STUDY GUIDE

An insured must always have an insurable interest at the time of the loss to receive payments under an insurance policy. True False

False

For a risk to be insurable, the losses must be indeterminable. True False

False

Ozzy has a group medical policy with a $500 annual deductible and an 80/20 coinsurance provision, with a $2,000 out-of-pocket limit on covered losses. Ozzy breaks his arm and has surgery that costs $12,000. How much will he have to pay for the surgery? A. $2,000 B. $2,300 C. $2,500 D. $2,800

A. $2,000

Marvin has a HO-3 policy that provides $300,000 of insurance on his dwelling, which has a current replacement value $500,000. Ignoring any deductible, how much will Marvin collect if he suffers a covered loss to the dwelling with a replacement value of $60,000 but an actual cash value of $30,000? He has an 80% coinsurance clause. A. $30,000 B. $45,000 C. $48,000 D. $60,000

B. $45,000

Reese's stereo was stolen. The stereo cost $3,000 when originally purchased. A similar new stereo now costs $2,400. Assuming the stereo was 50% depreciated, what is the actual cash value of Reese's loss? A. $400 B. $800 C. $1,200 D. $1,500

C. $1,200

Maria buys a whole life policy and pays premiums for her entire life. The death benefit of the policy is $250,000. During her life, she borrowed a total of $50,000 from the policy. When she dies, her beneficiary will receive $250,000. True False

False

Most citizens of the United States who are age 65 or older qualify for LTC services under Medicaid. True False

False

Most individuals will have sufficient LTC coverage under Medicare, assuming they are age 65 or older. True False

False

Premiums paid for life insurance are not tax deductible, with a few limited exceptions. TRUE FALSE

TRUE

The personal liability umbrella policy (PLUP) is designed to provide a catastrophic layer of liability coverage on top of the individual's homeowners and automobile insurance liability coverages. True False

True

Gladys, age 32, is in the 12% tax bracket and has two young children. Gladys is contemplating changing the investment allocation in her Roth IRA. Which of the following investment options is not an allowable investment from which she may select? a. A variable life insurance policy b. An exchange traded fund c. Municipal bonds d. A fixed or variable annuity

a. A variable life insurance policy

Which of the following factors may affect a person's individual retirement planning? Work life expectancy. Retirement life expectancy. Inflation. Savings rate. a. 1 and 2 b. 2 and 3 c. 1, 3 and 4 d. All of the above

d. All of the above

All earned income is subject to a social security tax True False

false

As a result of a recent hospitalization, Ruby's hospital bill was $9,000, including $250 for flowers ordered from the hospital florist shop. How much will Ruby's major medical insurer pay if the policy has a $500 deductible and an 80 percent coinsurance provision? A. $6,600 B. $7,000 C. $7,875 D. $8,750

A. $6,600

Which of the following statements concerning term life insurance is (are) correct? Because death rates rise at an increasing rate as ages increase, the mortality cost for term insurance also rises at an increasing rate. Term insurance has a cash value. A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2

A. 1 only

Which of the following statements concerning the characteristics of disability income insurance is (are) correct? 1. During the elimination period, disability income benefits are not being paid. 2. During the elimination period, partial disability income benefits are paid. A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2

A. 1 only

Which of the following statements concerning the consequences of the "spend down" of assets strategy to qualify for Medicaid is correct? A. After the Medicaid recipient's death, states may recover the value of exempt assets such as a home from the recipient's estate. B. Exempt assets will be subject to recovery by a state if those assets are transferred to a spouse during the lifetime of the Medicaid recipient. C. The full value of assets transferred by the recipient to an irrevocable trust will be subject to state recovery after the Medicaid recipient's death. D. States cannot recover the value of exempt assets such as a car from the Medicaid recipient's estate.

A. After the Medicaid recipient's death, states may recover the value of exempt assets such as a home from the recipient's estate.

Avery does not want to miss out on the expected growth of the stock market. However, he wants to have protection against the loss of his principal. He expects to contribute to an annuity over the next twelve years. What annuity is best suited for Avery? A. An equity-indexed annuity B. An S&P 500 base annuity C. A single premium deferred annuity D. A variable annuity

A. An equity-indexed annuity

Which of the following statements concerning the nature of term insurance is correct? A. It provides protection for only a limited period of time. B. It usually builds cash values in the later years. C. It is convertible only with evidence of insurability. D. It is renewable for another term at no increase in premium.

