Foundations of Retirement Planning part one Flashcards by Jamar Blackman

The group of people born between 1946 and 1964 are known as

A] baby boomers
B] the greatest generation
C] an affluent generation
D] the prewar generation

A] baby boomers

How well did you know this?

Not at all

Perfectly

Which of the following characteristics is considered to be the most significant factor in deciding whether someone is qualified prospect?

A) needs and values your products and services
B) can afford to pay your products and services
C) is insurable or financially suitable
D) can be approached by favorable basis

D] can be approached on a favorable basis

How well did you know this?

Not at all

Perfectly

Witch of the fallowing roadblocks to retirement saving is perhaps the biggest?

A] the tendency to spend all income
B] unexpected expenses
C] frequent employment changes
D] other accumulation needs

A] the tendency to spend all income

How well did you know this?

Not at all

Perfectly

Which of the following statements concerning the silent generation is correct?

A] none of them have retired yet
B] they have little need for retirement planning
C] members of this group were born prior to 1946
D] as a group, they suffered economic decline following world war two

C] members of this group were born prior to 1946

How well did you know this?

Not at all

Perfectly

Which of the following prospects sources involves any influential person who knows you, has a favorable opinion of you, agrees to recommend you to others?

A] centers of influence
B] networking
C] seminars
D] lists

A] centers of influence

How well did you know this?

Not at all

Perfectly

Which of the following is one of the five phases of retirement planning a client moves through his or her lifecycle?

One. Increase preparation and visualization fees
Two. Decision phase

A] one only
B] two only
C] both one and two
D] neither one nor two

C] both one and two

How well did you know this?

Not at all

Perfectly

which of the following statements regarding critical issues that affect retirement planning is [are] correct?

One. The face of retirement is changing as more workers expect to exit the workforce completely upon retirement
Two. Financial needs during retirement are met from three primary sources, often referred to as the legs of a three-legged stool

B] two only

How well did you know this?

Not at all

Perfectly

Which of the following occurs in the analysis of information step of the selling/planning process?

One. The advisor looks at the prospects current situation and future goals in order to evaluate appropriate strategies for the prospect
Two. The advisor analyzes the prospect’s financial risk tolerance, risk management strategies, and risk exposures.

A] one only
D] two only
C] both one and two
D] neither one nor two

C] both one and two

How well did you know this?

Not at all

Perfectly

All of the following are motivating factors for clients to begin planning for retirement EXCEPT

A] Retirement may last longer than planned because Life expectancies continue to rise
B] the tendency of most people to use their full after-tax income to support their current standard of living
C] starting early can mean the difference between success and failure
D] careful planning requires preparing for contingencies

B] the tendency of most people to use their full after-tax income to support their current standard of living

How well did you know this?

Not at all

Perfectly

Each of the following is an aged-based market segment for retirement planning identified in the text EXCEPT

A] under age 45
B] ages 45 to 61
C] ages 55 to 65
D] age 62 And older

C] ages 55 to 65

How well did you know this?

Not at all

Perfectly

Which of the following best describes when the savings phase of retirement planning should begin?

A] upon the clients reaching age 30
B] at the beginning of the client’s career
C] when the client purchases his or her first home
D] after the client has his or her first child

B] at the beginning of the client’s career

How well did you know this?

Not at all

Perfectly

Which of the following American generations can be described as risktakers, self oriented, and practical?

A) silent generation
D)baby-boom generation
C) generation X
D) millennial generation

C] generation X

How well did you know this?

Not at all

Perfectly

The marketing strategy that allows the advisor to customize his or her approach and presentations based on the common needs and characteristics of prospects in a particular market is known as which of the following?

A] market penetration
B] market segmentation
C] market share
D] market promotion

B) market segmentation

How well did you know this?

Not at all

Perfectly

Which of the following definitions of networking as it relates to the retirement selling/planning process is correct?

A] networking is the broadcasting of retirement planning infomercials on television and radio
B] networking is a competitive relationship among financial advisors who are vying for retirement planning prospects on an ongoing basis
C] networking is the continual communication and sharing of ideas of prospects with others whose work does not compete with the financial advisor’s
D] networking is the is the obtaining of a steady stream of referrals from clients for whom the advisor has conducted retirement planning

C] networking is a continual communication and sharing of ideas and prospects with others whose work does not compete with the financial advisor’s

How well did you know this?

Not at all

Perfectly

Financial needs during retirement are met by three primary sources of income. Which of the following is [are] among those three?

One. Social Security benefits
Two. Inheritances

A] one only
B] two only
C] both one and two
D] neither one nor two

A] one only

How well did you know this?

Not at all

Perfectly

Which of the following statements concerning active life expectancy is [are] correct?

One. Active life expectancy is the number of years a person can anticipate living without a disability
Two. Although life expectancy is increasing, active life expectancy is actually decreasing.

A] one only
D] two only
C] both one and two
D] neither one nor two

A] one only

How well did you know this?

Not at all

Perfectly

Which of the following statements concerning that age 62-and-older market is [are] correct?

One. Now that prospects in the age-62-and-older market are near or in retirement, they have become less concerned about health care issues.
Two. Prospects in this market worry less than younger prospects that their monthly income and assets will be sufficient to cover their needs.

A] one only
B] two only
C] both one and two
D] neither one nor two

D neither one nor two

How well did you know this?

Not at all

Perfectly

All of the following our steps in the selling/planning process EXCEPT

A] analyze the information
B] implement the plan
C] Ask for referrals
D] meet the prospect

C] ask for referrals

How well did you know this?

Not at all

Perfectly

All of the following statements regarding the changing face of retirement are correct EXCEPT

A] Current workers expect to work longer than current retirees did before they retired
B] current workers are most likely to say that personal savings will be their most important source of retirement income
C] the trend towards retirees who work is unlikely to continue
D] retirees are increasingly was responsible for caring for their parents and children

C] the trend toward retirees who work is unlikely to continue

How well did you know this?

Not at all

Perfectly

All the following are advantages of seminars as a prospecting source EXCEPT

A] They eliminate the need for the follow-up appointments
B] they enable the advisor to reach several prospects at one time
C] they help the advisor identify qualified prospects
D] they spotlight the adviser as the expert in his specialized area.

