You got 26 of 38 possible points.
Your score: 68%
Question 1

A 65-year-old man has an average life expectancy of approximately an additional:

Score: 0 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. 10 years

0

The correct answer is C. A man reaching age 65 today can expect to live, on average, until age 84.3, according to the Social Security Administration.

B. 15 years

Incorrect
0

The correct answer is C. A man reaching age 65 today can expect to live, on average, until age 84.3, according to the Social Security Administration.

C. 20 years

0

The correct answer is C. A man reaching age 65 today can expect to live, on average, until age 84.3, according to the Social Security Administration.

Should have chosen

D. 25 years

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The correct answer is C. A man reaching age 65 today can expect to live, on average, until age 84.3, according to the Social Security Administration.

E. Don't know

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The correct answer is C. A man reaching age 65 today can expect to live, on average, until age 84.3, according to the Social Security Administration.

The correct answer is C. A man reaching age 65 today can expect to live, on average, until age 84.3, according to the Social Security Administration.

Question 2

Sarah is single, age 65 and takes a reverse mortgage with a lump sum payment. When does the loan have to be repaid?

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. When she attains age 75

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The correct answer is C. Reverse mortgages are being used in a number of ways in retirement planning, and it is important to have a basic understanding of how they work. The concept is that a loan is made (there are a number of payout options available) and it does not have to be repaid until the owner permanently leaves the home.

B. When she takes on any other loan

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The correct answer is C. Reverse mortgages are being used in a number of ways in retirement planning, and it is important to have a basic understanding of how they work. The concept is that a loan is made (there are a number of payout options available) and it does not have to be repaid until the owner permanently leaves the home.

C. When she permanently leaves the home

Correct
1

The correct answer is C. Reverse mortgages are being used in a number of ways in retirement planning, and it is important to have a basic understanding of how they work. The concept is that a loan is made (there are a number of payout options available) and it does not have to be repaid until the owner permanently leaves the home.

Should have chosen

D. Whenever the mortgage company wants it back

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The correct answer is C. Reverse mortgages are being used in a number of ways in retirement planning, and it is important to have a basic understanding of how they work. The concept is that a loan is made (there are a number of payout options available) and it does not have to be repaid until the owner permanently leaves the home.

E. Don’t know

0

The correct answer is C. Reverse mortgages are being used in a number of ways in retirement planning, and it is important to have a basic understanding of how they work. The concept is that a loan is made (there are a number of payout options available) and it does not have to be repaid until the owner permanently leaves the home.

The correct answer is C. Reverse mortgages are being used in a number of ways in retirement planning, and it is important to have a basic understanding of how they work. The concept is that a loan is made (there are a number of payout options available) and it does not have to be repaid until the owner permanently leaves the home.

Question 3

A single person who is likely to live to age 90 is generally going to be better off claiming Social Security benefits at age…

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. 62

0

The correct answer is C. One factor in determining when to choose Social Security benefits is life expectancy, because this affects total benefits provided under the system. Delaying to age 70 is a good idea if the higher benefit is paid for a long time—as in this case. This is tricky though, as most people don’t know how long they will live. And for a married couple the larger benefit is paid for the joint lifetime—so the couple’s joint life expectancy should be considered when thinking about this question. Another way to look at the claiming question is how can you improve your retirement security. Deferring Social Security can do this as deferring “buys” more lifetime income that will receive inflation protection.

B. 66

0

The correct answer is C. One factor in determining when to choose Social Security benefits is life expectancy, because this affects total benefits provided under the system. Delaying to age 70 is a good idea if the higher benefit is paid for a long time—as in this case. This is tricky though, as most people don’t know how long they will live. And for a married couple the larger benefit is paid for the joint lifetime—so the couple’s joint life expectancy should be considered when thinking about this question. Another way to look at the claiming question is how can you improve your retirement security. Deferring Social Security can do this as deferring “buys” more lifetime income that will receive inflation protection.

C. 70

Correct
1

The correct answer is C. One factor in determining when to choose Social Security benefits is life expectancy, because this affects total benefits provided under the system. Delaying to age 70 is a good idea if the higher benefit is paid for a long time—as in this case. This is tricky though, as most people don’t know how long they will live. And for a married couple the larger benefit is paid for the joint lifetime—so the couple’s joint life expectancy should be considered when thinking about this question. Another way to look at the claiming question is how can you improve your retirement security. Deferring Social Security can do this as deferring “buys” more lifetime income that will receive inflation protection.

Should have chosen

D. 75

0

The correct answer is C. One factor in determining when to choose Social Security benefits is life expectancy, because this affects total benefits provided under the system. Delaying to age 70 is a good idea if the higher benefit is paid for a long time—as in this case. This is tricky though, as most people don’t know how long they will live. And for a married couple the larger benefit is paid for the joint lifetime—so the couple’s joint life expectancy should be considered when thinking about this question. Another way to look at the claiming question is how can you improve your retirement security. Deferring Social Security can do this as deferring “buys” more lifetime income that will receive inflation protection.