A. It provides protection for only a limited period of time.

Which of the following is not correct regarding the benefits provided by Medicaid? A. Medicaid pays for approximately 65 percent of nursing home expenditures in the United States. B. Medicaid is a joint entitlement program between the federal government and the state government, such that individuals in one state may receive benefits whereas similarly situated persons in another state may not receive benefits. C. To be eligible, a person must meet both the general requirements as well as meet the financial requirements for Medicaid. D. A person's income for Medicaid purposes includes Social Security benefits.

A. Medicaid pays for approximately 65 percent of nursing home expenditures in the United States.

A peril is: A. The cause of a loss B. The probability that a loss will occur C. A condition that creates or increases chances of a loss D. A moral hazard

A. The cause of a loss

If an employer has set up a non-qualified deferred compensation plan for an executive and has funded it with assets in a secular trust, what additional feature of the plan would be needed to allow the executive to defer the income tax? A. The executive has a substantial risk of forfeiture. B. The executive receives an economic benefit. C. The executive has constructive receipt of income. D. The trust is made irrevocable.

A. The executive has a substantial risk of forfeiture.

Cayden is an employee of FBG Corporation, with an annual salary of $60,000. Cayden's employer provides $90,000 of group term life insurance. Cayden is required to contribute monthly $0.15 per $1,000 of coverage. The IRS Uniform Premium Table shows $0.60 as the monthly cost per $1,000 for the coverage. How much is included in Cayden's annual gross income for the benefits received from the employer's group life insurance coverage? A. $0 B. $126 C. $153 D. $288

B. $126 - The cost of the $40,000 excess insurance is $288 ($0.60 x 40 x 12) minus $162 paid by Cayden ($0.15 x 90 x 12). $288 - $162 = $126.

The GONZO partnership is owned by five equal partners: Gary, Ophelia, Nancy, Zoe, and Olivier. The partners are considering entering into a buy-sell agreement to establish an orderly transfer of the ownership interest in the event that one of the partners were to die, become disabled, or retire. Which of the following statements is (are) true regarding their options for the buy-sell agreement? 1. If they establish a cross-purchase agreement and fund it with life insurance, 20 policies will be needed. 2. If they establish an entity purchase agreement and fund it with life insurance, five policies will be needed. 3. If they establish either a cross-purchase or entity agreement and fund it with life insurance, the premiums paid on the policies will be tax deductible as a business expense. A. 1 only B. 1 and 2 C. 1 and 3 D. 2 and 3

B. 1 and 2

Which of the following statements regarding disability insurance is false? A. future increase option rider allows the insured to increase benefits in the future. B. Employer-sponsored plans are usually portable. C. Insured individuals with an occupation definition of disabled can more easily qualify for policy benefits than insureds with any occupation definition of disabled. D. Disability insurance is a contract of adhesion.

B. Employer-sponsored plans are usually portable.

There are various factors that influence the need for long-term care insurance. Which of the following is correct regarding these factors? A. There is an indirect relationship between life expectancy and the need for long-term care. B. Men generally need long-term care services more than women. C. A family history of debilitating health conditions increases the likelihood of needing long- term care. D. Net worth and the need for long-term care insurance are indirectly related - the less net worth, the greater the need for LTC insurance.

C. A family history of debilitating health conditions increases the likelihood of needing long-term care.

Lydia, who is nearing retirement, understands that the stock market can provide higher returns than found with fixed income securities. She would like to have the value of her investment increase if the equity markets increase. However, she is very concerned about losing the value of her "nest egg." In addition, she is concerned about running out of money. Which of the following investments is the best choice for Lydia given her concerns? A. An exchange traded fund B. A fixed income annuity C. An equity-indexed annuity D. A variable annuity

C. An equity-indexed annuity

When must an insurable interest exist for a life insurance policy? A. Both at the time of death and at the inception of the policy. B. At the time the beneficiary is paid. C. At the inception of the policy. D. At the time of death.