A] thet eliminate the need for the follow up appointments

How well did you know this?

Not at all

Perfectly

A cash flow statement does which of the following?

A] indentifies a client’s assets and liabilities
B] estimates a client’s net worth
C] calculates the retirement funding need for a preretiree
D] summarizes a client’s financial activities over a specified period of time by comparing cash inflows and inflows

D] summarizes a client’s financial activities over a specified period of time by comparing cash inflows and inflows

How well did you know this?

Not at all

Perfectly

Net worth is defined as the difference between which of the following?

A] nonfinancial assets and investment assets
B] gains and looses
C] income and expenses
D] assets and liabilities

D] assets and liabilities

How well did you know this?

Not at all

Perfectly

What are the three traditional sources of retirement income?

A] Social Security, savings, and welfare
B] Social Security, pensions, and savings
C] Social Security, savings, and investments
D] Social Security, pensions, and work afer retirement

B] Social Security, pensions, and savings

How well did you know this?

Not at all

Perfectly

Which of the following best describes the Rule of 72?

A] It is the basis used to calculate the return on an investment
B] It is a quick method to calculate the present value of an investment
C] It can be used to approximate the number of years it takes an investment to triple in value
D] It can be used to approximate the interest rate required for an investment to double in value

D] It can be used to approximate the interest rate required for an investment to double in value

How well did you know this?

Not at all

Perfectly

If you invest$1,000 today and earn 3 percent compunded annually, what will it be worth in 6 years? (use the time-value-of-money interest tables in Appendix A of the textbook to determine the answer.) A] $837 B] $1,194 C] $5,417 D] $6,468

B] $1,194

Your prospect plans to retire in 15 years. He plans to set aside $4000 each year starting immediately. He estimates that he can maintain a 5 percent annual interest rate for the entire period. How much will he have at the end of the 15 year period? [Use of the time value of money interest tables Appendix A of the textbook to determine the answer.] A] $68,316 B] $82,316 C] $89,104 D] $90,628

D] $90,628

Your prospect wants to accumulate $50,000 over the next 10 years to help pay her son's college costs. Assuming her investment will return 4% annually, how much does she need to invest at the beginning of each year to reach her goal by the end of the 10th year? [use the time value of money interest tables in appendix A of the textbook to determine the answer.] A] $2,002 B] $4,004 C] $6,164 D] $8,006

B] $4,004

Which of the following may be eligible for survivor benefits at the death of a wage earner? One. A surviving sibling Two. Independent parent who is aged 62 or older A] one only B] two only C] both one and two D] neither one nor two

All of the following statements concerning the time value of money are correct EXCEPT A] the interest rate received on a sum of money is the only factor to consider when saving. B] a small sum of money can grow to a substantial amount when interest is compounded, given enough time. C] a dollar received today is worth more than a dollar received in the future. D] the higher the interest rate and the longer the time horizon, the higher the future value will be.

A] the interest rate received on a sum of money is the only factor to consider when saving.

All of the following statements regarding social security retirement benefits are correct except A] full retirement age is gradually increasing to age 67 but the year 2027. B] the spouse of an eligible covered spouse is entitled to benefits beginning at age 62 or earlier in some circumstance C] dependent children of an eligible worker are entitled to benefits. D] A covered worker is entitled to a monthly benefit equal to two times his or her PIA at full retirement age

D] A covered worker is entitled to a monthly benefit equal to two times his or her PIA at full retirement age

Which of the following is the correct term for a full or part-time job involving little responsibility, bitch a return he holes after returning from a career and before stopping work in Turley? A] phase retirement B] retirement income credit C] Bridge job D] reduced wage base

C] Bridge job

Time value of money is BS on which of the following concepts? A] A dollar received today is worth more than a dollar received in the future D] a dollar received today it's worth less than a dollar received in the future C] compound interest can lead to come Pontaxit edition D] compound Toxish and Kennedy to compliment dress

A] A dollar received today is worth more than a dollar received in the future

It comes home and will interest rate of 60%, a single sum of one dollar both double invaluable weeks two dollars in the prospering how many years? A] 3 years D] 9 years C] 18 years D] 24 years

D] 24 years

Which of the following statements concerning the cash flow statement is correct? A] it is based on projections of future income and expenses B] it has three basic components Ossette Leadville tease, I'm met cash flow. C] it classifies annual expenses as either fixed or discretionary D] it shows the clients wealth [net worth] at a point in time

C] it classifies annual expenses as either fixed or discretionary

Future retirees are more likely to work then in the past four bits of the following reasons? One. People are living longer and thus will have more retirement years to fund Two. The earnings test for social security benefits at at or beyond full retirement age has been given it is A] 1only D] tool only C] both one and two D] neither one nor to

C] both one and two

Other things being equal, which of the following changes will increase to future value of a present sum of money? One. An increase in the interest rates use in the component process Two. A decrease in the number of years over which component occurs A] one only B] tune only C] both one and two D] neither one nor two

A] one only

Which of the following statements concerning the name asked sets is [are] correct? One. For purposes of the financial position statement? It is necessary to know whether assets are purchased for cash? Finance by boring? Or received as gifts are inheritances. Two. It is common practice to miss assets on the financial position statement at the original purchases price instead of their current fair market value. A] one only B] to only C] both one and two D] neither one nor two

D] neither one nor two

All of the following are eligible to receive social security retirement benefits at set A] a retired covert worker D] this post of a covert worker C] the parent of a covered worker D] dependent child of a covert worker

C] the parent of a covered worker

Hey clients net worth can increase as a result of the following accept A] appreciation in the value of his or her assets B] addition assets through route retaining income C] addition to assess true and inheritance D] addition to assess by making lifetime gifts

D] addition to assess by making lifetime gifts

All of the following statements concerning cost for time and I am/are budgeting are correct at set A] cash flow planning is identifying courses of action that will help optimize neck cash flow B] cash flow planning is effective only when it proceeds cash flow analysis C] budgeting is a process of creating the phone and a specific time for spending and investing resources available for the client D] budgeting provides both a means of financial and self-evaluation and a guideline to measure actual performance

