BUS Unit 4 Exam

how much is the cost of a will with zoom?

$100-200

how much is the cost of a will with an attorney?

$300-500

Medicaid eligibility

*eligibility set by state - varies* - individual makes less than 100% - 200% of the Federal Poverty Level, *&* is pregnant, elderly, disables, a parent/caretaker, or a child

"non-working spouse" method of determining life insurance needs

*utilized if non-working spouse DIES* - 10k/year PER number of years the youngest* child has until they're 18 ex: 3, 4, 5, yr old 18-3 = 15 15 x 10,000 = $150,000

benefits of Health Savings Account

- helps pay deductibles - tax-deductible deposits - tax-deferred growth - tax-free for medical care - if account balance is never withdrawn, can be added to IRA

what population are annuities ideal for

- individuals that have funded their 401k and IRAs to allowable limits - have extra $ for retirement and want to get more tax deferred growth

earliest Social Security Benefits can be collected

62 (collecting too early can limit availability of benefit)

what is full retirement age

67

what is the best age to collect social security benefits

70 (benefit amounts increase with age)

"easy method" of determining life insurance requirements

70% of combined income for 7 years (income x 7) x 0.7

Roth IRA

A self-funded/self-managed savings or investment account intended for retirement (deposit amounts are limited per year) - no tax deductions on contributions

What is an Individual Retirement Agreement (IRA)?

A self-funded/self-managed tax-deferred savings or investment account intended for retirement (deposit amounts are limited per year) - benefit now, taxed later

Required minimum distribution (RMD) rule for IRAs

After the age of 72, a certain amount must be withdrawn from the account each year

What is Social Security funded by

FICA tax

What is Blue Cross known for covering?

Hospital care benefits

Medigap Policy requirements

additional coverage for high premium - must have Medicare A and B

2 most important factors impacting life insurance cost

age gender

Medicare Part B cost

approx. $145 monthly premium 20% co-insurance deductible

Medicare Part D cost

approx. $30 monthly premium

mental accounting

assigning different values/purposes when it comes to money

elimination period

associated with disability insurance: - specific amount of time that must elapse until insurance benefits can be accessed - typically 1-6 months

Rule of 72

formula to approximate the number of years it will take for an investment to double: - divide 72 by annual rate of return ex: annual return = 6% - 72/6 = 12 years for investment to double

Medicaid

government health program offered to low income individuals - very good coverage/additional insurance is not required

Medicare

health insurance for individuals over the age of 65, with disabilities, or end stage renal disease (kidney failure)

Health Maintenance Organization (HMO)

health insurance plans that gives individual access to network of specific doctors and healthcare providers - in exchange for fixed prepaid premium

Health Savings Accounts can only be paired with:

high deductible insurance plans

what is a typical person's most valuable asset as they reach retirement?

house

disability insurance

insurance in place that provides individuals with a paycheck if they are unable to do job due to non-work related accident or illness - longer premium period / elimination period should have lower premium total

group health insurance

insurance offered by employer to large group

what is a will?

legal document that specifies how property should be distributed after death - must be signed by you in front of 2 witnesses

term insurance

life insurance coverage for a specific period of time - cheaper than whole life insurance

group life insurance

life insurance that is offered to large group by employer - easier to sign up for / better deal

limit of financial gifting

more than 11.58 mil --> 40% tax

Summary Plan Description (SPD)

outlines benefits and legal rights (such as coverage, dependents, copays, deductibles) - makes understanding financial responsibilities easier

What is the cash value in whole life insurance?

portion of premium that goes into a side account and earns a modest rate of return

Medicare Part D coverage

prescription drugs

Medicare Part C cost

run through private insurance companies (not gov't) --> higher (highest) premium

deductible

set/fixed amount that must be paid by the individual before receiving any benefits from insurance

inheritance tax

state tax collected if individual inherits more than $1mil - paid by individual receiving inheritance

opportunistic rebalancing

systematic process of buying things when they have lost value and selling things that have been performing well

What is the tax treatment of money in a Roth IRA?