E. Don't know

0

The correct answer is C. One factor in determining when to choose Social Security benefits is life expectancy, because this affects total benefits provided under the system. Delaying to age 70 is a good idea if the higher benefit is paid for a long time—as in this case. This is tricky though, as most people don’t know how long they will live. And for a married couple the larger benefit is paid for the joint lifetime—so the couple’s joint life expectancy should be considered when thinking about this question. Another way to look at the claiming question is how can you improve your retirement security. Deferring Social Security can do this as deferring “buys” more lifetime income that will receive inflation protection.

The correct answer is C. One factor in determining when to choose Social Security benefits is life expectancy, because this affects total benefits provided under the system. Delaying to age 70 is a good idea if the higher benefit is paid for a long time—as in this case. This is tricky though, as most people don’t know how long they will live. And for a married couple the larger benefit is paid for the joint lifetime—so the couple’s joint life expectancy should be considered when thinking about this question. Another way to look at the claiming question is how can you improve your retirement security. Deferring Social Security can do this as deferring “buys” more lifetime income that will receive inflation protection.

Question 4

Social Security workers’ monthly benefits are increased for each year that benefits are deferred from age 62 to age…

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. 65

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The correct answer is C. Social Security worker’s benefits can be claimed as early as age 62, but benefits continue to increase for each year of deferral up to age 70. Benefits do not increase after that, so there is no incentive to defer workers benefits past age 70. Spousal benefits and widow(er) benefits do not benefit from increases past full retirement age—so there is no reason to defer these benefits past full retirement age (age 66 to age 67 depending upon date of birth).

B. 66

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The correct answer is C. Social Security worker’s benefits can be claimed as early as age 62, but benefits continue to increase for each year of deferral up to age 70. Benefits do not increase after that, so there is no incentive to defer workers benefits past age 70. Spousal benefits and widow(er) benefits do not benefit from increases past full retirement age—so there is no reason to defer these benefits past full retirement age (age 66 to age 67 depending upon date of birth).

C. 70

Correct
1

The correct answer is C. Social Security worker’s benefits can be claimed as early as age 62, but benefits continue to increase for each year of deferral up to age 70. Benefits do not increase after that, so there is no incentive to defer workers benefits past age 70. Spousal benefits and widow(er) benefits do not benefit from increases past full retirement age—so there is no reason to defer these benefits past full retirement age (age 66 to age 67 depending upon date of birth).

Should have chosen

D. 75

0

The correct answer is C. Social Security worker’s benefits can be claimed as early as age 62, but benefits continue to increase for each year of deferral up to age 70. Benefits do not increase after that, so there is no incentive to defer workers benefits past age 70. Spousal benefits and widow(er) benefits do not benefit from increases past full retirement age—so there is no reason to defer these benefits past full retirement age (age 66 to age 67 depending upon date of birth).

E. Don't know

0

The correct answer is C. Social Security worker’s benefits can be claimed as early as age 62, but benefits continue to increase for each year of deferral up to age 70. Benefits do not increase after that, so there is no incentive to defer workers benefits past age 70. Spousal benefits and widow(er) benefits do not benefit from increases past full retirement age—so there is no reason to defer these benefits past full retirement age (age 66 to age 67 depending upon date of birth).

The correct answer is C. Social Security worker’s benefits can be claimed as early as age 62, but benefits continue to increase for each year of deferral up to age 70. Benefits do not increase after that, so there is no incentive to defer workers benefits past age 70. Spousal benefits and widow(er) benefits do not benefit from increases past full retirement age—so there is no reason to defer these benefits past full retirement age (age 66 to age 67 depending upon date of birth).

Question 5

According to the Social Security Administration, in 2033 they will only have funds to pay for approximately ___ of promised benefits.

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. 0%

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The correct answer is D. If Congress doesn't act, the Social Security trust fund will be depleted after 2033, meaning the program will only be able to pay 77 cents of every dollar of benefits owed through additional tax revenue that it receives.

B. 25%

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The correct answer is D. If Congress doesn't act, the Social Security trust fund will be depleted after 2033, meaning the program will only be able to pay 77 cents of every dollar of benefits owed through additional tax revenue that it receives.

C. 50%

0

The correct answer is D. If Congress doesn't act, the Social Security trust fund will be depleted after 2033, meaning the program will only be able to pay 77 cents of every dollar of benefits owed through additional tax revenue that it receives.

D. 75%

Correct
1

The correct answer is D. If Congress doesn't act, the Social Security trust fund will be depleted after 2033, meaning the program will only be able to pay 77 cents of every dollar of benefits owed through additional tax revenue that it receives.

Should have chosen

E. Don't know

0

The correct answer is D. If Congress doesn't act, the Social Security trust fund will be depleted after 2033, meaning the program will only be able to pay 77 cents of every dollar of benefits owed through additional tax revenue that it receives.

The correct answer is D. If Congress doesn't act, the Social Security trust fund will be depleted after 2033, meaning the program will only be able to pay 77 cents of every dollar of benefits owed through additional tax revenue that it receives.

Question 6

Continuing care retirement communities (CCRCs) are different than a 55-plus housing development in that CCRCs always offer…

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. A range of care from independent living to nursing care

Correct
1

The correct answer is A. Both adult active communities (55-plus) and CCRCs are living arrangements that appeal to some older adults. Both offer opportunities for social interaction and other services. CCRCs are unique in that they allow for an individual to age in place, as they offer a full range of care options from independent living to nursing care.