B] cash flow planning is effective only when it proceeds cash flow analysis

Which of the following best describes the definition of goals and retirement planning? A] they must be long-term in nature B] they must have financial significance C] they must not conflict with each other D] they must be definable, Measurable, Achievable,Realistic

D] they must be definable, Measurable, Achievable,Realistic

One of the most critical aspects of effective communication means being able to do which of the following? A] listen effectively B] make your position known C] prejudge your prospects needs D] Explain your products concisely

A] listen effectively

One reason to use an agenda when meeting with a prospect is to A] increase anxiety and discomfort B] advertise your products and services C] let your prospect know you are in charge D] let your prospect know what is expected of him or her

D] let your prospect know what is expected of him or her

Which of the following statements about retirement planning is correct? A] a fact finder of some sort should be completed this in the context of any financial product sale B] facts are more important than feelings in the retirement planning process C] most people nearing retirement have the same expectations D] retirement means stopping work at is 65

A] a fact finder of some sort should be completed this in the context of any financial product sale

An income replacement ratio A] is difficult to calculate B] includes factors for inflation and longevity C] should never be used because it is not exact D] approximates the amount of income that will be needed in retirement

D] approximates the amount of income that will be needed in retirement

Which of the following best describes the retirement income gap? A] the difference between the replacement ratio needed at retirement and the pension benefits expected B] the time lag between application for and receipt for and receipt of Social Security retirement benefits C] the difference retrieve the amount of the early retirement reduction in Social Security benefits and the full retirement benefits D] the difference between the amount of money your prospects need and what they expect to have for retirement

D] the difference between the amount of money your prospects need and what they expect to have for retirement

Which of the following statements concerning the personal retirement planning review is correct? A] the use of this mini fact finder is mandatory B] it can serve as an additional motivator to purchase financial products C] it is sufficient to gather all the information you will need about a prospect D] it is not to be used for qualifying a prospect for retirement planning

B] it can serve as an additional motivator to purchase financial products

When in the initial into you should the preliminary discovery agreement or trial close be use? A] after completing a more thorough fact finder and feeling finder B] after discussing the need for retirement planning and asking the prequalification questions C] when concluding the fact-finding interview D] when presenting the interview agenda to the prospect

B] after discussing the need for retirement planning and asking the prequalification questions

Within which section of the retirement planning fact finder is the dollar commitment for the amount the prospect can afford to budget for retirement planning obtained? A] personal data and retirement goals B] quantitative data C] retirement income sources D] calculations and interest tables

B] quantitative data

All of the following statements concerning fact-finding are correct EXCEPT A] you should limit yourself to asking only factual and quantitative questions B] recording the feelings and values revealed during the fact finding process is recommended C] involving the prospect gives him or her an ownership interest in your financial product recommendations D] your prospect must collaborate in this process

A] you should limit yourself to asking only factual and quantitative questions

Which of the following expenses is likely to increase for retirees? A] FICA taxes B] work-related expenses C] medical expenses D] home ownership expenses

C] medical expenses

The approach to information gathering that uses a fact finding form that first broadly covers all of the prospect's financial needs and then narrows the discussion to prioritized dominant needs is the A] deductive approach D] inductive approach C] single need approach D] dominant need approach

A] deductive approach

In estimating retirement savings, which of the following corresponds to the prospect's projected growth rate and compensation, thereby keeping the rate of savings at a constant percentage? A] step-up rate B] capitalization of equity C] accumulation factor D] standard of living

A] step-up rate

The difference between which of the following best describes the retirement income gap? A] age 65 and the prospect's life expectancy B] the deductibility threshold and the excess above the threshold for qualifying medical expenses C] the amount of money that is necessary to reach the retirement income goal and the amount anticipated from all available sources D] the estimated inflation rate and the long-term inflation rate

C] the amount of money that is necessary to reach the retirement income goal and the amount anticipated from all available sources

Which of the following statements regarding the goals of retirement planning is [are] correct? One. Retirement planning has become less important today because of changes of our socioeconomic institutions and because most people know anticipate working at least part-time during the retirement years Two. The primary responsibility for an advisor in planning for a prospects' retirement is to make them aware that they are making lifestyle choices about their retirement security every day A] one only B] two only C] both one and two D] neither one nor two

B] two only

Which of the following statements concerning the level of income that a retiree needs to sustain throughout his or her retired life is [are] correct? One. The retirement income gap method must be used for prospects at or near retirement because they can closely approximate their retirement income budget Two. The Expense method generally works well for younger prospects because they cannot accurately estimate their retirement expenses but they can determine the standard of living they want to enjoy during retirement A] one only B] two only C] both one and two D] neither one nor two

D neither one nor two

Which of the following statements concerning forecasting the rate of inflation is [are] correct? One. The inflation assumption rate chosen depends on the prospect's spending habits, current age, and risk tolerance Two. The lower the inflation rate projected, the greater percentage of salary the prospect needs to save for retirement A] one only B] two only C] both one and two D] neither one nor two

A] one only

All of the following are assumptions required in the retirement planning process EXCEPT A] retirement age assumption B] longevity assumption C] income requirement assumption D] insurability assumption

D] insurability assumption

To establish rapport in the initial interview, an advisor must create an environment that promotes prospect openness by doing all of the following EXCEPT A] alleviating the prospect's concerns B] responding to the prospect's social style C] talking most of the time to the prospect D] mutually agreeing to an agenda for the interview

C] talking most of the time to the prospect

All of the phone they are considered major sources of retirement income at set A] charity B] personal savings C] Social Security benefits D] pension distributions

A] charity

Which of the following is the most widely known measure of inflation? A] the wall street journal B] consumer price index C] US Department of Commerce D] survey of current business trends

B] consumer price index

Which of the following statements about planning for life events is true? A] it is impossible to plan for all life events B] planing allows you to control all life events C] an important part of the planning process is recognizing the need for contingency planning D] planning is impossible unless you ignore uncertain life events

C] an important part of the planning process is recognizing the need for contingency planning

Which of the following is a program designed to provide medical expense of assistance to the poor? A] Medigap B] Medicare C] Medicaid D] state-administered Medicare

