Deck 6: Retirement Savings and Income Planning

Question 1

Your 18 year old client says he's not working pass the age of 30. A life of retirement is for him. You inform that the costs of goods and services that retirees use most often increase faster than the general rate of inflation measured by the ______?

A)Internal Revenue Service
B)Standard and Poor
C)Consumer Price Index
D)Social Security Agency

Answer 1

Consumer Price Index

Question 2

Martha and Matt are retiring in 30 years and they want to make sure they have enough funds to maintain their lifestyle until they pass away. As a financial planner you know a comprehensive income-need analysis must be calculated. What calculation type would you not take into consideration for the analysis?

A)Present Value
B)Interest Rate
C)Paid Bills
D)Number of periods

Answer 2

Paid Bills

Question 3

Beth is the most optimistic and altruistic client you've ever had. She saves 10 percent of her income weekly and her living expenses only take-up 30 percent of her pay; the rest is given to charity. She wants to retire early and maintain her current lifestyle. What option would you suggest to have her save more income to meet her financial needs?

A)Become fully insured.
B)Take a second job.
C)Reduce charitable contributions.
D)Inform her that retiring early and maintaining her lifestyle is perfectly doable.

Answer 3

Reduce charitable contributions.

Question 4

After calculating a comprehensive income-need analysis for Martha and Matt, you realize they need to start saving $100,000 per year to retire like Madonna will. What for projected cash-flow shortfall compensation strategy would you not suggest?

A)Decrease current and future expenditures
B)Advance the retirement age
C)Accept higher risk levels for investments
D)Consider level annual payments instead of serial annual payments

Question 5

John has broken his tow and insists he can no longer work - ever! He insists you help him start getting disability payments. You try to explain to John that:

A)Has a five-month waiting period if not exempted and his toe would already be healed.
B)You'll get the paperwork started and the first check will be mailed within a week.
C)A and B
D)Neither A nor B

Question 6

Becky's parents have died in a car crash, she is five. Her grandparents are 59 years old and now care for her. Granddad is considering taking on some work to earn a little extra money. He is wondering how an extra job may affect the benefits they receive for Becky's care, what do you tell him about working?

A)Any type of work will stop benefit eligibility.
B)As long as he earns less than $7,005 per year, he is eligible for benefits.
C)As long as he earns less than $14,160 per year, he is eligible for benefits.
D)He is eligible for benefits regardless of the amount of income he earns.

Question 7

How many days does Medicare cover at a skilled nursing facility?

A)First 100 days
B)Last 100 days
C)First 30 days
D)Last 30 days

Question 8

For Medicare Part A, how many days in the hospital is paid in full?

A)10 days
B)15 days
C)45 days
D)60 days

Question 9

Under what circumstances are Medicare benefits not provided?

A)If an accident is the fault of the covered.
B)If the covered is traveling outside of the United States.
C)If the covered is hit by an uninsured individual.
D)If the individual has never been covered by Medicare.

Question 10

Your client is currently taxed for FICA at 7.65 percent; however, they are considering opening their own business. What would be the new tax rate for FICA?

A)There is no change for FICA as an employee or as self-employed.
B)32.1 Percent.
C)15.3 Percent.
D)None of the above.

Question 11

Mitch is a stay-at-home Dad with 8 year old twins. His wife just passed-away and he is not sure what to do with his financial situation. There are some savings from his wife's law firm and Mitch will receive monies from the firm as part owner. What should you inform Mitch of?

A)He has the right to apply for survivor benefits.
B)There is a one-time death benefit of $255.
C)He will receive benefits until the children are 18 years of age.
D)All the above.

Question 12

Mitch is happy to know there will be some funds coming in the house for his children after his wife passed-away after 11 years of marriage. But the monies are not really enough to maintain their standard of living. What should Mitch be informed of?

A)There is nothing he can do when it comes to benefits to help out.
B)Mitch can receive up to 10 percent of the employee's benefits once the children move out.
C)Mitch can receive a percentage of his wife's employee's benefits once he is 62 years old.
D)That he is entitled to 50 percent of his wife's employee benefits as long as the children are under the age of 16 years.

Question 13

Social Security is common within many benefits plan. What type is/are the method(s) used for Social Security integration?

A)Excess
B)Offset
C)Excess and offset
D)None of the above.

Question 14

Eleanor is about to retire. She is trying to determine how her Social Security benefits will be taxed. What item is not included in benefit determination?

A)Eleanor's Salary.
B)Number of children married
C)Unemployment Compensation
D)Spouses Salary

Question 15

There are several types of retirement plans that either contribution or defined plans. What are three-year vesting contribution and five-year vesting benefit plans referred to as for qualified plan vesting schedules?

