Deck 14: The Economics of Aging

Question 1

The privatization of Social Security would mandate that individuals be more in charge of their own retirement and the government less responsible. One country with a privatization program in existence is:

A) Argentina.
B) Chile.
C) Norway.
D) Sweden.

Answer 1

B

Question 2

The elderly today do not have a diverse source of income compared to the elderly of the 1960s.

Answer 2

False

Question 3

Which of the following is a difference between the elderly before the 1960s and the elderly of today?

A) Mortality rates for the elderly have increased rapidly.
B) The elderly now have the highest poverty rates among all age groups.
C) Social Security benefits for the elderly have reduced.
D) The median income of people who are 65 and above has risen steadily.

Answer 3

D

Question 4

Saving rates are lower among the elderly than all other age groups because they spend their money on:

A) health care and housing.
B) their children.
C) vacations.
D) jewelry.

Question 5

The _____ was passed in 1974 to curb problems associated with defined pension plans.

A) Employee Retirement Fund
B) Employee Retirement Security Act
C) Employee Retirement Income Security Act
D) Employee Security Act

Question 6

Between 2000 and 2010, attitudes toward Social Security have shifted. Which statement best describes this shift?

A) Elderly people now feel that too much is being spent on Social Security.
B) Young people now feel that too little is being spent on Social Security.
C) The majority of people now feel that too much is being spent on Social Security.
D) The majority of people now feel that the government is spending too little or just about the right amount on Social Security.

Question 7

Reducing benefits is an option to preserve Social Security. Which age group is likely to be adversely affected by reducing benefits?

A) low-income elderly
B) middle-income elderly
C) higher-income elderly
D) corporate elderly

Question 8

In the context of the expected shortage of funding for Social Security benefits, one of the most popular solutions to restore the trust fund is:

A) to reduce the benefits.
B) means-testing.
C) to reduce the cost-of-living increases.
D) to gradually increase the payroll tax.

Question 9

Identify an accurate statement about means-testing.

A) It encourages people to increase their savings.
B) It is considered the most popular choice for funding Social Security benefits among the Liberals.
C) It would eliminate benefits entirely for retirees with high incomes.
D) It appears to encourage work in later life.

Question 10

Personal savings are a third source of income in retirement. Problems with saving for retirement include all of the following except:

A) the uncertainty related to life expectancy.
B) the uncertainty in the labor market.
C) the little encouragement or advice to save.
D) the chronic illnesses that can deplete resources.

Question 11

Which of the following is NOT a characteristic of defined benefit plans?

A) They typically pay lump benefits.
B) The amount of benefit is based on years of service and prior earnings.
C) They exclude yearly rises.
D) Funds may not be invested wisely; thus, there are not enough to cover all those eligible for them.

Question 12

Defined contribution plans represent a savings plan with some tax advantages. Which of the following is NOT a problem with defined contribution plans?

A) The plan is involuntary.
B) The plan is voluntary.
C) Workers may withdraw funds before retirement.
D) Workers sometimes are encouraged or required to place all their contributions into company stock.

Question 13

The primary policy tools of government are the power to tax and the power to spend.

Question 14

The cohort that reached adulthood in the 1950s had:

A) low birth rates.
B) high divorce rates.
C) low fertility rates.
D) high marriage rates.

Question 15

One major obstacle of means-testing is:

A) it encourages risk-taking in the stock market.
B) it discourages savings.
C) it stops one from planning for retirement.
D) it encourages savings.

Question 16

One of the recommendations to preserve Social Security is to raise the normal retirement age. A consequence of raising it is that:

A) fewer people will receive its benefits than before.
B) it could worsen racial and ethnic inequality among older Americans.
C) more elderly people will fall below the poverty level than before.
D) companies will suffer due to the increasing average age of their employees.

Question 17

By the 2030s, there will most likely be a deficit in funding the Social Security benefits because:

A) fewer baby boomers than today will be working during that time.
B) the average life expectancy will be the lowest by then.
C) Social Security will be completely privatized by then.
D) fertility rates will be on the rise during that time.

Question 18

One country with a means-tested age pension is _____.

A) Australia
B) Finland
C) Germany
D) Italy

Question 19

The baby boom generation has fewer opportunities than their parents. One reason for this lack of opportunity is:

A) the size of the cohort.
B) the number of children born to members in this cohort.
C) competition among members of this cohort.
D) limited resources.

Question 20

_____ has proved to be the most successful program of the American welfare.

A) Social Security
B) Medicare
C) Medicaid
D) Disability insurance

Question 21

Younger individuals are less likely than older people to choose the Roth Individual Retirement Account in saving for retirement.

Question 22

Public support for Social Security is low.

Question 23

Wealth continues to rise until one dies.

Question 24

The idea of a means test appeals to many Americans. One reason for its appeal is the continued growth in living standards for most working Americans.

Question 25

An increase in the payroll tax, to increase the Social Security fund, will fall heavily on high-income earners.

Question 26

The majority of citizens believe that spending on Social Security is too high.

Question 27

Median net worth is the total value of all assets.

Question 28

A problem with defined contribution plans is that they are vulnerable to big fluctuations.

Question 29

Discuss the pros and cons of raising the retirement age to pressure the Social Security trust fund.

Question 30

The greatest risk of a means test is that it would create two unequal classes of retirees.

Question 31

A vesting rule is the length of time workers must be employed by a firm before they are eligible for pension benefits.

Question 32

In the last 40 years, there has been a vast improvement in the economic position of the aged.

Question 33

The United States is one of several countries thinking about raising the retirement age.

Question 34

Because so much of the net worth of older people is housing wealth, some retirees have started using their home equity to pay for their retirement.

Question 35

One of the changes contributing to the decrease in the Social Security trust fund is the decline in birth rate.

Question 36

In a traditional Individual Retirement Account, money is deposited into the fund before taxes are paid and then withdrawals at retirement are taxed as income.

Question 37

What are the major differences between a defined benefit and a defined contribution plan?

Question 38

List some things a 35-year-old could begin to do to save for her/his retirement.