Should have chosen

B. The opportunity to participate in social events

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The correct answer is A. Both adult active communities (55-plus) and CCRCs are living arrangements that appeal to some older adults. Both offer opportunities for social interaction and other services. CCRCs are unique in that they allow for an individual to age in place, as they offer a full range of care options from independent living to nursing care.

C. The opportunity to have relatives move onto facility grounds

0

The correct answer is A. Both adult active communities (55-plus) and CCRCs are living arrangements that appeal to some older adults. Both offer opportunities for social interaction and other services. CCRCs are unique in that they allow for an individual to age in place, as they offer a full range of care options from independent living to nursing care.

D. A range of housing options

0

The correct answer is A. Both adult active communities (55-plus) and CCRCs are living arrangements that appeal to some older adults. Both offer opportunities for social interaction and other services. CCRCs are unique in that they allow for an individual to age in place, as they offer a full range of care options from independent living to nursing care.

E. Don't know

0

The correct answer is A. Both adult active communities (55-plus) and CCRCs are living arrangements that appeal to some older adults. Both offer opportunities for social interaction and other services. CCRCs are unique in that they allow for an individual to age in place, as they offer a full range of care options from independent living to nursing care.

The correct answer is A. Both adult active communities (55-plus) and CCRCs are living arrangements that appeal to some older adults. Both offer opportunities for social interaction and other services. CCRCs are unique in that they allow for an individual to age in place, as they offer a full range of care options from independent living to nursing care.

Question 7

Traditional Medicare will cover which of the following medical expenses?

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. Routine dental care

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The correct answer is B. Traditional Medicare covers many medical services including wellness visits. However, there are services that can be quite costly for seniors that are not covered including dental care and hearing aids. Planning for these expenses is an important part of planning. Beneficiaries have the option to elect out of traditional Medicare in favor of Medicare Advantaged plans. These programs sometimes include additional services like dental coverage, but in exchange the beneficiary will have a more limited network of health care providers.

B. Wellness visits 

Correct
1

The correct answer is B. Traditional Medicare covers many medical services including wellness visits. However, there are services that can be quite costly for seniors that are not covered including dental care and hearing aids. Planning for these expenses is an important part of planning. Beneficiaries have the option to elect out of traditional Medicare in favor of Medicare Advantaged plans. These programs sometimes include additional services like dental coverage, but in exchange the beneficiary will have a more limited network of health care providers.

Should have chosen

C. Hearing aids

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The correct answer is B. Traditional Medicare covers many medical services including wellness visits. However, there are services that can be quite costly for seniors that are not covered including dental care and hearing aids. Planning for these expenses is an important part of planning. Beneficiaries have the option to elect out of traditional Medicare in favor of Medicare Advantaged plans. These programs sometimes include additional services like dental coverage, but in exchange the beneficiary will have a more limited network of health care providers.

D. All of the above

0

The correct answer is B. Traditional Medicare covers many medical services including wellness visits. However, there are services that can be quite costly for seniors that are not covered including dental care and hearing aids. Planning for these expenses is an important part of planning. Beneficiaries have the option to elect out of traditional Medicare in favor of Medicare Advantaged plans. These programs sometimes include additional services like dental coverage, but in exchange the beneficiary will have a more limited network of health care providers.

E. Don’t know

0

The correct answer is B. Traditional Medicare covers many medical services including wellness visits. However, there are services that can be quite costly for seniors that are not covered including dental care and hearing aids. Planning for these expenses is an important part of planning. Beneficiaries have the option to elect out of traditional Medicare in favor of Medicare Advantaged plans. These programs sometimes include additional services like dental coverage, but in exchange the beneficiary will have a more limited network of health care providers.

The correct answer is B. Traditional Medicare covers many medical services including wellness visits. However, there are services that can be quite costly for seniors that are not covered including dental care and hearing aids. Planning for these expenses is an important part of planning. Beneficiaries have the option to elect out of traditional Medicare in favor of Medicare Advantaged plans. These programs sometimes include additional services like dental coverage, but in exchange the beneficiary will have a more limited network of health care providers.

Question 8

True or false: Medicare supplement insurance policies are most commonly purchased to cover the deductibles and copays that are charged under Medicare Parts A and B.

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. True

Correct
1

The correct answer is A. For those who are in Traditional Medicare, there will be annual deductibles to both Part A (hospital coverage) and Part B as well as certain co-pays. One way to limit unexpected out-of-pocket costs is to purchase a supplemental policy. The most extensive policies cover almost all deductibles and copays. Note however, that the supplemental policies will not pay for services that are not covered under Medicare, like dental coverage and hearing aids.

Should have chosen

B. False

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The correct answer is A. For those who are in Traditional Medicare, there will be annual deductibles to both Part A (hospital coverage) and Part B as well as certain co-pays. One way to limit unexpected out-of-pocket costs is to purchase a supplemental policy. The most extensive policies cover almost all deductibles and copays. Note however, that the supplemental policies will not pay for services that are not covered under Medicare, like dental coverage and hearing aids.

C. Don't know

0

The correct answer is A. For those who are in Traditional Medicare, there will be annual deductibles to both Part A (hospital coverage) and Part B as well as certain co-pays. One way to limit unexpected out-of-pocket costs is to purchase a supplemental policy. The most extensive policies cover almost all deductibles and copays. Note however, that the supplemental policies will not pay for services that are not covered under Medicare, like dental coverage and hearing aids.