A)Palate Vesting
B)Bi-year Vesting
C)Cliff Vesting
D)Scheduled Vesting

Question 16

Rick loves only half of his employees and hates the rest. He is considering offering a qualified retirement plan, but doesn't want to give it to the employees he hates. As his financial advisor, you remind him:

A)That employers are allowed an immediate tax deduction for amount contribute
B)That the employees that he loves will love him back for not having to pay income taxes on the amount they contribute to their savings.
C)Both A and B
D)Neither A nor B

Question 17

What are the major types of qualified plan categories?

A)Defined Benefit Plans and Defined Contribution Plans
B)Vesting Plans and Quasi-vesting Plans
C)Defined Benefit Plans and Vesting Plans
D)Defined Contribution Plans and Quasi-vesting Plans

Question 18

Marla wants to start a qualified money purchase plan, but she doesn't know much about them beyond what her friend informed her of. What is true about these plans?

A)Employers are not required to make contribution based on contribution formulas.
B)The plan is not subject to minimum funding standards.
C)The investment risk rests on the employer.
D)The plan can be integrated with Social Security.

Question 19

Cash balance plans are defined benefit plans with features similar to those of a defined contribution plan however, there are a few exceptions. What is a difference is particular to a cash balance plan?

A)The use of the Pension Benefit guaranty Corporation.
B)That retirement benefits/distributions are not adjusted for cost of living.
C)Plan is not portable.
D)None of the above.

Question 20

Nonqualified vesting schedules pertain to whom within a company?

A)Day laborers
B)Hourly workers
C)Owners
D)Executives

Question 21

What are Section 457 plans also known as?

A)Executive Plans
B)Money Purchase Plans
C)Government Plans
D)401 (k) Plans

Question 22

What type of qualified plan limits sponsored company stock to 10 percent and generally does not produce large contributions or deductions for older employees?

A)Profit Sharing
B)Money Purchase Plans
C)Age-weighted
D)401 (k) Plans

Question 23

What types of account are protected by anti-alienation clause?

A)Savings Accounts
B)Employee Benefit Accounts
C)Corporate Accounts
D)Retirement Accounts

Question 24

What type of qualified plan must be "substantial and recurring" with non-discriminatory allocation of contributions?

A)Profit Sharing
B)Money Purchase Plans
C)Age-weighted
D)401 (k) Plans

Question 25

The Employee Retirement Income Security Act demands there is a fiduciary to retirement plans. Who would not be considered a fiduciary?

A)Trustee
B)Employer
C)Investment advisor
D)None of the above.

Question 26

Employer contributions are based on compensation for employer sponsored money purchase plans. What is not included in the definition of compensation?

A)Salary
B)Bonuses
C)Both A and B.
D)Neither A or B.

Question 27

The Pension Benefit Guaranty Corporation may terminate a plan for what reason (s)?

A)Plan has too many members.
B)Plan has too many managers.
C)Plan has become top-heavy.
D)None of the above.

Question 28

Marcus has 20 employees and wishes to start a qualified plan. Who can he exclude from plan participation?

A)Employees who work full-time for the last year.
B)Employees who work full-time for the past five years.
C)Employees who work full-time for the past three years.
D)Employees who are under the age of 21.

Question 29

Fred's company has committed a prohibited transaction by lending money from the company's retirement plan. The tax consequences that will be imposed are:

A)One-tiered
B)Two-tiered
C)Three-tiered
D)Four-tiered

Question 30

There are tax consequences for committing a prohibitive transaction between a retirement plan and a disqualified persons or party; however, there are exemptions under the Prohibited Transactions Rules. Which is not an exception?

A)Receipt of benefits under terms of the plan.
B)Providing office space or services for the plan for "reasonable" compensation.
C)Loans made to an ESOP.
D)None of the above.

Question 31

What is a distinguishing feature of a cash balance plan?

A)Low administration costs.
B)Not covered by Pension Benefit Guaranty Corporation.
C)Separate accounts are established for each participant.
D)Investment risk rests on employee.

Question 32

Rick says that his employees are complaining that their benefits plan isn't fair to everyone working in the company. To check if this is true, what should be recommended for Rick to do?

A)Provide more benefits.
B)Create different plans for each employee.
C)Terminate the plan and offer no benefits.
D)Complete a cross-testing analysis.

Question 33

What type of qualified plan insists employer contributions to be "substantial and recurring", have non-discriminatory allocation of contributions, and is highly recommend for upstart companies?

A)Section 402 (k)
B)Profit Sharing
C)Money Purchase
D)SIMPLE 401 (k)

Question 34

Mike owns a motorcycle shop and wants to add a benefit plan for his employees. He has heard about age-weighted plans and thinks this may be the best plan. What should Mike know about age-weighted plans?

