react quickly to changes

A

T

63
Q

Using a Roth IRA in order to have more tax diversification may not provide protection from new types of taxes such as a consumption tax.

A

T

64
Q

Planning for the possibility of public policy change in part requires retaining enough flexibility and liquidity in order to be able to react to changes

A

T

65
Q

A key role of the advisor in addressing public policy risk is to stay current on policy changes, planning opportunities and effective dates, and the impact that the change will have on the plan

A

T

HS 353 (8 decks)

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