CRPC
Income replacement percentage is another name for
"replacement ratio" and is used as a rough guide in determining the amount of income needed in retirement relative to pre-retirement income.
Industry standards typically consider expenses lasting beyond ____
1 year to be long-term liabilities.
The spouse, at their Social Security full retirement age, will receive
50% of the worker's PIA unless the spouse's Social Security benefit is higher based on his or her own earnings. (Note: The FRA began increasing for those workers who reached age 62 in the year 2000.)
You have completed all of the activities involved in the data gathering step of the financial planning process, including obtaining sufficient quantitative information and documents. What is the next step of the process
Analyzing and evaluating the client's information. Once you have gathered all of the appropriate data needed, the next step is to analyze it.
Which one of the following is a potential problem with a golden parachute?
Any excess payment would be nondeductible by the payor and subject to an excise tax by the employee.
By definition, the required beginning date for IRA distributions is
April 1 of the year following the year in which the participant or IRA owner turns age 70½.
basic provisions of Medicare Part B?
Coverage includes benefits for physicians' services. Individuals who are eligible for Part A are automatically eligible for Part B. Participants pay a monthly premium.
The identification and resolution of apparent and potential conflicts of interest in the planner/client relationship occurs?
in the first step of the retirement planning process: Establishing and Defining the Client/Planner Relationship.
Planners also need to gather information on
investments the client absolutely does not want to include in an investment mix.
You have just finished identifying & disclosing all of the apparent & potential conflicts of interest in the relationship with your client. What is the next step that you would undertake as you continue through the planning process?
Gather information necessary to fulfill the engagement
The Department of Labor requirements regarding advice given to retirement investors will most likely
INCREASE CLIENT EXPECTATIONS OF ADVISERS AND PUT DOWNWARD PRESSURE ON FEES
income replacement percentages
Income replacement percentages vary between low-income and high-income retirees. income replacement ratios should not be used as the only basis for planning. Income replacement ratios are useful for younger clients as a guide to their long-range planning and investing
Which of the following generally are considered potential sources for the funds to cover the cost of long-term custodial care?
Medicaid, Medicare, group long-term care insurance offered through employers
Unsystematic risk
is affected by the nature of how a firm finances its operations.
Susan has reached full retirement age (FRA). She is trying to decide between starting Social Security benefits of $500 per month now, or delaying receipt for three years and using her savings to provide current income. By delaying three years her benefit would increase to $620 per month. Ignoring the time value of money and cost-of-living adjustments, use the break-even calculation to determine how much longer Susan will need to live in order for delaying to "pay off."
She should delay only if she expects to live beyond the next 12½ years or so. By delaying three years, Susan is forfeiting $500 × 36 payments or $18,000 of benefits. She would then gain $120 per month going forward: $18,000/$120 = 150 months, or 12.5 years. If she thinks she is going to live beyond 12.5 years, it would pay to delay benefits by three years.
identifying specific funds in which to invest are discussed on?
Specific investments are not discussed until step four of the planning process, when the planner develops and presents the retirement plan
For IRA purposes, taxable alimony
is earned income, but passive income, workers' compensation, or unemployment compensation are not.
Alpha
is not an asset allocation strategy, but a way to measure a portfolio manager's return relative to the amount of risk that has been taken.
A cash flow statement shows
a client's net cash flow or deficit over a period of time usually one year.
A statement of financial position shows
a client's net worth, which is defined as assets minus liabilities, as of a specific date.
Core/satellite is
a combination of strategic and tactical.
College funding is considered a
a lifestyle goal
Which one of the following U.S. citizens is currently eligible for Medicare coverage at no cost?
a self-employed truck driver, age 66. The truck driver is in a covered occupation (covered by Social Security) and is over age 65. Thus, he or she would receive benefits if fully insured.
A Medicare Part A patient must pay
all costs for a hospital stay beyond 150 days.
hich one of the following is correct regarding tax-exempt interest and the taxation of Social Security benefits?
all of the tax-exempt interest is included in the computation of the taxation of Social Security benefits.