The correct answer is A. For those who are in Traditional Medicare, there will be annual deductibles to both Part A (hospital coverage) and Part B as well as certain co-pays. One way to limit unexpected out-of-pocket costs is to purchase a supplemental policy. The most extensive policies cover almost all deductibles and copays. Note however, that the supplemental policies will not pay for services that are not covered under Medicare, like dental coverage and hearing aids.

Question 9

True or false: The total out of pocket medical costs for married couples in retirement is relatively consistent from retiree to retiree.

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. True

0

The correct answer is B. Medical expenses are one of the big unknowns in planning for retirement needs, and costs can vary a tremendous amount. Having comprehensive insurance coverage through a Medicare Supplement policy or Medicare Advantage is one way to make the total out-of-pocket costs more predictable.

B. False

Correct
1

The correct answer is B. Medical expenses are one of the big unknowns in planning for retirement needs, and costs can vary a tremendous amount. Having comprehensive insurance coverage through a Medicare Supplement policy or Medicare Advantage is one way to make the total out-of-pocket costs more predictable.

Should have chosen

C. Don't know

0

The correct answer is B. Medical expenses are one of the big unknowns in planning for retirement needs, and costs can vary a tremendous amount. Having comprehensive insurance coverage through a Medicare Supplement policy or Medicare Advantage is one way to make the total out-of-pocket costs more predictable.

The correct answer is B. Medical expenses are one of the big unknowns in planning for retirement needs, and costs can vary a tremendous amount. Having comprehensive insurance coverage through a Medicare Supplement policy or Medicare Advantage is one way to make the total out-of-pocket costs more predictable.

Question 10

What is the proportion of the population that is going to need assistance with activities of daily living (need long-term care) at some point?

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. 10%

0

The correct answer is D. This fact points out that the majority of Americans will need long-term care at some point in their lives. The odds are so high—everyone needs to consider that this is an issue that is likely to affect you.

B. 25%

0

The correct answer is D. This fact points out that the majority of Americans will need long-term care at some point in their lives. The odds are so high—everyone needs to consider that this is an issue that is likely to affect you.

C. 50%

0

The correct answer is D. This fact points out that the majority of Americans will need long-term care at some point in their lives. The odds are so high—everyone needs to consider that this is an issue that is likely to affect you.

D. 70%

Correct
1

The correct answer is D. This fact points out that the majority of Americans will need long-term care at some point in their lives. The odds are so high—everyone needs to consider that this is an issue that is likely to affect you.

Should have chosen

E. Don't know

0

The correct answer is D. This fact points out that the majority of Americans will need long-term care at some point in their lives. The odds are so high—everyone needs to consider that this is an issue that is likely to affect you.

The correct answer is D. This fact points out that the majority of Americans will need long-term care at some point in their lives. The odds are so high—everyone needs to consider that this is an issue that is likely to affect you.

Question 11

Who pays for the majority of long-term care expenses?

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. Medicare

0

The correct answer is C. Many don’t realize that the majority of institutional care is paid for by Medicaid. Medicaid only pays for care once an individual has essentially run out of assets, and care is limited to those institutions that take Medicaid and have beds available. This is a public policy concern as well, as the Medicaid system is really taxed by these costs—which are likely to continue to grow as baby boomers age.

B. Private payment by individuals

0

The correct answer is C. Many don’t realize that the majority of institutional care is paid for by Medicaid. Medicaid only pays for care once an individual has essentially run out of assets, and care is limited to those institutions that take Medicaid and have beds available. This is a public policy concern as well, as the Medicaid system is really taxed by these costs—which are likely to continue to grow as baby boomers age.

C. Medicaid

Correct
1

The correct answer is C. Many don’t realize that the majority of institutional care is paid for by Medicaid. Medicaid only pays for care once an individual has essentially run out of assets, and care is limited to those institutions that take Medicaid and have beds available. This is a public policy concern as well, as the Medicaid system is really taxed by these costs—which are likely to continue to grow as baby boomers age.

Should have chosen

D. Insurance purchased by individuals

0

The correct answer is C. Many don’t realize that the majority of institutional care is paid for by Medicaid. Medicaid only pays for care once an individual has essentially run out of assets, and care is limited to those institutions that take Medicaid and have beds available. This is a public policy concern as well, as the Medicaid system is really taxed by these costs—which are likely to continue to grow as baby boomers age.

E. Don’t know

0

The correct answer is C. Many don’t realize that the majority of institutional care is paid for by Medicaid. Medicaid only pays for care once an individual has essentially run out of assets, and care is limited to those institutions that take Medicaid and have beds available. This is a public policy concern as well, as the Medicaid system is really taxed by these costs—which are likely to continue to grow as baby boomers age.

The correct answer is C. Many don’t realize that the majority of institutional care is paid for by Medicaid. Medicaid only pays for care once an individual has essentially run out of assets, and care is limited to those institutions that take Medicaid and have beds available. This is a public policy concern as well, as the Medicaid system is really taxed by these costs—which are likely to continue to grow as baby boomers age.

