CRPC YOU GOT THIS STUDY CARDS - MEMORIZE AND BE FAMILIAR WITH THESE AND YOU GOT THIS. FRIGGEN 110% PASSING SCORE.

What are some true statements about the use of life insurance as a retirement savings vehicle?

life insurance cost basis can be withdrawn tax-free. loans are available and repayment is not required. investing under a life insurance wrapper is expensive.

Payments received in the years BEFORE you obtain FRA will be reduced $______for every $________ earned above the earnings cap.

$1 for every $2

Payments received in the year you obtain FRA will be reduced $______for every $________ earned above the earnings cap.

$1 for every $3

Payments received IN THE YEAR you obtain FRA will be reduced...

$1 for every $3 earned above the earnings cap.

2017 Earnings cap for singles?

$16,920

The Simpsons need to save an additional $300,000 (in retirement year 1 dollars) to build a sufficient retirement fund to support their targeted retirement lifestyle. They expect to earn a 7% after-tax return on their retirement savings and want to assume a 5% long-term inflation rate. Their preference is to allocate a level annual savings amount to build this fund. What level annual end-of-year savings amount will the Simpsons need to deposit at the end of each year during their 20-year preretirement period?

$7,318 In the level payment calculation, inflation is irrelevant. Calculator inputs are: $300,000 FV, 20 N, 7 I/YR; solve for PMT (with calculator set for end-of-year payments) = $7,318.

Sam, age 62, begins receiving his Social Security income. His PIA is $1,500 per month. Because he has filed at age 62, his payment will be reduced by 25% to $1,125. His wife Linda, age 67, would like to begin spousal benefits. Her monthly income would be____________

$750. Because Linda has attained FRA, she would be eligible for 50% of Sam's PIA, or $750.

Small firm investors should have...

...a LONG time horizon.

A Roth IRA distribution is considered to be "qualified" if...

...a five-year holding period is met and the distribution is made after the attainment of age 591⁄2, death, or disability, or if it is made for the purchase of a first-time home (maximum $10,000).

A worker's primary insurance amount (PIA) is the amount they receive from Social Security if...

...he or she began payments at full retirement age.

Old-age Social Security benefits are not reduced for persons who have attained their Social Security FRA regardless of...

...the amount of earned income received.

The lower the coupon rate...

...the greater the price sensitivity of the bond.

The asset with the lowest correlation provides...

...the most diversification.

What does "Fully" insured mean and what would you qualify for?

40 quarters of coverage (10 YEARS paying into social security!) What would you qualify for? Everything. Survivor's benefit for your dependent parent who is age 62 or older. Survivor's benefit for Maxine's spouse or former spouse who is age 60 or older. Dependent child benefits.

What does "Currently" insured mean and what would you qualify for?

6 quarters of coverage (so about 2 years paying into social security) What would you qualify for? ONLY 2 THINGS! Survivor's benefit for dependent child and Lump-sum death benefit spouse or child. Your spouse doesn't get anything!

Jerry was born in 1950. What age does Social Security consider to be his full retirement age (FRA)?

66

What's the increase for every year you delay retirement credits?

8%

What does a Roth IRA owner have to do to take distributions tax free?

A Roth IRA owner is required to hold the account for a minimum of five years and be 59 1/2 to qualify for tax-free distributions.

Which one of the following is not exempt from the 10% penalty tax on premature distributions from an IRA? a series of substantially equal periodic payments a distribution following the owner's death a distribution to a 55-year-old employee following separation from service a distribution for medical expenses not in excess of deductible medical expenses

A distribution to a 55-year-old employee following separation from service. This type of distribution is not exempt from the 10% penalty for an IRA. The exemption does apply to qualified plan distributions, however.

Joint tenancy with right of survivorship (JTWROS), tenancy by the entirety (TBE), and community property (CP) are all forms of co-ownership that can be used by who only?

A husband and a wife.