A)They must be combined with a qualified retirement plan.
B)They are exempt from non-discrimination testing.
C)Employer contributions must be "substantial and recurring."
D)These plans are tested under cross-testing rules.

Question 35

Of all the benefits possible for a company to employ; what one has the distinguishing feature establishing separate accounts for each participant, using a hypothetical account balance?

A)Cash Balance Plan
B)Money Purchase Plans
C)Employee Stock Ownership Plan (ESOP)
D)Thrift Plan

Question 36

Your new client owns her own company and is 10 years from retiring, what would be the best plan for the client to consider?

A)Cash Balance Plan
B)Money Purchase Plans
C)412 (i) plan
D)Thrift Plan

Question 37

Who would be a part of a control group in a company?

A)Owners
B)Wives
C)Employees
D)All of the above

Question 38

Seth wishes to circumvent the controlled group rules set forth in ERISA by opening a first service organization offering engineering services as an "A" organization. What is concept is Seth attempting to apply?

A)IRA Intervention
B)Affiliated Service Groups
C)Corporate Affiliation Practices
D)Service Unity Groups

Question 39

Your client wants to provide a retirement plan for their employees. What factor would you not consider when determining the best plan options?

A)Personnel Characteristics
B)Profile of employees
C)Profile of business owner
D)How long the business has been in operation.

Question 40

When determining what plan is best for Jeff's business some tax considerations should be considered. When selecting asset class of different investments, what should be compared?

A)After-tax
B)Before-tax
C)Earned-tax
D)Tax-deferred

Question 41

Megan and John just found the perfect house and want to purchase it. However, they lack the necessary funds to do so. What may this event trigger in regards to their 403 (b) plan?

A)Residential Trigger
B)Client in Need Trigger
C)Hardship Withdrawal
D)Hardship Loan Ability

Question 42

A couple is getting a divorce, you are discussing the division of retirement plans, how many methods will the financial planner introduce?

A)1
B)2
C)3
D)4

Question 43

During a divorce, who determines child support?

A)Financial Planner
B)Parents
C)Courts
D)Lawyers

Question 44

Mary wants to take a lump sum payout from one of her three benefits plans. Which plan can she use the lump sum distribution option?

A)Money Purchase Plan
B)Target Benefit
C)Both A and B
D)Neither A nor B

Question 45

The Internal Revenue Code excludes individual from withdrawal penalties. Which item is not excluded?

A)On the date or after the participant are 59 ½ years old
B)A payment to an alternate payee pursuant to a qualified domestic relations order
C)Corrective distributions
D)Prevention of eviction or foreclosure

Question 46

Craig contributes to his IRA monthly and when he has an extra lump sum of money he adds it to his account. The maximum contribution amount is $5,000; this year Craig contributed $5,500. What amount will his excess contribution penalty be?

A)10 percent
B)13 percent
C)6 percent
D)3 percent

Question 47

What type of IRA is not subject to minimum distribution rules until the death of the owner?

A)Traditional IRA
B)Roth IRA
C)Kipling IRA
D)Retirement IRA

Question 48

Tara wants to convert her traditional IRA into a Roth IRA, but she is not sure she can do it. What should you check to confirm that Tara can do the conversion?

A)See if she has a modified AGI that exceeds $100,000
B)Determine if she is married but filing a separate tax return
C)Nothing, there are no conversion rules
D)Both A and B

Question 49

There are three investment considerations for retirement plans on the side of the client. Which item is not one of them?

A)Personal Objectives
B)Business Objectives
C)Family Objectives
D)Altruistic Objectives

Question 50

When it comes to retirement plans, what is true of IRC Section 72 (t) for tax-advantaged personal retirement plans?

A)The owner can remove funds at any time.
B)Early withdrawal has a 10 percent penalty.
C)There is no triggering event needed for withdraw.
D)All of the above.

Question 51

Which of the following is NOT one of the factors you should include when performing a retirement needs analysis?

A)Income needs
B)Rates of inflation
C)Dependents' life expectancy
D)Number of years before retirement

Question 52

Before you begin looking at other aspects of retirement analysis, what should you determine?

A)Rates of inflation
B)Client's retirement goals
C)Taxes
D)Insurance needs

Question 53

What is a factor that you and the client CANNOT control?

A)Age at retirement
B)Returns on investments
C)Inflation rates
D)Income and expense needs

Question 54

For every year a client waits to claim benefits after reaching full retirement age, by how much do Social Security payments increase?

A)1%
B)5%
C)8%
D)13%

Question 55

Properly planning for Medicaid involves understanding which of the following?

