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HS354 Flashcards

1
Q

what year is full retirement age 66

A

1943-1954

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2
Q

what year is full retirement age 67

A

1960 or later

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3
Q

what years is full retirement age you have to add 2 month for each year

A

1955-1959

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4
Q

when can you file social security

A

must be age 61 and 9 months, can claim 3 months early

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5
Q

explain retroactive filing

A

can request that benefit begins 6 months prior to filing date. must be FRA and only allowed on unreduced benefit - thus FRA

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6
Q

how is date of birth determined

A

birthday is deemed 1 day before actual birthday

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7
Q

what is the early claiming reduction factor

A

PIA benefit is reduced by 5/9 for each month of retirement before FRA for first 36 months, then 5/12 for each month after FRA

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8
Q

Delayed claiming explain

A

claiming after FRA increases benefits by 2/3 of 1 percent for each month of deferral to age 70 (8% a year)

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9
Q

what is max ss benefit at age 62 ( year 2016)

A

$1,997 a month or $23,967 annually

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10
Q

what is max ss benefit at age 66 ( year 2016)

A

$2,639 monthly or $31,632 annualy

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11
Q

what is max ss benefit at age 70 year 2016

A

$3,576 monthly or $42,912 annually

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12
Q

what is average ss benefit in 2016

A

$1,341 per month

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13
Q

Explain earnings test

A

Only applies prior to FRA, reduces benefit $1 for every $2 over threshold of $15,720, higher threshold is $1 to every $3 of $41,880 until you reach FRA

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14
Q

Are Earning test dollars lost

A

earnings test is a forced suspension of benefits, benefits recompute at FRA

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15
Q

define spousal benefit

A

Once a worker has claimed FRA, a spouse is entitled to 50% of PIA at FRA

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16
Q

when can spousal benefits begin

A

benefits can begin as early as age 62, but will be subject to early reduction based on spouses age

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17
Q

what is early reduction formula for spouses reduction benefit

A

25/36 for each month upto 36 months, then

5/12 for additional months

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18
Q

what is spousal reduction for , PIA of $2000 for worker age 70, spouse is age 62, spouses FRA is 66

A 
step 1. spousal reduction is 50% x $2,000 = $1,000
step 2 apply reduction formula
25/36 x 36 months = 25%
5/12 x 12 months =5%
25% + 5% = 30%
$1,000 benefit x 70% = $700 
thus a $300 reduction
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19
Q

what is divorced spouses ss benefit

A

married for 10 years, spouse eligible for retirement or widower benefit. divorced spouse can get benefits at age 62 even if former spouse has not claimed benefits as long as worker is eligible for retirement benefits

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20
Q

requirement for divorced spouse benefit

A

married for 10 years, age 62, divorced for 2 years, unmarried,
can still be eligible for survivor benefit if remarried after age 60

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21
Q

windfall elimination

A

90% drops to 40% if less than 20 years of covered service. No reduction if 30 years of service and modified reduction if 20- 30 years

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22
Q

what is government offset

A

2/3 of pension reduces spousal benefit and widows benefit dollar for dollar
survivor benefit is higher of two

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23
Q

what is spousal survivor benefit

A

full survivors benefit can claim as early as age 60. subject to earnings test
No increase past FRA
can switch between survivor benefit and workers benefit