C. At the inception of the policy.

Which of the following statements concerning long term care is (are) correct? 1. Private medical expense insurance policies, in some cases, provide coverage only if a person also needs medical care; however, benefits are not provided if one's need for custodial care is due solely to the insured's advanced age. 2. Medicare is inadequate for long-term care, in that it will not cover custodial care, if that is all that is needed. A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2

C. Both 1 and 2

Which of the following statements concerning the insurance terms, "indemnity," and "subrogation" is / are correct? 1. Subrogation is the right of the insurer, upon paying the insured for a loss, to have the right to collect what was paid from a responsible third party. 2. Indemnity is a concept whereby an insured is entitled to payment only to the extent of an actual financial loss. A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2

C. Both 1 and 2

Which of the following statements concerning personal umbrella liability insurance is (are) correct? 1. The personal umbrella policy is designed primarily to provide liability coverage for catastrophic legal claims or judgments. 2. The personal umbrella policy requires the policy owner to carry certain underlying liability coverages of specified minimum amounts on both the homeowner's policy and the PAP. A claim made under an umbrella policy will pay only after the required limits of the relevant underlying policy have been paid either by the underlying policy, or by the insured if the required minimums are not carried. A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2

C. Both 1 and 2 - A PLUP is an excess liability policy which provides the face amount and legal defense in excess of liability limits for underlying policies (homeowners and PAP).

Steve is the librarian in his city's library. The library does not provide disability insurance. He buys a private policy through an insurance agent that provides a benefit of $4,200 a month. If he is in the 25% tax bracket and is disabled, what are his benefits after tax? A. $0 B. $1,050 C. $3,150 D. $4,200

D. $4,200

The purchaser of automobile physical damage coverage should use as large a deductible as he or she feels can be handled comfortably in case of an accident. The larger the deductible, the lower the premium. If the car owner were to purchase a policy with a low deductible, he or she would have to obtain the insurance company's approval for all minor repair expenses that exceed a $25 or $50 deductible in order to collect the minor claim payment. This would be a great waste of everyone's time. A, B, and C are factors to consider in purchasing auto physical damage coverage. A. Contributions made to the HSA by the plan participant are tax-deductible as an adjustment to gross income (above-the-line). B. Distributions from the HSA to pay for qualified medical expenses are excluded from income. C. When an employer makes contributions to an HSA on behalf of an employee, and the contribution limits are not exceeded, the employer contribution is not included in the taxable income of the employee. D. A 10% penalty applies to nonmedical expense withdrawals prior to age 65.

D. A 10% penalty applies to nonmedical expense withdrawals prior to age 65.

Annuities have many advantages, including mitigating a variety of risks. Which of the following risks could be mitigated with an annuity? A. Superannuation and purchasing power risk only B. Only superannuation C. Market risk and purchasing power risk D. All three listed risks

D. All three listed risks

Corinne purchased a single-premium deferred annuity ten years ago at age 45. She used $40,000 of after-tax funds she had accumulated over fifteen years. She decides to surrender the annuity for a lump-sum distribution of its $90,000 value. Which of the following statements is correct? A. Corinne will owe income taxes on $50,000. B. Corinne will owe income taxes on $90,000. C. Corinne will owe income taxes and a 10% penalty on $90,000. D. Corinne will owe income taxes and a 10% penalty on $50,000.

D. Corinne will owe income taxes and a 10% penalty on $50,000 - She will owe income tax on the earnings of $50,000. In addition, the distribution is prior to age 59½ and is subject to the 10 percent early withdrawal penalty on the taxable portion.

Which of the following factors is the LEAST important for an auto owner to consider when purchasing automobile physical damage coverage? A. The age and value of the car B. The financial condition of the insurance company C. Whether the car is financed or not D. How low a deductible the insurance company will accept (the lower the better)

D. How low a deductible the insurance company will accept (the lower the better)

Which of the following statements concerning universal life insurance is not correct? A. It is a flexible-premium policy. B. The cash value is credited with market interest rates. C. It separates the protection and savings components. D. It prohibits cash withdrawals.