C] Medicaid

Which of the following is an effective technique for dealing with information? A] seek long-term fixed income investments B] discontinue saving during periods of inflation C] withhold more income tax than is needed to get a year end refund D] reposition assets to well-diversified portfolios that are likely to grow more rapidly than the Rate of inflation

D] reposition assets to well-diversified portfolios that are likely to grow more rapidly than the Rate of inflation

Which of the following statements concerning benefits received from a qualified long-term care insurance policy is correct? A] they are included in income to the extent that they meet at 7.5% threshold for medical expense deductions B] they are excluded from income taxation up to the government's annually specified in the limit C] they are taxable unless long-term care expenses exceed an IRS limit D] they are taxable income

B] they are excluded from income taxation up to the government's annually specified in the limit

After paying the deductible, which of the following is the co-insurance amount required for most services covered under part B of Medicare? A] 10% B] 20% C] 30% percent D] $100

B] 20%

Although inflation affects everyone, it is most devastating to which of the following people? A] people with fixed incomes B] people saving for retirement C] dual-income couples without children D] college students using the federal loan program

A] people with fixed incomes

Medicare will cover how many days of hospitalization? A] up to 60 consecutive days for each benefit period B] up to 90 days for each benefit period C] unlimited consecutive days D] up to 90 days each year

B] up to 90 days for each benefit period

Which of the following sources pays the greatest percentage of long-term care facility cost in the United States today? A] Medicare B] Medicaid C] long-term care policies D] individual and family savings

B] Medicaid

All of the following statements concerning college funding are correct EXCEPT A] clients often delay funding college expenses because you have no idea what those expenses will be in the future B] College tuition costs are increasing faster than the general rate of inflation C] experts agree that parents should save for a child's education before saving for their own retirement D] an investment fund for educational needs is often a relatively long-term objective

C] experts agree that parents should save for a child's education before saving for their own retirement

Which of the following is considered a specialized financial planning goal? A] retirement planning B] college education funding C] risk management D] cash flow planning

B] college education funding

Before qualifying for benefits under a taxed qualified LTCI policy, an insured must be cognitively impaired or expected to require substantial assistance to perform two or more activities of daily living [ADLs] for a period of at least which of the following? A] 30 days B] 60 days C] 90 days D] 120 days

C] 90 days

Which of the following is the most effective means of reducing income taxes? A] tax evasion B] tax deduction C] tax deferral D] tax credit

D] tax credit

Which of the following is the most critical aspect of risk management? A] identifying exposure to loss of income or property B] evaluating the probability of occurrence C] calculating the maximum loss potential D] selecting the best tools for managing the risk

A] identifying exposure to loss of income or property

Which of the following statements concerning medical expense insurance coverage is [are] correct? One. Group and individual medical expense insurance primarily covers acute medical care for illness or injury Two. Medical expense policies frequently contain a specific exclusion for custodial care A] one only B] two only C] both one and two D] neither one nor two

C] both one and two

Which of the following statements concerning today's LTCI policies is [are] correct? One. The policies are guaranteed renewable, which means an individual's coverage cannot be canceled except for non-payment of premiums Two. A few states require an LTCI policy to offer some type of automatic inflation protection A] one only B] two only C] both one and two D] neither one nor two

A] one only

Which of the following statements concerning the effects of inflation is (are) correct? One. Inflation increases prices Two. Inflation increases purchasing power A] one only B] two only C] both one and two D] neither one nor two

A] one only

All of the following statements concerning Medicare payments for long-term care are correct EXCEPT A] Medicare hospital insurance helps pay for inpatient care in the Medicare certify skilled nursing facility under certain conditions B] Medicare pays some benefits for covered home health services furnished by a Medicare certified home health agency C] custodial care is available under Medicare even if the insured patient needs no other level of long-term care D] Hospice benefits are available under part A of the Medicare for terminally ill insured persons with a life expectancy of six months or less

C] custodial care is available under Medicare even if the insured patient needs no other level of long-term care

LTCI policies typically limit or exclude coverage for all of the following reasons EXCEPT A] pre-existing conditions B] alcohol or drug addiction C] Alzheimer's disease D] attempted suicide

C] Alzheimer's disease

All of the following are financial consequences that usually occur as a result of a working family member's death EXCEPT A] loss of the deceased's future earning power B] incurrence of costs and other obligations arising at death C] decrease expenses for the family D] loss of tax advantages

C] decrease expenses for the family

Assume taxpayer Kyle is in a 25% tax bracket and desires to invest $2000 in something on a pretax basis. If successful in doing this, what will his income tax savings be? A] $250 B] $500 C] $1500 D] $2,000

B] $500

Which of the following statements concerning after-tax investments is correct? A] they are flexible source of cash B] tax is paid when money is withdrawn from the investment C] they are tax deductible if there are earmarked for retirement D] they should never be used to save for retirement

A] they are flexible source of cash

Which of the following describes why diversification succeeds as a risk management tool? A] investors are not exposed to risk B] investors can effectively time market fluctuations C] it is a passive strategy that eliminates transaction cost D] it involves selecting investments with risk and return profiles that are dissimilar

D] it involves selecting investments with risk and return profiles that are dissimilar

The technique of averaging the ups and downs of the market trough periodic investments of the same size is known as A] asset allocation B] market segmentation C] Dollar cost averaging D] average dollar balancing

C] Dollar cost averaging

Most investors purchase mutual funds as a savings vehicle for which of the following financial objectives? A] creating a bequest B] short-term savings C] retirement needs D] estate building

C] retirement needs

Which of the following is another name for a mutual fund, defined as an investment company that stands ready to issue new shares whenever someone wants to make a purchase? A] An open-end company B] a closed-end company C] in no-load company D] a growth fund

A] An open-end company

Which of the following best describes the role of stockholders? A] corporate lenders B] owners of a corporation C] investors will have no investment risk D] investors with guaranteed dividend earnings

B] owners of a corporation

Which of the following best describes a municipal bond? A] share of ownership in a corporation B] promissory note given for loans to a cooperation C] debt instrument issued by the federal government D] debt instrument of states, cities, counties, or public utilities

