exam 3

Question 1

retirement - what kind of institutions would be interested?

Answer 1

Banks
Mutual Funds
Insurance Companies
Wirehouses
Brokerage Firms

Question 2

what kind of savings issues are there?

Answer 2

Savings Amount
Savings Rate
Timing of Savings

Question 3

what kind of investment issues are there?

Answer 3

Savings Amount
Savings Rate
Timing of Savings

Question 4

how much of your paycheck should you save?

Answer 4

at least 10%

Question 5

What is an IRA, and what are the types of IRA?

Answer 5

IRA - Individual Retirement Account: for each IRA, there is a limit on how much you can put into it, you can open them at Banks
Traditional IRA
Roth IRA
Rollover IRA

Question 6

Roth IRA

Answer 6

there isn’t a deduction, tradeoff is paying no taxes, when you take the money out, best to get a roth IRA, or 401K, best option is Roth IRA

Question 7

Roth 401 K

Answer 7

peak earning years - higher tax bracket
*retirement - lowering tax bracket
*can up to 11,000, that is the limit to put into IRA

Question 8

Traditional 401 K

Answer 8

retirement vehicles, where companies you work for set this up, so you can contribute to it. It is tax-deferred. A plan offered through your employer/company.

*can put up more than 11,000 for 401K
*Up to 23,000 for 401K]
*there is a catch up provision, for up to 50,000?

Question 9

rollover IRA

Answer 9

401K to 401K transfer, happens without you
If you don’t transfer the money to your new company, between the transition it will become taxable money within 60 days

You can leave it in old company, or rolling over your 401K into IRA
If you change jobs frequently, you want to take control of your assets
Don’t forget about 401k accounts!

Question 10

pension?

Answer 10

?

Question 11

what is the main advantage of a traditional 401k?

Answer 11

tax deferred growth, not being taxed upfront so it will be deferred until the future. It is a portfolio of investments, offers diversification and tax deferred growth, which will be tax deferred as long as you keep investing money while you’re working for your employer. You can be penalized for taking out money early.

Question 12

rollover 401k

Answer 12

for transferring between companies, main advantage: control of your investments.

Question 13

401 k -

Answer 13

can contribute to it, but it isn’t unlimited, there is a limit of 23,000 dollars put into the account, employers can match your amount. It is free money the company is giving you, just for participating in the plan.

Question 14

what is RMD?

Answer 14

For traditional 401k, at some point the government can ask for you to pay taxes, starting at 73.

IRA = you can buy stocks, bonds, mutual funds, has to be traditional investments (CDs included too)
$7,000 ?

Social Security = can be taken as early as 62

Question 15

Roth 401K

Answer 15

a different type of 401K, is is TAX FREE, it is a newer version of 401 K, will never have to pay taxes in the future. A lower tax bracket. The power of compounding and it won’t be taxed is an advantage. If withdrawals are before the age of 59 ½. It can trigger a 10% penalty

Employer matching for 401K, can vary between companies

*If just starting out in employment, it is more recommended to choose ROTH,

Question 16

What are the different types of Medicare?

Answer 16

Diff Types of Medicare - eligible for medicare at 65
Medicare Type A = pays for hospitalizations
Medicare Type B = pays for physicians visit
Medicare Type C = voluntary insurance plan that pays for things Medicare doesn’t pay for (optional/supplementary)
Medicare Type D = pays for prescription drugs

Only Need Part A + B for Medicare, the rest is optional

Question 17

What is a single payer system?

Answer 17

Single Payer System = a healthcare system that is subsidized by the government, no insurance, exists in Canada and UK. Only 1 payer.

Question 18

What is the difference between Medicare and Medicaid?

Answer 18

Medicare = federal government program
Medicaid = is a needs based plan, a minimum threshold for qualification, is partnership with federal government and state government, each one pays into it.

Question 19

What is the ACA?

Answer 19

Affordable Care Act or ‘’Obamacare’’ requires large employers, which is an employer that at any time during the year, employs at least 50 people, to provide a minimum level of health insurance coverage to employees or face stiff tax penalties.

Question 20

What is the biggest benefit of Obamacare?

Answer 20

Not denying them coverage for preexisting conditions

Question 21

What are the different types of ACA plans?

Answer 21

Bronze Plan - 60%
Silver Plan - 70%
Gold Plan - 80%
Platinum Plan - 90%

Question 22

what is the benefits of health insurance?