D. It prohibits cash withdrawals. - Cash withdrawals are permitted from universal life policies.

Millie has insured her expensive diamond engagement ring on a valued basis through an endorsement to her homeowners insurance policy. In the event that the ring is stolen, how much will the insurer pay? A. The ring's actual cash value B. The ring's replacement cost C. $2,500 at most D. The value of the ring as specified in the endorsement

D. The value of the ring as specified in the endorsement

All else equal, an any-occupation policy should have a larger premium than an own-occupation disability policy. True False

False

An individual's work life savings rate will not impact his retirement plan funding requirements. True False

False

If ICE Electronics, Inc. (ICE) established a profit-sharing plan for the current year, ICE is required to make contributions to the profit-sharing plan for the current plan year. True False

False

Insurance should be used for high severity coupled with high frequency risks. True False

False

It is more important to protect against short-term disabilities than long-term disabilities since most disabilities last under two years. True False

False

Pat and Sam were just divorced. Pat had insurance from Sam's employer. As a result of the divorce, Pat can continue with the same insurance coverage for 29 months under COBRA. True False

False

Reggie works for SMITH's Repairs, which permits employees to purchase disability insurance as part of a group plan with pre-tax dollars. If Reggie is disabled, his benefits are not taxable because he paid for them. True False

False

The six ADLs include preparing meals. True False

False

Under a Section 1035 exchange, a life insurance policy can be exchanged for another life insurance policy or for a MEC but cannot be exchanged tax-free for an annuity. True False

False

Key person life insurance is designed to benefit a key employee by paying the estate taxes due at the death of a key employee. True False

False - A key person policy is used to protect the business against the potential business disruption and lost revenues upon the death of a key employee.

Pre-existing conditions may prevent a person from obtaining health insurance. True False

False - The Affordable Care Act prohibits exclusions based on preexisting conditions for newly issued health insurance policies after 2013.

The Medicaid look-back period is 6 years True False

Falso

A rider is a modification or change to a life or health insurance policy. Riders and endorsements are a way for an insured to effectively customize a policy. True False

True

Aspen is the insured on a life insurance policy owned by his wife, Ardie. Ardie does not need the money, so she named Andy, their son, as the beneficiary of the policy. Aspen is the insured, Ardie is the owner, and Andy is the beneficiary. During Aspen's life, Ardie can access the cash value of the policy and receive policy dividends. When Aspen dies, the death benefit is paid to Andy and will be considered a taxable gift from Ardie to Andy. TRUE FALSE

True

Brandish owns a home with a replacement cost of $300,000. He has $200,000 of property insurance with an 80% coinsurance requirement. Brandish suffers a loss of $60,000. The insurance company will pay approximately $50,000 less the deductible. True False

True

Equity-indexed annuities are beneficial since the earnings may be positively impacted by increases in the equity market, but without market risk. However, these annuities will often have cap rates that limit equity performance participation. True False

True

Generally, individuals who are working should have between 60 and 70 percent of their gross income protected with a disability policy. True False

True

Lawrence has a vested account balance in his employer-sponsored profit-sharing plan of $120,000. He would like to take a loan for the maximum amount permitted. Lawrence has not taken any other plan loans before. The maximum loan the individual can take is $50,000. True False

True

Mandy, a single 29-year-old, has an AGI of $50,000. She is eligible to defer to her 401(k) plan, but she has not deferred any compensation to the 401(k) plan for the current year. However, she did receive a qualified matching contribution of $200. Her maximum deductible contribution to an IRA for this year (2022) is $6,000. True False

True

Nelson owns a home with a replacement cost of $300,000. A tree falls on Nelson's house, causing $100,000 in damage. Nelson has a policy with an 80% coinsurance amount and a $500 deductible. If Nelson only had $200,000 of coverage on the home, the insurance company would pay him less than $83,000. True False

True

The three types of annuities are fixed, variable and equity-indexed. True False

True

Charles, a single 29-year-old, deferred 2% of his salary, or $2,000, into a 401(k) plan sponsored by his employer during 2022. What is the maximum deductible IRA contribution Charles can make during 2022? a. $0 b. $1,000 c. $4,000 d. $6,000

a. $0

Dewitt, who is 41 years old, contributed $6,000 to a Roth IRA. What is the earliest age at which Dewitt could have a distribution of any kind from the Roth IRA? a. 46 b. 59 1/2 c. 70 1/2 d. 72

a. 46 - For a qualified distribution, Dewitt must meet the five-year rule and the distribution must be on account of death, disability, age 59½, or first-time home purchase (up to $10,000). The five-year period will be complete when Dewitt is age 45. Therefore, age 46 is the first time that Dewitt COULD have a qualified distribution.

Donald owns a traditional IRA and names his wife, Daisy, as the primary beneficiary. His son, Huey, is the contingent beneficiary. If Donald dies, but both Daisy and Huey are living, which of the following statements is correct? a. Daisy will inherit the full amount of the IRA. b. The IRA will be split equally between Daisy and Huey. c. Huey will inherit the IRA. d. None of the above.

a. Daisy will inherit the full amount of the IRA.