Penalty-free distributions can be made from a TSA or 401(k) when
an employee separates from service after attaining age 55, attains age 59½, becomes disabled or dies, or qualifies takes a hardship distribution for deductible medical expenses only.
client wants to retire the 1st of next year. She wants to receive monthly retirement income payments on the 1st day of each month. To solve the amount of capital required to provide her the income she wants, you need to solve for
annuity due—set calculator at begin. you would need to solve for annuity due, and set the calculator at begin.
An investment policy provides guidelines that
are standards to be followed.
Net worth is defined as
assets minus liabilitie
expenses
auto payments, insurance, food, utilities, mortgage payments, taxes, clothing, vacations, donations
The next step after Establishing and Defining the Client/Planner Relationship.
is to gather information necessary to fulfill the engagement, the second step in the retirement planning process.
One of the purposes of lifelong wealth accumulation
is to provide for a comfortable retirement.
Investors who want to bear the least amount of risk should acquire stocks with beta coefficients
less than 0.5. When seeking investments that have the least amount of risk, the lowest beta should be selected.
The two major risks associated with common stocks are
market risk and business risk.
When the client's circumstances change, the asset management process goes back
back to the data gathering step in the process.
The primary risks associated with common stock are
business risk and market risk.
Volatility is measured
by beta
It is true that Social Security benefits may?
may increase for people who work past their Social Security full retirement age. Additionally, wages and salaries earned during retirement will obviously increase retirement income.
Gold provides
more diversification than large stocks.
Tactical is
choosing various sectors that you believe will do best, and changing as you believe is necessary.
Which one of the following is a measure of a security's risk-adjusted return?
coefficient of variation
Contribution amounts always
come out of a Roth IRA account first, and then conversion amounts, if any.
Discounting and ___________
compounding are opposite time value of money concepts.
The coefficient of variation is one of several ways to
compute a security's risk-adjusted return.
All tax-exempt interest income is included in
computing the portion of Social Security benefits that are subject to taxation. A maximum of 85% of the Social Security benefits are subject to taxation.
Foundation goals are those that
contribute to more basic living needs such as food, insurance, and emergency funds. The coverage of risk exposures is also considered a foundation financial goal.
those with a lower preretirement income typically need a
need a much higher income replacement percentage in retirement.
Having annual client meetings is
not a requirement of the fiduciary standard, but it is certainly good practice.
Financial risk is one of the types
of unsystematic risk. Diversification decreases unsystematic risk.
The client's ability to purchase insurance or investments is reviewed
in step three of the planning process, in which an analysis and evaluation of financial status takes place.
The checking account and credit card balances would be on
on the statement of financial position.
With some exceptions, most categories of living expenses, such as transportation, clothing, and housing
decrease during retirement years.
the age of retirement is required for
determining investment and life insurance needs.
Compounding is the opposite of
discounting when talking about time value of money.
A springing durable power of attorney becomes
effective when the principal becomes incompetent or incapacitated.
When gathering data during the retirement planning process, financial goals should be quantified in dollar amounts and which of the following
established time frames
Sources of risk include which of the following
fluctuating exchange rates, a firm's financing decisions, higher interest rates, a loss of purchasing power
Medicare Part B includes coverage
for physicians' services;
Assume a client and investment professional have worked together for several years. Recently, the client's personal and financial circumstances have changed. According to the course materials, what is the next asset management step that the investment professional should take?
gather data
If client retirement funds are insufficient to meet goals
gifts to children should decrease.
A springing durable power of attorney
gives the attorney-in-fact authority only when the principal becomes incompetent.
Which of the following types of information are important to gather from a client prior to developing retirement planning recommendations?
his or her desired age of retirement, the client's assumption for the long-term rate of inflation, investments the client prefers not to use, number of children client and spouse intend to have
Part A covers
hospital charges. Part A is provided to eligible individuals at no charge, but participants must pay a premium for Part B. Individuals who are eligible for Part A are automatically eligible for Part B, and receive it if they pay the related premium.
The coefficient of determination measures
how much of the movement of a security is attributable to a second security.
longer life spans will result
in a need for more retirement income
Medicare provides
only 20 days of skilled nursing care at full cost and 80 days thereafter with a substantial copay, in only a limited number of situations. It is designed only to provide temporary care while patients improve enough to go home, but it does provide some level of LTC coverage.