tax now, benefits later - annual contributions are not tax deductible, but earnings grow tax-free - no tax on withdrawals

estate tax

tax on assets at death - less than $13 mil. --> no estate tax (more than 13 - every dollar above is taxed extra 40%)

gift tax

tax on financial gifts exceeding $17,000 - excess contributes to $13mil figure

Health Savings Account

tax-deferred savings account that allows individual to put money aside for medical expenses

what is spent less on in retirement

transportation, clothing, taxes, housing (if mortgage is paid off)

what is spent more on in retirement

travel, health insurance, recreation, medical care

coinsurance

type of agreement made with insurance company that splits up remaining balance after copay is made (% to be paid by individual, % to be paid by insurance)

premium

what you have to pay each month to have insurance

when should you apply for life insurance

when others are dependent on your income

what population is term insurance most used by

young families - cheaper for younger individuals ex: good premium estimate on a 1mil 20 yr policy @ 30 yrs old = $45 / month

what population is the Roth IRA ideal for

younger generations / people who are in lower tax brackets

4 major sources of income in retirement

1. employer pension plans 2. public pension plan (social security) 3. personal retirement plans (IRA) 4. Annuities

Social Security Benefit eligibility

10 full years of working (40 credits)

Affordable-Care Act

Obama Care - permits individuals to remain on parent health insurance plan until age of 26 - requires employers with other 200 employees to offer insurance

What is the significance of Blue Cross/Blue Shield?

Oldest and largest system of privately sponsored insurance

What is whole life insurance?

Permanent life insurance that lasts for the duration of the individual's lifetime if premiums are paid

What is Blue Shield known for covering?

Services provided by physicians

What is the tax treatment of money in an IRA?

Tax deferred until withdrawal - no income tax is paid on the money put into the account in a given year

defined benefit plan

a retirement plan in which both employee and employer contribute equal amounts to pension - benefits based on total earnings and years on the job (benefits are known) - ASRS managed (fixed contribution amounts) - withdrawals are not permitted until retirement - mandatory participation

defined contribution plan

a retirement plan in which both employee and employer contribute to varying amounts to retirement savings (401k, IRA) - benefits based on performance of investments (benefits are unknown) - employee managed (optional contribution amounts) - withdrawal are permitted before retirement - voluntary participation

how are credits earned

calculated in a quarterly basis (1 quarter, 1 credit)

Medicare Part C coverage

combines Part A and Part B into one plan (covers inpatient & outpatient care expenses) - includes extra coverage: prescription drugs, dental/vision/hearing, health and wellness programs

immediate annuity

contract owner can access income immediately

deferred/longevity annuity

contract owner will be able to access income later - fixed, tax-deferred premium

annuity

contract with life insurance company that provides income to individual in exchange for premium

Probate

court processes will and additional requests for deceased individual's assets

Medicare Part A coverage

covers inpatient hospital service expenses: - home care services following hospitalization - hospice care - transplants

Medicare Part B coverage

covers outpatient hospital service expenses: - doctors visits - home care services NOT following hospitalization - ambulance services - outpatient therapies (physical, speech, occupational) - x-rays

Medicare Part A cost

deductible only (no monthly premium)

Living Will

document that is made by the individual when they are in good health, determining how they wish to be medically treated if they become terminally ill

Intestate

dying without valid will

vesting

employee's right to the employer's contributions/ benefits attributable employer savings plan if employee leaves or retires early

what is your estate

everything you own (assets - liabilities)

What is NOT covered by Medicare? (Part A and B)

eye exams, dental, hearing aids, long-term care, acupuncture, cosmetic

Medigap Policy

federal program that supplies additional coverage for expenses not included by Medicare (fills the gaps) - i.e., deductibles and coinsurance

copayment

flat fee that is paid per visit

anchoring

focusing on how much was paid for a stock/what has been contributed to stock vs. how the stock is doing

worker's compensation

form of insurance that covers/reimburses individual for hospital expenses/missed pay in event of accident that occurs AT the workplace - commonly used by construction workers