Question 12

Who provides the majority of long-term care?

Score: 0 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. Family members

0

The correct answer is A. Most long-term care services are provided outside of an institutional setting by family members. Family caregivers undergo a tremendous amount of stress as they manage caregiving responsibilities along with work and other family responsibilities.

Should have chosen

B. Nursing homes

Incorrect
0

The correct answer is A. Most long-term care services are provided outside of an institutional setting by family members. Family caregivers undergo a tremendous amount of stress as they manage caregiving responsibilities along with work and other family responsibilities.

C. Assisted living facilities

0

The correct answer is A. Most long-term care services are provided outside of an institutional setting by family members. Family caregivers undergo a tremendous amount of stress as they manage caregiving responsibilities along with work and other family responsibilities.

D. Hospitals

0

The correct answer is A. Most long-term care services are provided outside of an institutional setting by family members. Family caregivers undergo a tremendous amount of stress as they manage caregiving responsibilities along with work and other family responsibilities.

E. Don’t know

0

The correct answer is A. Most long-term care services are provided outside of an institutional setting by family members. Family caregivers undergo a tremendous amount of stress as they manage caregiving responsibilities along with work and other family responsibilities.

The correct answer is A. Most long-term care services are provided outside of an institutional setting by family members. Family caregivers undergo a tremendous amount of stress as they manage caregiving responsibilities along with work and other family responsibilities.

Question 13

Long-term care insurance is intended to cover…

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. Custodial care and any post surgical care

0

The correct answer is C. Long-term care insurance is intended to provide a funding vehicle for custodial and semi-skilled nursing care, to reduce the burden on family members. If funding is available to pay for care, the insured is less likely to end up spending down all of their resources at the end of their life. It also provides for more care options.

B. Custodial care and any life sustaining measures such as IVs

0

The correct answer is C. Long-term care insurance is intended to provide a funding vehicle for custodial and semi-skilled nursing care, to reduce the burden on family members. If funding is available to pay for care, the insured is less likely to end up spending down all of their resources at the end of their life. It also provides for more care options.

C. Custodial care and semi-skilled nursing care

Correct
1

The correct answer is C. Long-term care insurance is intended to provide a funding vehicle for custodial and semi-skilled nursing care, to reduce the burden on family members. If funding is available to pay for care, the insured is less likely to end up spending down all of their resources at the end of their life. It also provides for more care options.

Should have chosen

D. Only custodial care

0

The correct answer is C. Long-term care insurance is intended to provide a funding vehicle for custodial and semi-skilled nursing care, to reduce the burden on family members. If funding is available to pay for care, the insured is less likely to end up spending down all of their resources at the end of their life. It also provides for more care options.

E. Don’t know

0

The correct answer is C. Long-term care insurance is intended to provide a funding vehicle for custodial and semi-skilled nursing care, to reduce the burden on family members. If funding is available to pay for care, the insured is less likely to end up spending down all of their resources at the end of their life. It also provides for more care options.

The correct answer is C. Long-term care insurance is intended to provide a funding vehicle for custodial and semi-skilled nursing care, to reduce the burden on family members. If funding is available to pay for care, the insured is less likely to end up spending down all of their resources at the end of their life. It also provides for more care options.

Question 14

True or false: Medicare typically pays for the costs of a nursing home for one year.

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. True

0

The correct answer is B. Many people are not aware that Medicare does not typically pay for costs of nursing care. There is an exception for those needing skilled nursing care after a 3-day (or longer) stay in a hospital. In this case, skilled nursing care may be provided for up to 100 days.

B. False

Correct
1

The correct answer is B. Many people are not aware that Medicare does not typically pay for costs of nursing care. There is an exception for those needing skilled nursing care after a 3-day (or longer) stay in a hospital. In this case, skilled nursing care may be provided for up to 100 days.

Should have chosen

C. Don't know

0

The correct answer is B. Many people are not aware that Medicare does not typically pay for costs of nursing care. There is an exception for those needing skilled nursing care after a 3-day (or longer) stay in a hospital. In this case, skilled nursing care may be provided for up to 100 days.

The correct answer is B. Many people are not aware that Medicare does not typically pay for costs of nursing care. There is an exception for those needing skilled nursing care after a 3-day (or longer) stay in a hospital. In this case, skilled nursing care may be provided for up to 100 days.

Question 15

In order to avoid a penalty tax, distributions from an IRA must begin for the year in which you attain age…

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. 55

0

The correct answer is D. Minimum distributions must be made from an IRA for the year in which a participant attains age 70½. However, the first distribution can actually be deferred to the following April 1st. It is important to understand these rules as failure to meet the required minimum distribution rules can result in a penalty of 50% of the amount that was supposed to be distributed!

B. 59 1/2

0

The correct answer is D. Minimum distributions must be made from an IRA for the year in which a participant attains age 70½. However, the first distribution can actually be deferred to the following April 1st. It is important to understand these rules as failure to meet the required minimum distribution rules can result in a penalty of 50% of the amount that was supposed to be distributed!

C. 65

0

The correct answer is D. Minimum distributions must be made from an IRA for the year in which a participant attains age 70½. However, the first distribution can actually be deferred to the following April 1st. It is important to understand these rules as failure to meet the required minimum distribution rules can result in a penalty of 50% of the amount that was supposed to be distributed!