Remember that according to the work penalty rule,
only earned income is counted toward the "allowable limit."
During retirement, CLIENT wants to receive $50,000 at the end of each year for the rest of his life. To calculate the amount that she will need to save, you need to solve for
ordinary annuity—set calculator at end. You do need to set the calculator in END mode and solve for ordinary annuity.
The asset with the lowest correlation
provides the most diversification. Therefore, gold provides more diversification than any of the other assets.
Medicaid and long-term care (ltc) insurance provide
recipients with benefits such as nursing home care.
When a client's funds are insufficient to attain retirement goals, it is appropriate for the planner to suggest
retiring later than initially planned, performing part-time work during retirement, spending less and saving more during retirement.
Income =
salaries, dividends, interest income
An income tax penalty-free distribution cannot be made from a TSA until the employee does which of the following?
separates from service after attaining age 55, becomes disabled or dies
When assisting the client in establishing realistic goals, the planner
should help define financial goals so that they are quantified in dollar amounts and have established time frames instead of remaining general in nature.
client has established a balanced portfolio with various amounts allocated to different asset classes, and periodically she rebalances the portfolio to keep the same approximate percentages in the different asset classes. Her approach is
strategic.
The standard deviation is
subtracted from and added to the average return and there is no guarantee that an investor will never have a negative return.
Net cash flow is calculated by
subtracting total cash outflows from total cash inflows.
if a withdrawal of converted IRA funds is made from the Roth account subsequent to the conversion but before five years has elapsed,
such a withdrawal may be subject to the 10% penalty.
Some expenses may even increase during retirement years.
such as travel and medical
Market fluctuations affect
systematic risk and volatile interest rates affect interest rate risk, which is a type of systematic risk.
examples of asset allocation strategies
tactical, core/satellite, strategic.
For purposes of determining if an individual may contribute to an IRA,
taxable alimony received is considered to be earned compensation.
Taxes and auto note payments appear on
the cash flow statement.
During the data gathering process the planner should identify
the clients retirement account balances, income sources and amounts and determine his or her risk tolerance.
f the Roth IRA earnings are withdrawn and the distribution is not "qualified,"
the earnings will be subject to income taxation and may be subject to the 10% penalty.
When saving on a level basis
the inflation rate does not come into play if the question notes on a level basis.
Interest rate risk, default risk and purchasing power risk are
the major risks of bonds.
If a security has an average return of 14.2% and a standard deviation of 8.4, then
the security's returns can be expected to be between 5.8% and 22.6% approximately 68% of the time. This security can be expected to have a return that does not range beyond one standard deviation on either side of its average return approximately 68% of the time.
The correlation coefficient measures
the strength of the relationship between two securities and covariance (not covered in this course) is used in the computation of a portfolio's standard deviation.
if they are fluid,
they are ever-changing and therefore would be difficult to implement and would provide inconsistency in the management of the portfolio.
Long-term liabilities are
those that are payable over a period greater than one year. Mortgage notes and auto loans are examples that fall into this category.
Economic assumptions need
to be gathered from the client. While the planner may help refine the assumption, it is nonetheless the client's assumption that is needed.
The dynamic approach is
to change asset allocation amounts as the market changes, typically used by institutional investors.
The very purpose of any durable power of attorney is
to give the attorney-in-fact authority to act after the principal becomes incapacitated. However, such authority does not survive the principal's death. Such authority is created in an independent document (not part of a living will), and is effective immediately in this type of power of attorney.
The number of children a couple may have provides an indication as
to what may be needed for education expenses, how children will affect family income, and creates the need for other forms of planning such as trusts and guardianship issues.
Goals may be organized based on
type, ownership, and priority but those are not ways of quantifying them and making them more specific. by type of goal
Delaying retirement
will decrease the need for retirement income.
If asked to solve for an annuity due (where payments occur at the beginning of the period)
you would set calculator for BEG.
If asking you to solve for an annuity due where payments occur at the beginning of the period
you would set calculator for BEG.