D] debt instrument of states, cities, counties, or public utilities

Which of the following explains why , when it is annuitized, some of each annuity payment is distributed on a prorated income tax-free basis to the annuitant? A] LIFO taxation rules B] FIFO taxation rules C] Annuity exclusion ratio D] state regulations governing life insurance companies

C] Annuity exclusion ratio

All of the following are unsystematic risks that are unique to a single business or industry EXCEPT A] business risk B] financial risk C] default risk D] market risk

D] market risk

Asset allocation is a portfolio management tool that allows investors to do which of the following? A] much investments to a specified index B] time all purchases and sales to maximize market changes C] wait out market ups and downs, thus avoiding high transaction costs D] spread risk across different types of investments in a planned and predetermined way

D] spread risk across different types of investments in a planned and predetermined me

When an advisor assesses whether or not it's specific investment is appropriate for a particular prospect based on his or her financial objective(s), which of the following is he or she determining about the product? A] marketability B] suitability C] safety D] risk

B] suitability

Which of the following statements concerning investing is generally correct? A] risk and return are independent of each other B] liquidity is generally not important to investors C] the higher the risk, the greater the potential return D] risk is the only factor that investors should consider

C] the higher the risk, the greater the potential return

Which of the following statements concerning tax-deferred savings vehicles is correct? A] permanent life insurance, deferred annuities, and U.S. savings bonds are tax-deferred financial products B] taxes on accumulations are deferred until age 59 1/2 C] money may be withdrawn from tax-deffered savings vehicles without penalty anytime it is needed D] they are always purchased with pretax dollars

A] permanent life insurance, deferred annuities, and U.S. savings bonds are tax-deferred financial products

Which of the following statements concerning a prospectus is [are] correct? One. It provides official projections of the investment's future value Two. It gives potential investors information about an investment A] one only B] two only C] both one and two D] neither one nor two

B] two only

Which of the following statements concerning the payout from a variable deferred annuity is [are] correct? One. Funds annuitized from the general account produce a guaranteed income that will not change from period to period Two. Funds annuitized from the separate account produce an income that changes from period to period based on the performance of the subaccount in which the funds are placed A] one only B] two only C] both one and two D] neither one nor two

C] both one and two

Which of the following terms is another term for the contingent deferred sales charge? One. Back end load Two. 12B –1 charge A] one only B] two only C] both one and two D] neither one nor two

A] one only

All of the following statements concerning characteristics of variable deferred annuities are correct EXCEPT A] variable deferred annuities are not suitable for all prospects B] the separate account is integrated with the assets contained in the general account assets of the insurance company C] because of the separate accounts, variable deferred annuities are considered securities under Federal law D] the separate account is made up of several subaccounts that offer a variety of investment options to the contract owner

B] the separate account is integrated with the assets contained into the general account assets of the insurance company

All of the following common sources of funds that a corporation typically uses for working capital beyond its general revenue EXCEPT A] obtaining a loan from a commercial bank B] issuing bonds C] tendering a new issue of stock D] selling its assets

D] selling its assets

A prospectus must be provided when selling all of the following products EXCEPT A] variable annuity B] mutual fund C] universal life insurance policy D] variable universal life insurance policy

C] universal life insurance policy

Which the following statements describes the nature of contributions to qualified plans? A] there are never matched by employers B] there are made with pretax dollars C] they are available for withdrawal whenever needed D] they are never taxed

B] there are made with pretax dollars

Which of the following statements of all qualified plans are correct? A] deductions made by the employer are not deductible until the employee receives and pays tax on retirement benefits B] businesses may access funds for a business emergency C] employer contributions are not currently taxable to employees D] plan administration is simple, involving no reporting to the IRS

C] employer contributions are not currently taxable to employees

In a 401(k) plan, the investment responsibility of at least the salary deferral portion of contributions typically rest with A] ERISA B] the employer C] the employee D] a third-party administrator

C] the employee

Which of the following statements concerning nonqualified plans is [are] correct? one. Nonqualified plans meet the requirements of ERISA Two. All employees must be covered under a nonqualified plan A] one only B] two only C] both one and two D] neither one nor two

D] neither one nor two

Which of the following statements regarding a Roth IRA is (are) correct? One. A taxpayer may not contribute to a Roth IRA if his or her modified adjusted gross income exceeds a specified maximum amount Two. A qualified distribution is received by the taxpayer tax-free A] one only D] two only C] both one and two D] neither one nor two

C] both one and two

Assume Karl and Myrna are too unrelated employees of a small business that does not offer a qualified plan. Karl has earned income of $40,000, and Myrna has earned income of $3,000. Which of the following statements regarding Karla and Myrna's IRA contributions is [are] correct? One. Myrna's contribution is limited to the amount of her earned income Two. Karl may contribute up to the maximum contribution limit to his IRA A] one only B] two only C] both one and two D] neither one nor two

C] both one and two

The 10% IRS penalty tax on money withdrawn from a qualified plan prior to age 59 1/2 is waived for which of the following situations? One. The money is withdrawn following the death of a spouse Two. The money is withdrawn to meet unforeseen financial needs A] one only B] two only C] both one and two D] neither one nor two

D] neither one nor two

All of the following are tax advantaged retirement plans that are restricted to employers with less than a specified number of employees [varying by plan] EXCEPT A] SEP IRA B] DB [K] plan C] 403 (b) plan [tax-deferred annuity] D] SIMPLE IRA

C] 403 (b) plan [tax-deferred annuity]

All of the following statements concerning tax-deferred annuities [TDAs] are correct EXCEPT A] employees must pay the income tax on any amounts contributed to a TDA B] a 501[C] 3 organization is permitted to offer them to their employees C] there are available to employees only if an eligible employer agrees to offer the plan D] TDA contributions may be invested in fixed or veriable annuities and mutual funds

A] employees must pay the income tax on any amounts contributed to a TDA

All of the following are examples of the nonqualified deferred-compensation plans EXCEPT A] SERP B] Stock bonus plan C] salary reduction plan D] death benefit only plan

Which of the following plans is always subject to a maximum salary deferral amount? A] SIMPLE B] SEP C] cash balance pension plan D] defined benefit pension plan

A] SIMPLE

Which of the following plans can based an employee's retirement benefit on final average earnings, years of service, or a combination of the two? A] profit sharing plan B] 401 [k] plan C] defined benefit pension plan D] money purchase plan