Answer 22

Bigger pool of people, more predictability, more affordability

Question 23

what are the different types of group and individual health insurance plans?

Answer 23

1). Health maintenance organization (HMO) - hospital you go to might be affiliated with the HMO, so hospital and insurance all rolled into one, designed for more affordability
2). Preferred Provider Organization (PPO) - can go to other doctors that are a part of the HMO.
3). Point of Service Plans (POS) - paid for service?
Indemnity - reimbursement for service, paid for service

Question 24

What is the COBRA Act and what does it do?

Answer 24

COBRA ACT - Consolidated Omnibus Budget Reconciliation Act of 1985 and ?????????

Question 25

rank health insurance plans according to most expensive to least expensive?

Answer 25

POS - is most expensive, freedom of choice don’t need to go to PCP first, and go to any specialist

PPO - gives you a choice in the ring

HMO - least expensive

Question 26

deductible

Answer 26

Deductible - paying off an amount, before insurance kicks in

Beginning of the year is the worst, have to pay off the deductible

Low deductible plan - will cost you more, more expensive

Question 27

HSA

Answer 27

?

Question 28

FSA

Answer 28

flexible spending account, company can contribute to your account but not you, use it or lOSE IT. up to 2 ½ months through March 15 of the following year, if not spent it will go to 0!

Question 29

true or false can you have HSA/FSA at the same time?

Answer 29

TRUE

Question 30

What are the 2 types of Real Estate?

Answer 30

1.Residential
2. Commercial

Question 31

What are the prime areas in real estate?

Answer 31

where people are migrating to
Weather related
Economic opportunity
*which is where real estate prices tend to be higher

Question 32

Advantages of Buying a Home

Answer 32

Forced Savings Plan - for people who can’t save or have saving habits
Leverages other people’s money, to afford things for yourself
Build Sweat Equity
Value tends to keep up with inflation

Question 33

Disadvantages of Buying a Home

Answer 33

Costs add up: Taxes, Insurance, Maintenance, HOA etc.
Leverage can work against you, when prices go down
During deflation, you are paying your mortgage with more expensive dollars and the value of your house in dollars may be going down.
Houses are not ‘’liquid’’, it may take time to sell if you need to move
You can lose a significant chunk of value (10-20%) when you sell due to transaction costs, i.e real estate agent commissions and more.

Question 34

What is the Bubble Effect?

Answer 34

building bigger houses, which can drive up the average price, can happen in a thinly traded market
prices can go down

Question 35

when is leverage used and what is it usually referred to?

Answer 35

Leverage is referred to loans, especially when buying a house

Question 36

what are the different loans offered when buying a house?

Answer 36

Conventional Loan - usually for 30 years, for buyers/borrowers with good credit scores
Jumbo Loan - best for borrowers with good credit looking to buy a more expensive home
Government loans - best for borrowers with lower credit scores and minimal cash for a down payment.
Diff. Type of Government Loans
FHA Loans = area has to qualify for this loan, at least 20% down to qualify for a mortgage
VA loans = from Veterans Affairs organization, qualify with 20% down (approx.)
USDA loans = U.S Department of Agriculture loan
Fixed Rate Mortgage - best for borrowers who’d prefer a predictable, set monthly payment for the duration of the loan
Adjustable-rate mortgages - best for borrowers who aren’t planning to stay in the home for an extended period, prefer lower payments in the short term or are comfortable with possibly having to pay more in the future.

Question 37

Loans

Answer 37

typically they usually are for 30 years, or 15 years to pay it off quicker
Interest rates are rising, which makes adjustable mortgages more attractive

Question 38

Refinancing

Answer 38

taking advantage of what the rates are, and go to the bank and get a lower interest rate so the payment amount can go down. Simultaneously taking out an old and new mortgage.

Question 39

1st time buyers

Answer 39

conventional loans for 30 years, however there are many costs associated with buying a home like closing costs, realtor fees.
Need 20% down for a down payment

Question 40

what is PMI?

Answer 40

Private Mortgage Insurance

It’s intended for the lender, however we pay for the premium
If you have more 20% of equity, you no longer need to pay the PMI

Question 41

28/36 Rule

Answer 41

28/36 Rule =used to calculate the amount of debt an individual or household should assume

.28xgross monthly pay = rough approximation on how much you can spend on housing