What's the long term gain rate applied to long term collectibles?

A maximum rate of 28% applies to long-term gain on collectibles.

Sara is ready to annuitize her contract. She would like to receive the largest lifetime monthly income possible. What income option should she select?

A pure life, or single-life, annuity will provide the largest lifetime monthly income.

How much tax exempt interest is included in SS?

ALL Tax-exempt interest is included in the computation of the taxation of SS benefits.

What is a mutual fund?

An open-end investment companies that pool investors' money in an attempt to achieve the financial objectives the fund is pursuing

Strategic asset allocation establishes a target allocation for a given asset class (such as 60% to common stocks) and then what?

And then rebalances the portfolio when necessary to maintain that target allocation.

Portfolio rebalancing involves selling those assets that have appreciated significantly and then what?

And then reinvesting in assets that have not performed well in order to get back to your original asset allocation.

Statement of Financial Position is used to calculate what? And what does it have on it?

Assets and Liabilities which helps you calculate Net Worth.

Spousal benefits can begin as early as age 62, assuming what?

Assuming that the worker spouse has filed to collect his or her own benefit.

Springing POA remains effective when?

Becomes effective when the principal becomes incompetent or incapacitated. SPRINGING. Springing into action WHEN it happens.

Old-age benefits of Social Security recipients may be reduced if the client earns income from wages and salary during retirement prior to Social Security's full retirement age. By how much are the benefits reduced?

Benefits paid to persons in the years prior to attaining full retirement age are reduced by $1 for every $2 earned over the limit.

Jeff and Betsy both attained FRA in 2014. Jeff's monthly benefit is $2,000 and Betsy's is $1,200. If they employ the "restricted application for spouses" strategy, Betsy will begin receiving $ per month.

Betsy, the spouse with the lower Social Security benefit, will take her own $1,200 benefit. Jeff, the spouse with the higher Social Security benefit, will receive a $600 spousal benefit, deferring receipt of his own benefit until age 70.

It is January 15, 2016. Bill and Mary both attained age 66 in 2015. They want to employ the restricted application strategy. Bill is the higher income earner. What can be said about their options?

Bill should file a restricted application for spousal benefits because he is the higher income earner.

Graham recommended that nonprofessional investors apply which one of the following rules of thumb?

Buy stocks for two-thirds or less of their net current assets.

Property held as a tenant in common or in which the decedent solely owned his interest does not what?

Bypass probate.

An individual's Social Security payment amount will be adjusted annually to account for increases in inflation as measured by the .

CPI

When calculating cash flow, what DON'T you include?

Checking or Credit Cards

What kind of money comes out of a Roth IRA distribution first?

Contribution amounts always come out of a Roth IRA account first, and then conversion amounts, if any.

What does Medicare Part A cover and how do you pay for it?

Covers hospital charges but patient must pay for all costs in a hospital beyond 150 days. Provided at no charge. No premium.

What does Medicare Part B cover and how do you pay for it?

Covers physician services Premium charge! If you're eligible for Part A, you've got Part B, BUT FOR A CHARGE!

Securities Exchange Act of 1934

Created the SEC.

How do you calculate the Coefficient of Variation?

Deviation divided by the expected return.

Social Security began as a program to provide retirement income, but has been expanded to provide what?

Disability Survivor benefits are provided to a spouse caring for a child under 16 or disabled Survivor benefits to children under age 19 Survivor benefits to spouses at age 60-61

What situations are exempt from the 10% penalty on qualified plan distributions made before age 59 ½?

Distributions because of death and annuitized payments based on an individual's remaining life expectancy.

A distribution cannot be made from a TSA until the employee does which of the following?

Distributions can be made when an employee separates from service, attains age 591⁄2, becomes disabled or dies, or qualifies under hardship rules.

When gathering data during the retirement planning process, financial goals should be quantified in what two ways?

Dollar amounts and established time frames.