D. 70 1/2

Correct
1

The correct answer is D. Minimum distributions must be made from an IRA for the year in which a participant attains age 70½. However, the first distribution can actually be deferred to the following April 1st. It is important to understand these rules as failure to meet the required minimum distribution rules can result in a penalty of 50% of the amount that was supposed to be distributed!

Should have chosen

E. Don’t know

0

The correct answer is D. Minimum distributions must be made from an IRA for the year in which a participant attains age 70½. However, the first distribution can actually be deferred to the following April 1st. It is important to understand these rules as failure to meet the required minimum distribution rules can result in a penalty of 50% of the amount that was supposed to be distributed!

The correct answer is D. Minimum distributions must be made from an IRA for the year in which a participant attains age 70½. However, the first distribution can actually be deferred to the following April 1st. It is important to understand these rules as failure to meet the required minimum distribution rules can result in a penalty of 50% of the amount that was supposed to be distributed!

Question 16

Which one of the following statements concerning the federal income tax treatment of distributions to a 65-year-old retiree is true?

Score: 0 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. All distributions from a Roth IRA that has been maintained for more than five years will be tax-free

0

The correct answer is A. All distributions from a Roth IRA for an individual who is at least age 59½ and has had the account for 5 years will be tax-free.

Should have chosen

B. All distributions from a traditional IRA created with tax deductible contributions will be taxed as long-term capital gains

Incorrect
0

The correct answer is A. All distributions from a Roth IRA for an individual who is at least age 59½ and has had the account for 5 years will be tax-free.

C. Distributions from a traditional IRA prior to age 70 1/2 will be subject to an additional 10% penalty tax

0

The correct answer is A. All distributions from a Roth IRA for an individual who is at least age 59½ and has had the account for 5 years will be tax-free.

D. Don’t know

0

The correct answer is A. All distributions from a Roth IRA for an individual who is at least age 59½ and has had the account for 5 years will be tax-free.

The correct answer is A. All distributions from a Roth IRA for an individual who is at least age 59½ and has had the account for 5 years will be tax-free.

Question 17

True or false:  An individual who is age 75 can still make a Roth IRA contribution if he or she has earnings from work and does not exceed the earnings limit.

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. True

Correct
1

The correct answer is A. Many people work part-time or participate in some self-employed activity in retirement. Many don’t realize that you can continue to contribute to a Roth IRA even after age 70½ as long as you have earnings from employment and don’t exceed the earnings threshold. Taking full advantage of Roth IRAs even at an advanced age makes sense as it converts investments that would otherwise be taxable to tax-free. Roth IRAs are not subject to the required minimum distribution requirements during the life of the participant meaning that the assets can continue to grow tax-free in the Roth IRA until distributions are needed.

Should have chosen

B. False

0

The correct answer is A. Many people work part-time or participate in some self-employed activity in retirement. Many don’t realize that you can continue to contribute to a Roth IRA even after age 70½ as long as you have earnings from employment and don’t exceed the earnings threshold. Taking full advantage of Roth IRAs even at an advanced age makes sense as it converts investments that would otherwise be taxable to tax-free. Roth IRAs are not subject to the required minimum distribution requirements during the life of the participant meaning that the assets can continue to grow tax-free in the Roth IRA until distributions are needed.

C. Don't know

0

The correct answer is A. Many people work part-time or participate in some self-employed activity in retirement. Many don’t realize that you can continue to contribute to a Roth IRA even after age 70½ as long as you have earnings from employment and don’t exceed the earnings threshold. Taking full advantage of Roth IRAs even at an advanced age makes sense as it converts investments that would otherwise be taxable to tax-free. Roth IRAs are not subject to the required minimum distribution requirements during the life of the participant meaning that the assets can continue to grow tax-free in the Roth IRA until distributions are needed.

The correct answer is A. Many people work part-time or participate in some self-employed activity in retirement. Many don’t realize that you can continue to contribute to a Roth IRA even after age 70½ as long as you have earnings from employment and don’t exceed the earnings threshold. Taking full advantage of Roth IRAs even at an advanced age makes sense as it converts investments that would otherwise be taxable to tax-free. Roth IRAs are not subject to the required minimum distribution requirements during the life of the participant meaning that the assets can continue to grow tax-free in the Roth IRA until distributions are needed.

Question 18

Converting a portion of a traditional IRA into a Roth IRA is a good idea this year if…

Score: 0 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. You have more taxable income than usual and your marginal tax rate is higher than normal

Incorrect
0

The correct answer is B. If you have money in a traditional IRA, any withdrawals are going to be taxable. A useful tax rule-of-thumb is take withdrawals from these plans at a lower-than-normal tax rate. If you don’t need withdrawals to live on—even better convert it to a Roth IRA (and pay taxes at the low rate) and future earnings are now tax-free.

B. You have a big tax deduction this year and your marginal tax rate is lower than normal

0

The correct answer is B. If you have money in a traditional IRA, any withdrawals are going to be taxable. A useful tax rule-of-thumb is take withdrawals from these plans at a lower-than-normal tax rate. If you don’t need withdrawals to live on—even better convert it to a Roth IRA (and pay taxes at the low rate) and future earnings are now tax-free.