A)Tax planning
B)Retirement savings and income planning
C)Estate planning
D)All of the above

Question 56

Which of the following is true regarding Medicaid?

A)Medicaid is a health insurance program specifically designed for retirees
B)The laws enacting Medicaid were signed in 1985
C)Medicaid is designed to be run at the state level
D)The Affordable Care Act provided less federal funding to most states

Question 57

On a Federal level, what department oversees Medicaid?

A)CMS
B)DFCS
C)ACA
D)SSA

Question 58

Medicaid eligibility is based on certain guidelines. In general, which of the following is NOT one of those guidelines?

A)Past Medicaid contributions
B)Household income
C)Disability status
D)Family status

Question 59

Which of the following is NOT a requirement to qualify for Medicaid?

A)The recipient must be a U.S. citizen
B)A non-U.S. citizen who must meet certain immigration rules
C)The recipient must have previously worked in the state where the application is filed
D)The recipient must have a Social Security number

Question 60

What is the amount of countable assets a married couple can retain when applying for Medicaid?

A)$2,000
B)$3,000
C)$4,000
D)$6,000

Question 61

Which of the following can be excluded from the evaluation of countable assets?

A)A vacation home
B)Life insurance with a value of $2,000
C)A burial plot
D)Burial funds of $3,000

Question 62

Which of the following is an optional benefit, rather than a benefit that all state programs must make available?

A)Inpatient hospital services
B)Family planning services
C)Home health services
D)Respiratory care services

Question 63

Which of the following was created first in the history of retirement plans?

A)Social Security
B)Traditional IRAs
C)Pensions for Massachusetts residents who were wounded in battle
D)The American Express Company's private pension plan

Question 64

Which of the following types of plans allow most individuals to contribute after-tax amounts into government savings bonds and then withdraw those funds without paying tax when they retire?

A)Social Security
B)401k
C)Roth IRA
D)myRA

Question 65

Which of the following defines a plan that may provide tax advantages to either the plan sponsor or beneficiary, but not both?

A)Defined benefit
B)Defined contribution
C)Qualified plan
D)Non-qualified plan

Question 66

What was the amount of aggregate IRA assets near the end of 2014?

A)$1.8 million
B)$3.7 billion
C)$7.3 trillion
D)$8.9 trillion

Question 67

Which of the following is NOT a type of IRA?

A)SEP
B)SIMPLE
C)Roth
D)Qualified pension

Question 68

What is the amount of income tax withheld (by the plan sponsor or company) on an IRA or qualified plan?

A)5%
B)10%
C)20%
D)25%

Question 69

At what age can a taxpayer withdraw amounts from IRAs without incurring an early withdrawal penalty?

A)50 ½
B)59 ½
C)65
D)70

Question 70

Which of the following includes immediate and deferred annuities?

A)Risk management and insurance planning
B)Investment planning
C)Tax planning
D)Estate planning

Question 71

What are the phases of planning for retirement called?

A)Earning phase, saving phase, spending phase
B)Earning phase and saving phase
C)Saving phase, spending phase, and distribution phase
D)Saving phase and distribution phase

Question 72

Which of the following is a decision required during the distribution phase?

A)Time value of money calculations
B)Tax and estate planning
C)Risk management
D)All of the above

Question 73

How does retirement planning rank among client goals addressed by financial planners?

A)Last
B)Among the least common
C)In the middle
D)Among the most common

Question 74

What percentage of all North American business enterprises are estimated to be family-owned?

A)10-20%
B)40-50%
C)60-70%
D)80-90%

Question 75

What percentage of family businesses successfully transition from the first generation of ownership to the second generation?

A)20%
B)30%
C)50%
D)70%

Question 76

Most family business owners prefer to do what?

A)Keep the business within the family
B)Sell the business to a large corporation at retirement
C)Close the business at retirement
D)Sell the business to another small business owner at retirement

Question 77

What is information asymmetry?

A)The transfer of knowledge from one party to another
B)The difference in knowledge of one party and another
C)The difference in quality assessed by the buyer and quality assessed by the seller
D)The price of goods and services in a contract

Question 78

What is screening?

A)A process where an uninformed party requests additional information from the informed party
B)The active conveyance of information by the party with more knowledge
C)Creating a filter of transferring knowledge by using a third party
D)Performing background checks on another party

Question 79

What usually determines the best successor to a business?

A)Family ties
B)Abilities and motivation
C)The person to inherit money needed to run the business
D)The wishes of the preceding owner

Question 80

What is the process by which the party with more knowledge actively conveys information to the party with less knowledge?

A)Mind meld
B)Signaling
C)Disclosing
D)Training