Carla is collecting $600 per month from a government pension and is also receiving a Social Security spousal benefit of $500 per month. Due to the GPO, her Social Security spousal benefit will be reduced to .

Due to the GPO, her Social Security spousal benefit will be reduced by 2/3 of the amount of her government person, or $400. $500 - $400 = $100. 2 divided by 3 multiplied by $600 = $400 now with the reduction. $500 - $400 = $100

Earned income, as defined by the Internal Revenue Code, includes what?

Earned income only includes salary, fees, bonuses, commissions, and TAXABLE alimony

When can a distribution be made from a TSA? 4 categories!

Employee separates from service, attains age 59 1⁄2, becomes disabled or dies, or qualifies under hardship rules.

What is the key word to describe UNIVERSAL life?

Flexibility.

In a community property state, a person's earnings from their job subsequent (after) to the date of their marriage will be considered community property. We get married, my earnings then become yours as well. We "share it". Community property. If I own property before I met you, that's still just mine.

Got it?

What is the key word to describe WHOLE life?

Guaranteed.

Harry, a frantic 34-year-old, contributed $2,000 to a Roth IRA six years ago. By this year, the investments in his account had grown to $3,785. Finding himself in a financial bind, Harry is now compelled to withdraw $2,000 from this Roth IRA. What is the tax and penalty status of this withdrawal?

Harry does not have to pay any tax or penalty on the $2,000 distribution, even though he is only 34. All Roth IRA contributions are made with after-tax funds, and contributions are considered to be withdrawn first, tax-free, then earnings. Also, the IRC rules allow the aggregation of all Roth IRAs for this calculation. Penalties would apply only to taxable income.

Tom, 59, is a widower and is receiving a widower's benefit on his deceased spouse's record. Tom is considering getting remarried. As a planner, you should suggest which one of the following?

He should wait until age 60 to remarry. If you remarry before the age of 60, your widower's benefit will be terminated. If you are over the age of 60 when you remarry, your marriage will not affect your Social Security widower's benefit.

Before employing a pension maximization strategy a retiree needs to consider what 5 things?

His age and that of his spouse His health and insurability The cost of taking a joint life versus a single life annuity His tax bracket and financial situation, and Whether health insurance benefits will be impacted

Bob and Helen Jones just won the lottery. The benefit this year will be $50,000, and it will increase over the next 19 years. Bob's monthly Social Security benefit is $1,800; Helen's monthly Social Security benefit is $1,200. Bob is age 68, and Helen is age 69. Which one of the following is a correct statement about Bob and Helen's old-age Social Security benefits?

If they file jointly, up to 85% of their Social Security benefit must be included in gross income. Since Bob and Helen are married filing jointly and their gross income exceeds the base amount of $44,000, then up to 85% of their Social Security benefit must be included in gross income, regardless of age. Since Bob and Helen are over Social Security's full retirement age, the Social Security benefit would not be reduced because of additional earned income.

A Cash Flow statement is used to calculate what? And what does it have on it?

Inflows and out flows. Not assets and liabilities.

The amount paid from a reverse mortgage can come in any of the following forms except: lump sum. tenure payments. term payments. interest only.

Interest only

An individual is not considered an "active participant" in an employer-sponsored plan (defined contribution plan) if they receive only what addition?

Interest. Only employee and employer contributions and forfeitures result in active participant status. Investment earnings credited to an individual's account do not.

What does NOT count as "earnings" for the purpose of the Social Security earnings test? (5)

Investment income, pensions, capital gains, inheritances, alimony

What does the Coefficient of Variation measure? How do you calculate it?

It measures a securities risk adjusted return. It allows you to compare 2 securities together, so you DIVIDE. DEVIATION DIVIDED BY THE EXPECTED RETURN.

Mark, age 54, funded a nonqualified annuity with a $1,000 deposit. His annuity is now worth $2,500. He would like to make a $500 withdrawal. How will this distribution be taxed?