Should have chosen

C. The value of the assets in your IRA have remained the same for 10 years

0

The correct answer is B. If you have money in a traditional IRA, any withdrawals are going to be taxable. A useful tax rule-of-thumb is take withdrawals from these plans at a lower-than-normal tax rate. If you don’t need withdrawals to live on—even better convert it to a Roth IRA (and pay taxes at the low rate) and future earnings are now tax-free.

D. Don’t know

0

The correct answer is B. If you have money in a traditional IRA, any withdrawals are going to be taxable. A useful tax rule-of-thumb is take withdrawals from these plans at a lower-than-normal tax rate. If you don’t need withdrawals to live on—even better convert it to a Roth IRA (and pay taxes at the low rate) and future earnings are now tax-free.

The correct answer is B. If you have money in a traditional IRA, any withdrawals are going to be taxable. A useful tax rule-of-thumb is take withdrawals from these plans at a lower-than-normal tax rate. If you don’t need withdrawals to live on—even better convert it to a Roth IRA (and pay taxes at the low rate) and future earnings are now tax-free.

Question 19

If a participant is given the choice of a lump sum or a life annuity from a company sponsored retirement plan, the life annuity is likely to be the better choice if the participant is most concerned about…

Score: 0 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. Leaving money to children

0

The correct answer is B. Choosing the life annuity provides a specified benefit amount for life, essentially guaranteeing income to meet basic needs. On the flipside, it eliminates the possibility of growth in income, flexibility to change strategies, or leaving the asset to children. The annuity provides certainty and simplicity. Even though the lump sum may better meet these other goals, it presupposes that the retiree has the skill to make the right investment decisions and understands all the factors relevant in choosing how much can be withdrawn each year.

B. Having enough money to meet basic expenses

0

The correct answer is B. Choosing the life annuity provides a specified benefit amount for life, essentially guaranteeing income to meet basic needs. On the flipside, it eliminates the possibility of growth in income, flexibility to change strategies, or leaving the asset to children. The annuity provides certainty and simplicity. Even though the lump sum may better meet these other goals, it presupposes that the retiree has the skill to make the right investment decisions and understands all the factors relevant in choosing how much can be withdrawn each year.

Should have chosen

C. Having flexibility to meet changing income needs

0

The correct answer is B. Choosing the life annuity provides a specified benefit amount for life, essentially guaranteeing income to meet basic needs. On the flipside, it eliminates the possibility of growth in income, flexibility to change strategies, or leaving the asset to children. The annuity provides certainty and simplicity. Even though the lump sum may better meet these other goals, it presupposes that the retiree has the skill to make the right investment decisions and understands all the factors relevant in choosing how much can be withdrawn each year.

D. Getting an increasing stream of income over retirement

Incorrect
0

The correct answer is B. Choosing the life annuity provides a specified benefit amount for life, essentially guaranteeing income to meet basic needs. On the flipside, it eliminates the possibility of growth in income, flexibility to change strategies, or leaving the asset to children. The annuity provides certainty and simplicity. Even though the lump sum may better meet these other goals, it presupposes that the retiree has the skill to make the right investment decisions and understands all the factors relevant in choosing how much can be withdrawn each year.

E. Don’t know

0

The correct answer is B. Choosing the life annuity provides a specified benefit amount for life, essentially guaranteeing income to meet basic needs. On the flipside, it eliminates the possibility of growth in income, flexibility to change strategies, or leaving the asset to children. The annuity provides certainty and simplicity. Even though the lump sum may better meet these other goals, it presupposes that the retiree has the skill to make the right investment decisions and understands all the factors relevant in choosing how much can be withdrawn each year.

The correct answer is B. Choosing the life annuity provides a specified benefit amount for life, essentially guaranteeing income to meet basic needs. On the flipside, it eliminates the possibility of growth in income, flexibility to change strategies, or leaving the asset to children. The annuity provides certainty and simplicity. Even though the lump sum may better meet these other goals, it presupposes that the retiree has the skill to make the right investment decisions and understands all the factors relevant in choosing how much can be withdrawn each year.

Question 20

If a large public company sponsoring a 401(k) plan files for bankruptcy, employees are…

Score: 0 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. At risk of losing their 401(k) benefits because trust assets will pay creditors first

0

The correct answer is B. When building a retirement income plan, one step is evaluating sources of income and one question to ask is how secure is each source of income. Many don’t realize that 401(k) benefits are held in an irrevocable trust and are outside the claims of the company’s creditors, meaning that the benefits are quite secure. What is uncertain in a 401(k) plan is that the benefit equals the current account balance and the underlying assets change value with market conditions.

B. At no risk of losing their 401(k) benefits because the plan is outside the claims of creditors

0

The correct answer is B. When building a retirement income plan, one step is evaluating sources of income and one question to ask is how secure is each source of income. Many don’t realize that 401(k) benefits are held in an irrevocable trust and are outside the claims of the company’s creditors, meaning that the benefits are quite secure. What is uncertain in a 401(k) plan is that the benefit equals the current account balance and the underlying assets change value with market conditions.