C] defined benefit pension plan

A client under age 50 can contribute $5000 [in 2010] on behalf of his or her nonworking spouse plus $5000 to his or her own IRA as long as which of the following circumstances exists? A] the nonworking spouse has $5000 of taxable unearned income B] the contributing spouse has $10,000 of taxable earned income C] the contributing spouse is the owner owner of the spousal IRA D] the nonworking spouse is an active participant in a pension plan

B] the contributing spouse has $10,000 of taxable earned income

Which of the following statements concerning contributions to a traditional IRAs is [are] correct? One. Individuals can make regular [non-catch up] contributions up to 100% of earned income or an inflation-adjusted limit, whichever is less. Two. Contributions can be made beyond age 70 1/2 as long as the IRA owner is still receivingearned income A] one only B] two only C] both one and two D] neither one nor two

A] one only

Which of the following qualified plans be categorized as a defined contribution pension plan? One. Cash balance plan Two. Stock bonus plan A] one only B] two only C] both one and two D] neither one nor two

D] neither one nor two

Which of the following statements concerning the legal requirements of a quantified plan is [are] correct? One. The plan must you written and communicated to employees Two. The plan must be an established for the exclusive benefit of the employees A] one only B] two only C] both one and two D] neither one nor two

C] both one and two

Which of the following statements concerning pension plans is [are] correct? One. They do not require an employer to maintain any specified level of annual contributions Two. Their sole purpose is to provide retirement income A] one only B] two only C] both one and two D] neither one nor two

B] two only

01.Which of the following statements concerning interviewing the prospect during an initial meeting is correct? _A) The most critical aspect of the initial interview is asking for the sale. _ B) One part of the initial interview involves explaining, in general terms, the need for adequate retirement income. _ C) Using an agenda during the initial interview constrains the process too much and harms rapport. _ D) Dictating the agenda enables the advisor to prevent the prospect from raising objections.

B) One part of the initial interview involves explaining, in general terms, the need for adequate retirement income.

02.Which of the following statements concerning the importance of Social Security benefits in retirement planning is correct? _ A) Social Security provides retirement benefits for retired covered workers, their spouses, and dependent children, if applicable. _ B) Social Security benefits are intended to be a substitute for private savings, pension plans, and insurance protection. _ C) Full retirement age is currently age 67 and decreasing to age 65 by the year 2027. _ D) All workers are eligible for Social Security retirement benefits regardless of insured status.

A) Social Security provides retirement benefits for retired covered workers, their spouses, and dependent children, if applicable.

03.Which of the following statements concerning qualifying the prospect is correct? _ A) The qualification process is designed solely to assess whether or not a prospect is healthy enough to underwrite. _ B) Qualifying the prospect should occur once the prospect is ready to implement the plan. _ C) The Personal Retirement Planning Review is one method that can be used to qualify prospects. _ D) Qualifying prospects saves valuable time because it eliminates the need to use a fact finder.

C) The Personal Retirement Planning Review is one method that can be used to qualify prospects.

04.Which of the following statements concerning a mutual fund is correct? _ A) It is an investment company that pools investors' money _ B) It is a vehicle consumers can use to purchase a large number of shares of an individual stock directly. _ C) One of the disadvantages of a mutual fund is its inherent lack of diversification. _ D) Mutual funds can only invest in stocks.

A) It is an investment company that pools investors' money

05.Which of the following statements concerning the advantages of saving money in a qualified retirement plan is correct? _ A) Distributions are received on a tax-free basis. _ B) Contributions made to a qualified plan are made with pretax dollars. _ C) Earnings are taxed as capital gains rather than as ordinary income. _ D) Required minimum distribution rules do not apply to qualified retirement plans.

B) Contributions made to a qualified plan are made with pretax dollars.

06.Which of the following statements concerning the suitability of an investment that an advisor recommends is correct? _ A) Suitability isssues arise only when the advisor recommends individual stocks or stock mutual funds. _ B) An advisor can protect him- or herself by adhering to the universal, absolute rules related to determining product suitability. _ C) Suitability can be defined as the degree to which your prospect or client is willing to accept risk. _ D) The investment should be appropriate based on the client's current financial situation, investment objectives, time horizon, age, and risk tolerance.

D) The investment should be appropriate based on the client's current financial situation, investment objectives, time horizon, age, and risk tolerance.

07.Which of the following statements concerning nonqualified retirement plans is correct? _ A) A simplified employee pension (SEP) is a type of nonqualified retirement plan. _ B) Nonqualified retirement plans are not eligible for the same favorable tax treatment as qualified plans. _ C) ERISA's burdensome rules apply to nonqualified retirement plans. _ D) All nonqualified plans are required to be funded.

B) Nonqualified retirement plans are not eligible for the same favorable tax treatment as qualified plans.

08.Which of the following statements concerning IRA rollovers is correct? _ A) There are strict dollar limits on the amount of money that can be rolled over. _ B) A direct transfer of money from an existing IRA into a new IRA requires withholding 20 percent of the total amount of the funds. _ C) Funds may be transferred from an employer-sponsored qualified plan directly into a Roth IRA. _ D) Monies from a rollover from a qualified plan are not subject to required minimum distribution rules.

C) Funds may be transferred from an employer-sponsored qualified plan directly into a Roth IRA.

09.Which of the following statements regarding the income taxation of Social Security retirement benefits is correct? _ A) Social Security benefits are not subject to income tax. _ B) The amount of Social Security benefits subject to income tax is based on Medicare benefits received in the previous tax year. _ C) Whether or not an individual is receiving income from other sources has no effect on the amount of Social Security retirement benefits subject to income taxation. _ D) Taxation of up to 85 percent of an individual's or married couple's Social Security retirement benefits is possible.

D) Taxation of up to 85 percent of an individual's or married couple's Social Security retirement benefits is possible.

10.Which of the following statements concerning an irrevocable life insurance beneficiary is correct? _ A) He or she must provide consent in order for a policyowner to take a policy loan. _ B) He or she has no policy rights, only an expectation of benefits. _ C) An irrevocable beneficiary's ownership rights become part of his or her estate if he or she predeceases the insured. _ D) He or she is liable for any unpaid premiums and loan interest.