Which of the following is not correct regarding the benefits provided by Medicaid? a. Medicaid pays for approximately 65 percent of nursing home expenditures b. Medicaid is a joint entitlement program between the federal government and the state government, such that individuals in one state may receive benefits whereas similarly situated persons in another state may not receive benefits. c. To be eligible, a person must meet both the general requirements as well as meet the financial requirements for Medicaid. d. A person's income for Medicaid purposes includes Social Security benefits.

a. Medicaid pays for approximately 65 percent of nursing home expenditures

Which of the following statements regarding traditional and Roth IRAs is not true? a. Roth IRA and traditional IRA owners must take required distributions from their IRA after the attainment of age 70½ (or age 72 if age 70½ is attained after December 31, 2019). b. The contribution limits are the same for both types of IRAs c. Traditional IRAs are subject to minimum distribution rules d. The earned income rules apply to both IRAs

a. Roth IRA and traditional IRA owners must take required distributions from their IRA after the attainment of age 70½ (or age 72 if age 70½ is attained after December 31, 2019).

Distributions prior to age 59½ are generally subject to the early withdrawal penalty. However, there is an exception for substantially equal periodic payments. Which of the following is correct? a. Substantially equal periodic payments must continue for at least five years or until age 59 1/2, whichever is longer b. Each of the three methods will produce a payment that is similar in terms of the amount of the payment. c. Taxpayers are not permitted to change from one method of calculating substantially equal periodic payments to another method. d. Each of the three methods to calculate the payment results in a payment that remains constant for the term of the substantially equal periodic payments.

a. Substantially equal periodic payments must continue for at least five years or until age 59 1/2, whichever is longer

Kevin established a Roth IRA and named his wife, Jennifer, as the sole beneficiary on the beneficiary designation form. Ten years later, he and Jennifer were divorced. Kevin updated his will to leave all of his assets to his son, Brian. How will the IRA be distributed at Kevin's death?a. To Jennifer b. To Brian c. To Brian and Jennifer equally d. To Kevin's estate - the executor and lawyers will have to sort out the situation

a. To Jennifer

Which of the following statements concerning the timing of IRA deductible contributions is (are) correct? a. To be deductible for this year, the contribution must be made by April 15th next year. b. An extension for filing a taxpayer's final tax form grants the taxpayer the same extension for making a deductible IRA contribution. c. Contributions must be made by December 31 of the year for which they are to be deducted. d. Contributions must be made by December 31 of the year for which they are to be deducted, but the decision of whether to deduct must be made by April 15 of the following year.

a. To be deductible for this year, the contribution must be made by April 15th next year.

Benjamin retired at age 62 and began to collect Social Security benefits. After a year of playing three rounds of golf a day, Ben is a bit bored and decides to go back to work part-time. In 2022 (when Benjamin is age 63) he earns $29,560 at his part-time job. His Social Security benefit before any adjustments for 2022 is $18,000. What will his actual Social Security benefit be for 2022? a. He will lose all his social security earnings b. $13,000 c. $18,000 d. $29,560

b. $13,000

Jada, age 48, earns $65,000 per year from her employer. Jada saves $15,000 per year for retirement and pays $12,000 per year for her home mortgage. Given this information and considering that Jada will have eliminated her mortgage debt before retirement, what is Jada's expected wage replacement ratio during retirement? a. 43.16% b. 50.81% c. 58.46% d. 73.89%

b. 50.81% - Calculate the Wage Replacement Ratio: Salary $65,000.00 100.00% Payroll Taxes ($4,972.50) (7.65%) Savings ($15,000.00) (23.08%) Mortgage Paid-Off ($12,000.00) (18.46%) $33,027.50 50.81%

Tony died suddenly at the age of 42, leaving behind his wife, Carmela (age 44), and their six-year-old son, A.J. Tony and Carmela had been married for 15 years. All of the following statements concerning Social Security benefits available to the family are correct, EXCEPT a. A.J. will be able to collect Social Security benefits on Tony's account until he reaches age 18. b. Carmela will be able to collect Social Security benefits on Tony's account until A.J. reaches the age of 18. c. Carmela will receive a death benefit of $255. d. When Carmela reaches age 60, assuming she does not remarry, she will be entitled to collect Social Security retirement benefits on Tony's account.

b. Carmela will be able to collect Social Security benefits on Tony's account until A.J. reaches the age of 18.