It will be fully taxable and subject to an early withdrawal penalty. Lump-sum distributions from an annuity are fully taxable until all earnings have been distributed; this is referred to as last-in, first-out. Because Mark is under age 59½, his distribution will be subject to a 10% early withdrawal penalty. If the contract were annuitized, payments would be taxed on a pro rata basis

The basis that is used in determining gains from mutual funds sales may be calculated by using what three methods?

LIFO, Average Cost, Specific Identification method

Nonperiodic distributions from an annuity contract prior to the annuity start date?

LIFO. It is first considered a taxable interest payment and then a tax-free return of principal. Last in, first out.

Whole life policies feature what?

Level premiums and a level death benefit for the insured's entire life. Whole life policies are designed to provide for level premiums, a guaranteed death benefit no matter when the insured dies, and guaranteed cash value.

What is the key word to describe TERM life?

Low-cost.

How do you calculate standard deviation? (Remember it makes you MAD >:| )

MEAN return plus deviation MEAN return minus deviation

How do you calculate beta?

Multiply.

Joint tenants or tenants in common are forms of ownership that can be used by who only?

Non spouses. Husband and wife can't use these.

What makes you eligible for Medicare coverage?

Over 65 and in a covered occupation meaning you're getting social security.

Distributions of ______________ from a Roth IRA are not subject to the 10% penalty.

Principal

What is Dollar Cost Averaging?

Purchasing shares with equal, periodic contributions.

Non spring POA remains effective when?

Remains effective after the principal becomes incapacitated. NON Spring. NOT springing into action until AFTER.

The Securities Act of 1933

Required that new companies provide full disclosure through the issuance of a prospectus.

Investment Advisers Act of 1940

Requires advisors to register with the SEC.

What counts as "earnings" for the purpose of the Social Security earnings test?

Self-employment net earnings.

Margaret is confused about her options and takes a friend's advice to file and begin collecting benefits at age 62. Two years later she attends one of your seminars on Social Security and realizes that this was a mistake, as she has sufficient personal assets to get her through until at least age 70 and her life expectancy is nearly 100. What can you suggest to her?

She can suspend payments, keep the benefits she has received, and resume payments later at an increased rate. She would only have the option of paying back benefits if she made the election within one year of beginning benefits.

Margaret is confused about her options and takes a friend's advice to file and begin collecting benefits at age 62. Two years later she attends one of your seminars on Social Security and realizes that this was a mistake, as she has sufficient personal assets to get her through until at least age 70 and her life expectancy is nearly 100. What can you suggest to her?

She can suspend payments, keep the benefits she has received, and resume payments later at an increased rate. She would only have the option of paying back benefits if she made the election within one year of beginning benefits.

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 121⁄2 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.

How are net LONG term capital gains taxed?

Subject to a 0% tax rate if the taxpayer is in a 10% or 15% marginal income tax bracket.

How are net SHORT term capital gains taxed?

Subject to a taxpayer's ordinary income tax rate.

When calculating net worth, what DON'T you include?

Taxes or Auto

When seeking investments that have the least amount of risk, what beta do you choose?

The absolute lowest one! 0.5

The vested accrued benefit in George's TSA is $87,500. He has never taken a loan from the plan but is interested in building an addition on to his home. What correctly describes George's option?

The amount of the loan would be limited to $43,750 and the term would be limited to five years. George wants to remodel, not purchase, his home. The amount of the loan cannot exceed 50% of the vested amount in George's account, and the term of the loan would be limited to five years.

Charlie Clemons contributed $2,000 to Roth IRA 1 last year, when he was age 24, and $2,000 to Roth IRA 2 this year. Two years from now, Roth IRA 1 will have a balance of $2,650, and Roth IRA 2 will have a balance of $2,590, and Charlie will close Roth IRA 1, receiving the balance of $2,650. Which one of the following statements best describes his tax and penalty status for that year?