A) He or she must provide consent in order for a policyowner to take a policy loan.

11.Which of the following statements regarding dollar cost averaging is correct? _ A) It requires that the number of shares or units purchased be consistent. _ B) It is most effective in volatile markets. _ C) It guarantees protection against market losses. _ D) It is a strategy limited to those who can afford a large monthly investment.

B) It is most effective in volatile markets.

12.Which of the following statements regarding estate planning is correct? _ A) The marital deduction is limited to estates valued at $600,000 or less. _ B) The applicable credit amount is a specified annual limit per donee. _ C) An applicable credit amount applies to both federal estate and gift taxes. _ D) The decedent's estate is entitled to a tax credit for the costs of the decedent's funeral and for the expenses associated with his or her last illness.

C) An applicable credit amount applies to both federal estate and gift taxes.

13.Which of the following statements concerning inflation is correct? _ A) Inflation increases a prospect's purchasing power over time. _ B) The wholesale price index (WPI) measures prices paid for goods by households at the retail level. _ C) Governments fight inflation by increasing the money supply. _ D) Inflation is created by too much demand chasing after too few goods and services

D) Inflation is created by too much demand chasing after too few goods and services

14.Which of the five phases of retirement planning is often characterized by the imminent event of retirement. _ A) decision phase _ B) retirement transition and lifestyle phase _ C) savings phase _ D) increased preparation and visualization phase

A) decision phase

15.The legal process of validating the will is known as _ A) intestacy _ B) probate _ C) transfer _ D) distribution

B) probate

16.Which of the following describes the approach to fact finding that starts with a dominant or single need and widens into a full-blown comprehensive financial needs analysis? _ A) reactive approach _ B) dominant or single need approach _ C) deductive approach _ D) inductive approach

D) inductive approach

17.Mark has an investment that produces a 6 percent rate of return. Approximately how long will it take for his initial investment of $10,000 to double? _ A) 6 years _ B) 12 years _ C) 18 years _ D) 24 years

B) 12 years

18. Which of the following types of care will usually be covered by a long-term care insurance policy? I. Acute care II. Medical care covered by Medicare _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

D) Neither I nor II

19. Which of the following actions would likely occur in the "Develop and Present the Plan" step of the selling/planning process? I. Provide a current asset allocation model along with strategy recommendations. II. Develop a specific plan to meet the prospect's goals and expectations, accounting for the prospect's values, attitudes, and financial risk tolerance. _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

C) Both I and II

20. Which of the following is considered to be an advantage of a household budget? I. It creates awareness of total income and anticipated expenditures. II. It facilitates impulse buying decisions so one can buy what one wants now. _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

A) I only

21. Which of the following statements concerning the regulation of insurance and financial products is (are) correct? I. Insurance products are regulated solely by the federal government. II. To sell variable annuities, mutual funds, and other securities products, an advisor must be registered with FINRA. _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

B) II only

22. Which of the following statements concerning a Roth IRA is (are) correct? I. A Roth IRA is not subject to required minimum distributions at age 70 1/2. II. Contributions to a Roth IRA may always be withdrawn tax free. _ A) I only _ B) II only _ C) Both I and II _D) Neither I nor II

C) Both I and II

23.Which of the following statements regarding goal setting in retirement planning is (are) correct? I. It is not necessary for creating a successful retirement plan. II. Once established, a person's financial goals generally remain static. _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

D) Neither I nor II

24.Which of the following is a major component of the retirement planning fact finder form? I. Longevity tables II. Retirement income sources _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

B) II only

25.In which of the following situations would the IRS 10 percent penalty tax for a withdrawal made from an IRA before age 59 1/2 be waived? I. The funds are withdrawn due to unforeseen expenses such as a car repair. II. Contributions have been made into the IRA for more than 10 years. _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

D) Neither I nor II

26.The value of an investment at the end of a specified period will be greater if which of the following occurs I. The number of compounding period increases. II. The interest rate increases. _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

C) Both I and II

27.Which of the following is a requirement that must be met in order to be fully insured for Social Security eligibility purposes? I. The employee must accrue a total of 40 quarters, or 10 years, in covered work. II. The employee must be currently employed. _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

A) I only

28.Which of the following expenses tends to increase after a person retires? I. Work-related expenses II. Expenses related to dependent children _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

D) Neither I nor II

29. Hallie is in the 25 percent federal income tax bracket. Which of the following statements concerning Hallie's tax situation is correct? I. A $1,000 tax deduction generally will result in a $250 tax savings. II. A $1,000 tax credit generally will result in a $1,000 tax savings. _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

C) Both I and II

30.An unauthorized entity is an insurance company with which of the following characteristics? I. It has not gained approval to place insurance business from a department of insurance in the jurisdiction where it or a producer wants to sell insurance. II. In most cases unauthorized entities characterize themselves as one of several types that are exempt from state regulation. _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

C) Both I and II

31.Which of the following statements regarding diversification as a portfolio management technique is (are) correct? I. Diversification is designed to eliminate the impact of one security, investment, or asset category on overall portfolio performance. II. Diversification can be achieved by investing in a variety of assets that have identical risk and return profiles. _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

D) Neither I nor II

32.Which of the following statements regarding college education funding is (are) correct? I. Coverdell education savings accounts and Sec. 529 plans are tax advantaged ways to save for a child's college education. II. The accrued earnings from Series EE U.S. savings bonds are taxable each year. _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

A) I only

33.Which of the following is a commonly recognized selling/planning opportunity usually available to advisors working with early retirees? I. Purchasing needed disability income insurance coverage II. Transferring lump-sum qualified plan distributions into a traditional IRA account. _ A) I only _ B) II only _ C) Both I and II _ D) Neither I nor II

B) II only

34.All of the following are characteristics of a qualified prospect EXCEPT _ A) needs and values your products and services _ B) can be approached on a favorable basis _ C) can afford to pay for your products and services _ D) knows you personally

D) knows you personally

35.All of the following statements concerning income in respect of a decedent (IRD) are correct EXCEPT: _ A) It is income a decedent earned prior to death that is paid to another person after the decedent's death. _ B) An example of IRD is the present value of survivor benefits payable to a third-party beneficiary under an employer-sponsored defined-benefit pension plan. _ C) It is excludible from the decedent's gross estate. _ D) It is includible as income to the beneficiary for federal income tax purposes.