Carla would like to determine her financial needs during retirement. All of the following are costs she might eliminate in her retirement needs calculation except: a. The $175 per month of parking expenses for parking at her place of employment. b. The $1,500 mortgage payment she makes is scheduled to end 2 years into retirement. c. The Medicare taxes she pays each year. d. The $2,000 per month she deposits into savings.

b. The $1,500 mortgage payment she makes is scheduled to end 2 years into retirement.

At the death of an IRA owner, which of the following controls the distribution of the IRA assets? a. The intestacy laws b. The IRA beneficiary form if it was completed c. The will d. Federal IRA rules

b. The IRA beneficiary form if it was completed

All of the following are acceptable reasons for an employer to terminate a qualified retirement plan except: a. The employer is no longer in a financial position to make further plan contributions. b. The employer no longer wants to maintain the plan because it must cover other employees other than just himself. c. The plan benefits are not meaningful amounts, and participants are limited in their ability to make deductible IRA contributions. d. To lower plan costs and ease administrative complexity, the employer wants to switch plan designs.

b. The employer no longer wants to maintain the plan because it must cover other employees other than just himself.

Cora, age 54 and single, has compensation this year of $85,000. Her employer does not sponsor a qualified plan, so Cora would like to contribute to a Roth IRA. What is Cora's maximum contribution for this year to the Roth IRA in 2022? a. $0 b. $6,000 c. $7,000 ($6,000 plus $1,000 catch up) d. $21,250

c. $7,000 ($6,000 plus $1,000 catch up) The maximum Roth IRA contribution is $6,000 plus $1,000 (2022) for those individuals 50 and over. Cora can make a $7,000 contribution to his Roth IRA. Cora's income does not exceed the phase-out limit for 2022.

Miriam, age 78, is confined to a custodial nursing home. Which of the following programs is / are likely to pay benefits towards the cost of the nursing home? Medicare may pay for up to 100 days of care after a 20-day deductible. Long-term care insurance may pay part if coverage of the facility type is broad enough. Private medical insurance may pay part if it is a comprehensive major medical policy. Medicaid may pay if Miriam has income and assets below state thresholds. a. 4 only b. 1 and 3 c. 2 and 4 d. 1, 2 and 3

c. 2 and 4 - Medicare covers 100% of costs for the first 20 days following at least a 3-day hospital stay for a nursing home; so, statement #1 is incorrect. Statement #4 is true, as is statement #2; therefore, option c is the correct answer.

Which of the following statements concerning choosing the most appropriate type of vesting schedule for a qualified plan --restrictive vs. generous--is (are) correct? Two advantages of choosing a restrictive vesting schedule are (1) to reduce costs attributable to employee turnover and (2) to help retain employees. Three advantages of choosing a liberal vesting schedule in which there is immediate and full vesting are (1) to foster employee morale (2) to keep the plan competitive in attracting employees, and (3) to meet the designs of the small employer who desires few encumbrances to participation for the "employee family." a. 1 only b. 2 only c. Both 1 and 2 d. Neither 1 nor 2

c. Both 1 and 2

Which of the following statements concerning stock bonus plans and ESOPs is(are) true? They both give employees a stake in the company through stock ownership and allow taxes to be delayed on stock appreciation gains. They both limit availability of retirement funds to employees if an employer's stock falls drastically in value and create an administrative and cash-flow problem for employers by requiring them to offer a repurchase option (a.k.a. put option) if their stock is not readily tradable on an established market. a. 1 only b. 2 only c. Both 1 and 2 d. Neither 1 nor 2

c. Both 1 and 2

Stanley (age 63) has enjoyed abundance during his lifetime and decided to share that abundance with three wives. His first marriage to Dorothy (currently age 65, who has never remarried) lasted 25 years. Two years after divorcing Dorothy, Stanley married Blanche (currently age 65), but that marriage ended three years later when Blanche fell madly in love with, and married, Stanley's brother. Stanley and his current wife, Rose (age 58 this year) have been married for 8 years. Which of the following statements concerning spousal benefits under Social Security is correct? a. If Stanley retires early this year, Rose will be able to receive a spousal benefit equal to 50% of Stanley's Social Security benefit. b. Blanche can collect a spousal benefit from Stanley's Social Security record. c. Dorothy can collect a spousal benefit from Stanley's Social Security record. d. Rose will be able to collect a spousal benefit on Stanley's record, as well as a Social Security benefit based on her own earnings when she reaches the age of 62.