The distribution is not qualified because Charlie is under age 591⁄2, and he is withdrawing the money before the waiting period of five tax years. Withdrawals within five years are not prohibited, but taxation will generally occur and penalties may apply in some cases. None of the withdrawal, however, is included in Charlie's taxable income because the $2,650 sum is less than the aggregate total of his contributions ($4,000). No penalty applies since the withdrawal is not taxable.

Calculating the exclusion ratio for a fixed annuity?

The investment in the annuity contract is divided by the total expected return.

Name a key features of a fixed annuity.

The premiums in a fixed annuity are invested in the company's general account.

Investment Company Act of 1940

The regulation of mutual funds.

What is the tax treatment for a shareholder participating in a common stock's dividend reinvestment program?

The shareholder is treated as if he or she received a cash dividend equal to the fair market value of the shares purchased under the plan. You literally bought more stock with the dividends. The dividend you got is treated like cash. The dividend is cash and you used that cash to buy more stock. The fair market value of the shares purchased is generally taxed at a 15% or 20% rate.

Can you still use the file and suspend strategy?

The spouse who wants to file and suspend must have done so before April 30, 2016, therefore they are no longer eligible. Effective May 1, 2016, this option was no longer be available, although those who were already employing this strategy will be grandfathered in and don't need to refile.

What is the valuation date for gifts?

The valuation date for gifts is when the transfer is completed!

Name three key features of a variable annuity.

Their objective is to outpace inflation. A rider can be added so that the value at death is guaranteed to be at least equal to the amount of the premium investment. Premium contributions purchase units of an open-end investment company.

This year, your 63-year-old client had $14,075 of earned income and $30,000 of investment income. He was also drawing Social Security benefits. Which one of the following correctly describes the impact on his Social Security benefits?

There is no reduction to his benefits. The client's earnings (earned income) are below the allowable limit for the current year ($16,920 for 2017). Remember that according to the work penalty rule, only earned income is counted toward the "allowable limit."

Brent and Carol have an AGI of $40,000 and they receive a combined Social Security benefit of $15,000. They have no tax-exempt income. What percentage of their Social Security benefit will be subject to taxation?

They have no tax exempt income, but they have PROVISIONAL income! Provisional income = $47,500. This is over the $44,000 threshold so 85% of their Social Security benefit will be subject to taxation.

What do cash equivalents include? What DON'T they include?

They include: Treasury bills, negotiable certificates of deposit, commercial paper, and bankers' acceptances. They do not include: Treasury NOTES.

Dan Oakley, age 41, has been contributing $2,000 annually to his IRA for seven years; his contributions have been fully deductible. The most recent year-end account value was $18,100. He also has accumulated $16,800 in his profit sharing plan account at work; the plan permits loans. This year, Dan needs approximately $5,000 to replace the 15-year-old shingles on the roof of his home and is considering either withdrawing this amount from his IRA or borrowing it from his profit sharing plan account. Which one of the following best describes the potential tax liability from these two options?

Withdrawing the funds from his IRA will result in a tax liability; Dan will be subject to ordinary income tax and an early withdrawal penalty on the $5,000 withdrawal amount. The $5,000 IRA withdrawal will be subject to ordinary income tax and to the 10% early withdrawal penalty. Plan loans that meet all legal requirements are not subject to income tax.

Do rights of survivorship property bypasses probate?

Yes.

Surrender charges associated with an annuity. Name four key things about this.

a typical surrender charge period is four to nine years. surrender charges are a way for the insurance company to recoup expenses associated with the establishment of the contract and cost associated with contract guarantees. Surrender charges are typically a percentage of the principal, most often starting at a higher percentage and declining over time.

Withdrawals of up to $10,000 from a Roth IRA for the purchase of a first home can be penalty-free if what?

if the five-year holding period has been met.

What are the 3 levels of Standard Deviation?

o 68 = 1 o 95 = 2 o 99 = 3