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24
Q

define provisional income

A

AGI
+ 1/2 social security
+tax free income
= provisional income

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25
who is effected by tax torpedo
people who pay some tax on ss 68% of people pay not tax on ss 16% of people are fully phased in (thus they pay tax on 85% of their social security benefit) 16% of people pay some tax on their ss benefit 401k withdrawls increase income thus delay withdrawls and spend more tax effecient money to lower your provisional income
26
what method is the break even analysis
Net present Value approach. compare npv of dollars recieved is start ss at age 62 vs npv of dollars recieved if started later. break even age is age 80 or lower
27
social security assumptions are
life expectancy is age 84 3% risk free rate of return break even age is 80
28
widow benefit options
can choose between workers benefit and survivor benefti
29
what percent of households have mortgages between ages 60-64
39% have primary mortgages
30
what percent of percent of people in mid 60's find it hard to work because of health limitaions
25%
31
constructive retirement means
you have bad boss or bad job conditions
32
what is avgerage retirement age for men
64
33
what is avg retirement age for woman
62
34
what percent of people are prepared for retirement at age 62
about 30%
35
what percent of people are prepared for retirement at age 66
55%
36
what percent of people are prepared to retire at age 70
86%
37
what is cohort effect
today retirees have greater longevity, higher levels of education and a greater occupation profile, this provieds a basis for working longer
38
gifted annuity taxation
transaction is treated as if the contract is surrendered and then the cash is gifted. taxable event to the donor
39
to be part of civil service retirment system CSRS must be hired before
1984
40
are benefits different for different branches of the military
all branches have the same benefits
41
what is military pension if hired prior to 2018
you get pension with 20 years or more of service and no match to TSP
42
What is military pension if hired after 2018
reduced pension and TSP contribution, however if you have 12 years or less on 1/1/2018 can elect a blended
43
does military get medical benefits
tricare medical is available at at 65 there is no cost for your medical
44
F what is FERS retirement system benfit
1% x years of service if 20 or more years of service multiply by 1.1% per year average highest 36 months of salary
45
what is FERS mandatory employee contribution rate
.8% , 3.1% hired in 2013
46
What is FERS retirement age
age 62 ( could be earlier with a reduction)
47
What year of hire are CSRS employees
1984, CSRS are not in social security, better program than FERS
48
What is employee contribution rate for CSRS
7% of pay goes toward pension, not eligible for social security
49
how much more doe CSRS ee get than FERS ee with 41 years of service
almost 2 times
50
what is CSRS special voluntary ee contribution
can make a voluntary contribuion of 10% of lifetime compensation and convert that amount to a Roth
51
describe CSRS and FERS health care benefit
provides health and dental and vision benefits, coverage available if you retire before age 65, at age 65 you enroll into medicare and it becomes a cost effective supplement to medicare
52
what is maximum match to Federat TSP plan
5%
53
optimal household portfolio
optimal capital allocation b/w risky and risk free assets the portion of assets allocated to risk free assets is based on risk tolerance of client
54
retirement income planning : define return and risk
``` return = the amount withdrawn from the account risk = will the portfolio be exhausted before end of life ```
55
monte carlo with multiple asset classes: how asset classes move in relation to each other is measured by
either covariance or correlation coeffcient
56
new research for modified withdrawals how do fees impact withdrawal rate
1 % fee reduces withdrawal rate by about 1/3 of percent ie 4% withdrawal rate and 1% fee answer: reduce withdrawal rate by 1/3 1% x 1/3 = .33 4% - .33 = 3.66% withdrawal rate
57
Define windfall elimination
windfall elimination is a provision that can result in a lowering of benefits for a worker with employment in and outside of the social security system
58
how many social security and medicare trust funds are there
two social security - old age and survivors insurance and disability and two medicar - part A trust and Part B trust
59
who is subject to windfall elimination
those with a pension from a noncovered service and employment from a covered service for at least 10 years
60
why does windfall elimination exist
because people with working history will appear to b be low income individuals because AIME is calculating avg 35 years of service ( will have zero's in their calcualtions
61
applying windfall eliminaton
the first part of the PIA calculation that normally replaces 90 percent of the lowest AIME is adjusted downward depending on the # of years one paid into social security
62
Applying Windfall elimination WEP
if 20 years or fewer , reduction from 90% to 40%
63
when does WEP windfall elimination not apply to a covered worker
when the covered worker has 30 or more years of service, there is no reduction on the 90%
64
when can you voluntarily suspend benefits
you can only voluntarily suspend benefits from FRA and older. between 62 and FRA you cannot voluntary suspend benefits . between 62 and 66 you can withdraw and application and pay back benefits
65
what is social security earning s test
social security withholds benefits if a beneficary has not attained FRA and earnings exceed what is call the earnings tesxt exempt amount ( threshold) there are two exempt amounts 1. withhold $1 for ever $2 in excess of xxxx prior to reaching FRA 2. withhold $1 for every $3 in excess of xxxx prior to reaching FRA
66
Earnings test is applied to what types of benefits
worker benefits survivor benefits dependent retirement benefits
67
spousal benefit rule
deferring benefits beyond FRA does not increase benefits. Only worker benefits receive deferral credits. spousal and survivor benefits do not increase past FRA
68
is Spousal benefit subject to earnings test
benefits claimed prior to FRA are subject to earnings test
69
when can divorced benefits be claimed
divorced spousal benefits can begin age 62, even if former spouse has not claimed benefits as long as worker is eligible for benefits ( meaning ex spouse is at least age 62)
70
what is government offset provision
those who receive a pension from federal, state or local gov't based on work not subject to social security will have a reduction in spousal and widow(er) survivor benefits
71
how much is the government offset reduction
social security is reduced by two thirds of govt pension | ie pension is $600 a month reduction would be $400 a month
72
what are survivor benefits
payments made primarily to surviving spouse ( and eligible dependents
73
how much is the survivor benefit
100% of deceased workers benefit, if claiming or deferring.Full Benefits are only available at FRA but can claim early age 60 subject to redcutions
74
are survivor benefits eligible for deferral credits
no, benefits do not increase past FRA so no reason not to claim at FRA( can still claim early subject to reductions
75
social security earning test is
social security withholds beenfits if a beneficary has not yet attained FRA and income exceeds the earnigs test threshold
76
what happens to monies subject to earnings test
at FRA they are added back into a calculation and your benefits could go up
77
WEP windfall is
a provision that can result in lowering benefits for a worker with employment both in and outside of the social security system

hs 354 (2 decks)

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