c. Dorothy can collect a spousal benefit from Stanley's Social Security record. Since Stanley and Dorothy's marriage lasted more than 10 years, they have been divorced for at least two years, and Dorothy has attained an appropriate age, she can collect a spousal benefit on Stanley's account. Option a is incorrect because Rose is too young to collect a benefit this year. Option b is incorrect because Stanley's marriage to Blanche did not last 10 years. Option d is incorrect because Rose will be able to collect the greater of the spousal benefit under Stanley's record, or her own benefit, but not both, when she reaches age 62 (assuming they remain married at least another 2 years).

Uma, a widow and age 72, is a participant of the Ace Web Enterprise (AWE) 401(k) plan. For the current year she deferred $6,000, or 10 percent of her salary to the plan. She did not receive a profit-sharing contribution, a forfeiture, an employer match, or any other employer contribution. Uma would like to make a contribution to her Roth IRA. If Uma's AGI is $99,000 (all comprised of W-2 earnings, Social Security, and portfolio income), what is the maximum contribution she can make for 2022? a. $0 b. $3,000 c. $6,000 d. $7,000

d. $7,000

For persons with substantial income in addition to Social Security benefits, the beneficiary's modified adjusted gross income (MAGI) which is used to calculate how much of their social security income will be taxed includes which of the following? a. Any earned income b. Municipal bond interest earned c. 1/2 of social security earned d. All of the above

d. All of the above - All of the answers are included in determining MAGI.

Jerry, who is age 56, was just called into the President's office at Napa Sunrise, Inc. He just learned that his position has been eliminated in the recent reorganization. While he is devastated, he thinks he may attempt to retire and work on his golf game. Jerry has a retirement plan at Napa Sunrise, which permits lump-sum distributions, and has accumulated some personal savings, but not enough to sustain him until age 65. Jerry also worked for KMA for 30 years and expects to receive a pension from KMA at age 65. He also expects to receive Social Security at age 67. Which of the following is correct? a. Jerry cannot access his funds at Napa Sunrise prior to full retirement age for the plan. b. Jerry could take a distribution from Napa Sunrise, but it will be subject to ordinary income and subject to an early withdrawal penalty prior to the age of 59 ½. c. Jerry could begin taking substantially equal periodic payments, which would avoid the early withdrawal penalty, but he could not stop the payments until age 59 ½. d. Jerry can take any distribution permitted by the Napa Sunrise plan and avoid the early withdrawal penalty since he is separating from service at age 56.

d. Jerry can take any distribution permitted by the Napa Sunrise plan and avoid the early withdrawal penalty since he is separating from service at age 56.

Phyllis is 68 years of age and is covered by traditional Medicare. Unfortunately, while traveling in a foreign country, Phyllis broke her ankle and had to go to the hospital emergency room. Which part of Medicare will cover the emergency room fees? a. Part A b. Part B c. Part D d. Medicare will not cover the emergency room fees in a foreign country

d. Medicare will not cover the emergency room fees in a foreign country - The correct answer is d. Medicare generally does not cover the cost of care in a foreign country.

Which of the following is correct regarding converting traditional IRA funds to a Roth IRA? a. Only taxpayers with AGI less than $100,000 may convert traditional IRA funds to a Roth IRA. b. The conversion is tax and penalty free if done as a direct rollover. c. The conversion can be recharacterized if done before the due date of the tax return (including extensions). d. None of the above.

d. None of the above.

Which of the following sources of income count towards the retirement earnings limitation? a. Pension income b. Capital gains c. Rental income d. Wages

d. Wages

Retirement plan participants who wish to take advantage of a qualified plan's loan provision must agree to the following restrictions on the amount of the loan and how it is repaid: a. Generally, a participant may borrow no more than $50,000 or one-half of the vested account balance, whichever is less. b. A participant's loan must be repaid within 5 years, unless the loan is used to acquire a participant's principal residence. c. If the participant leaves the company and still owes a balance on their 401(k) loan, they must repay the loan or the loan is considered a distribution d. a, b and c are all correct

d. a, b and c are all correct - All three statements are true