C) It is excludible from the decedent's gross estate

36.All of the following types of expenses are covered under Medicare Hospital Insurance (Part A) EXCEPT _ A) custodial care _ B) operating room costs _ C) room and board in semiprivate accommodations _ D) hospice care

A) custodial care

37.All of the following statements concerning the role of life insurance in retirement planning are correct EXCEPT: _ A) Life insurance policies offer some financial flexibility through policy loans or partial surrenders (when applicable). _ B) The investment aspects of life insurance should be primary when it is purchased in conjunction with retirement planning. _ C) Life insurance in place during retirement can free retirees to consume assets that they might otherwise have earmarked as a financial legacy for their heirs. _ D) Life insurance can provide a source of cash that may be used to generate retirement income.

B) The investment aspects of life insurance should be primary when it is purchased in conjunction with retirement planning

38.All of the following statements concerning 403(b) plans (tax-deferred annuities) are correct EXCEPT: _ A) As with qualified plans, nondiscrimination rules generally apply to 403(b) plans. _ B) They are available only to certain tax-exempt organizations and public school systems. _ C) Employee contributions are generally not subject to FICA and FUTA taxes. _ D) An employee is 100 percent vested in the contributions made through salary deferral.

C) Employee contributions are generally not subject to FICA and FUTA taxes

39.All of the following statements regarding defined-contribution plans are correct EXCEPT: _ A) They place the burden of risk on the employee. _ B) They typically offer plan participants several investment options. _ C) They are also categorized as either pension plans or profit-sharing plans. _ D) Benefits are determined as a percentage of final pay multiplied by the number of years with the company.

D) Benefits are determined as a percentage of final pay multiplied by the number of years with the company

40.All of the following statements concerning qualified plans are correct EXCEPT: _ A) The money-purchase plan is the most basic form of a defined-contribution plan. _ B) Defined-contribution plans require the use of an actuary. _ C) Internal Revenue Code 415 places a limit on the annual benefit allowed for a defined-benefit plan. _ D) Most employers with defined-benefit plans must pay the Pension Benefit Guaranty Corporation a modest premium based on the number of participants in the plan.

B) Defined-contribution plans require the use of an actuary

41.All of the following are common roadblocks to retirement planning EXCEPT _ A) getting married _ B) the lack of financial literacy _ C) the lack of a retirement plan at one's place of employment _ D) inadequate insurance coverage

A) getting married

42.Members of generation X have all of the following characteristcs EXCEPT _ A) practical _ B) self-oriented _ C) image conscious _ D) risk-takers

C) image conscious

43.All of the following are critical issues concerning retirement planning that an advisor must consider EXCEPT _ A) increasing life expectancy _ B) growing number of defined-benefit pension plans _ C) the disparity in the public's financial preparedness _ D) the public's need for education and advisors

B) growing number of defined-benefit pension plans

44.According to HIPAA, all of the following are defined as activities of daily living (ADLs) EXCEPT _ A) eating _ B) bathing _ C) transferring from bed to chair _ D) shopping

D) shopping

45.All of the following are SEC tests for determining whether or not an individual or entity must become a registered investment advisor (RIA) EXCEPT _ A) The individual or entity must give advice or analysis concerning securities. _ B) The individual or entity must sell individual stocks and bonds. _ C) The individual or entity must be engaged in the business of advising others regarding secruities. _ D) The individual or entity must be in receipt of compensation.

B) The individual or entity must sell individual stocks and bonds

46.Elena is contemplating whether or not to receive Social Security benefits at age 62 even though she plans to continue working part time. All of the following statements concerning her Social Security benefits are correct EXCEPT: _ A) Elena will receive a smaller Social Security benefit at age 62 than if she waits until full retirement age to receive benefits. _ B) Elena's benefit will initially be reduced further $1 for each $2 she earns above an IRS limit (for example, $14,160 in 2010). _ C) The breakeven age for Elena is the age to which she must survive to make delaying benefits the better option. _ D) All of Elena's Social Security benefits will be taxed if she continues working.

D) All of Elena's Social Security benefits will be taxed if she continues working

47.All of the following are people who are appear to be dealing with the postretirement mentality EXCEPT: _ A) Bob places 80 percent of his retirement account in a high tech stock mutual fund. _ B) Lammy is not satisfied if he has to dip into his rather large nest egg to cover retirement expenses. _ C) Sammy feels he is not able to enjoy retirement for fear of exhausting his nest egg before he dies. _ D) Tammy works as a greeter at a large discount department store so she can continue saving her sizeable, monthly pension check.

A) Bob places 80 percent of his retirement account in a high tech stock mutual fund

48.All of the following statements concerning required minimum distributions (RMDs) are correct EXCEPT: _ A) There is a 50 percent penalty tax imposed if RMDs are not made from a qualified plan (or traditional IRA). _ B) The amount of an RMD for most IRA owners is based on a uniform table that reflects the participant's life expectancy. _ C) RMDs must be taken in a lump sum. _ D) The RMD rules are applicable when a person turns age 70 1/2.

C) RMDs must be taken in a lump sum

49.All of the following are defined-contribution plans EXCEPT _ A) cash-balance pension plan _ B) stock bonus plan _ C) target-benefit pension plan _ D) 401(k) plan

A) cash-balance pension plan

50.All of the following statements concerning annuities are correct EXCEPT: _ A) Earnings generally may be withdrawn from an annuity tax-free if the annuitant is over age 70 1/2. _ B) The accumulation phase is the period of time from the purchase of an annuity until benefit payments are paid out. _ C) A deferred annuity may be surrendered in full at any time prior to the distribution phase, although taxes and surrender charges may apply. _ D) The distribution phase begins with the the payment of the first benefit amount to the annuity owner or other designated annuitant.

A) Earnings generally may be withdrawn from an annuity tax-free if the annuitant is over age 70 1/2

Foundations of Retirement Planning part one Flashcards

This flashcard deck was created using Flashcardlet's card creator