Should have chosen

C. Only at risk of losing their 401(k) benefits if the plan document says the creditors have the right to trust assets

Incorrect
0

The correct answer is B. When building a retirement income plan, one step is evaluating sources of income and one question to ask is how secure is each source of income. Many don’t realize that 401(k) benefits are held in an irrevocable trust and are outside the claims of the company’s creditors, meaning that the benefits are quite secure. What is uncertain in a 401(k) plan is that the benefit equals the current account balance and the underlying assets change value with market conditions.

D. Only at risk of losing their 401(k) benefits if a judge decides that the creditors should be paid first

0

The correct answer is B. When building a retirement income plan, one step is evaluating sources of income and one question to ask is how secure is each source of income. Many don’t realize that 401(k) benefits are held in an irrevocable trust and are outside the claims of the company’s creditors, meaning that the benefits are quite secure. What is uncertain in a 401(k) plan is that the benefit equals the current account balance and the underlying assets change value with market conditions.

E. Don’t know

0

The correct answer is B. When building a retirement income plan, one step is evaluating sources of income and one question to ask is how secure is each source of income. Many don’t realize that 401(k) benefits are held in an irrevocable trust and are outside the claims of the company’s creditors, meaning that the benefits are quite secure. What is uncertain in a 401(k) plan is that the benefit equals the current account balance and the underlying assets change value with market conditions.

The correct answer is B. When building a retirement income plan, one step is evaluating sources of income and one question to ask is how secure is each source of income. Many don’t realize that 401(k) benefits are held in an irrevocable trust and are outside the claims of the company’s creditors, meaning that the benefits are quite secure. What is uncertain in a 401(k) plan is that the benefit equals the current account balance and the underlying assets change value with market conditions.

Question 21

Which of the following types of long-term bonds typically has the highest yield?

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. AAA-rated corporate bonds

0

The correct answer is B. Bonds provide greater returns as the risk increases. Treasury bonds are backed by the Federal Government and AAA rated corporate bonds have been determined by the rating agencies to have a low probability of default by the corporate entity. As the ratings for corporate bonds get lower, the risk of default increases and the return to compensate investors for taking that risk increases.

B. B-rated corporate bonds

Correct
1

The correct answer is B. Bonds provide greater returns as the risk increases. Treasury bonds are backed by the Federal Government and AAA rated corporate bonds have been determined by the rating agencies to have a low probability of default by the corporate entity. As the ratings for corporate bonds get lower, the risk of default increases and the return to compensate investors for taking that risk increases.

Should have chosen

C. Treasury bonds 

0

The correct answer is B. Bonds provide greater returns as the risk increases. Treasury bonds are backed by the Federal Government and AAA rated corporate bonds have been determined by the rating agencies to have a low probability of default by the corporate entity. As the ratings for corporate bonds get lower, the risk of default increases and the return to compensate investors for taking that risk increases.

D. Don’t know

0

The correct answer is B. Bonds provide greater returns as the risk increases. Treasury bonds are backed by the Federal Government and AAA rated corporate bonds have been determined by the rating agencies to have a low probability of default by the corporate entity. As the ratings for corporate bonds get lower, the risk of default increases and the return to compensate investors for taking that risk increases.

The correct answer is B. Bonds provide greater returns as the risk increases. Treasury bonds are backed by the Federal Government and AAA rated corporate bonds have been determined by the rating agencies to have a low probability of default by the corporate entity. As the ratings for corporate bonds get lower, the risk of default increases and the return to compensate investors for taking that risk increases.

Question 22

Suppose that the interest rate on your savings account was 2% per year and inflation was 4% per year.  After one year, would you be able to buy more than, exactly the same as, or less than today with the money in this account?

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. More than today

0

The correct answer is C. This is one of the standard questions for testing financial literacy. It checks the basic understanding of inflation. If prices rise faster (4%) than earnings on investments (2%) the amount of goods that can be purchased in the future is less than today. When investing for a long time horizon (like retirement) investing too conservatively can mean that the portfolio value may not even keep up with inflation.

B. Exactly the same as today

0

The correct answer is C. This is one of the standard questions for testing financial literacy. It checks the basic understanding of inflation. If prices rise faster (4%) than earnings on investments (2%) the amount of goods that can be purchased in the future is less than today. When investing for a long time horizon (like retirement) investing too conservatively can mean that the portfolio value may not even keep up with inflation.

C. Less than today

Correct
1

The correct answer is C. This is one of the standard questions for testing financial literacy. It checks the basic understanding of inflation. If prices rise faster (4%) than earnings on investments (2%) the amount of goods that can be purchased in the future is less than today. When investing for a long time horizon (like retirement) investing too conservatively can mean that the portfolio value may not even keep up with inflation.

Should have chosen

D. Don’t know

0

The correct answer is C. This is one of the standard questions for testing financial literacy. It checks the basic understanding of inflation. If prices rise faster (4%) than earnings on investments (2%) the amount of goods that can be purchased in the future is less than today. When investing for a long time horizon (like retirement) investing too conservatively can mean that the portfolio value may not even keep up with inflation.

The correct answer is C. This is one of the standard questions for testing financial literacy. It checks the basic understanding of inflation. If prices rise faster (4%) than earnings on investments (2%) the amount of goods that can be purchased in the future is less than today. When investing for a long time horizon (like retirement) investing too conservatively can mean that the portfolio value may not even keep up with inflation.

Question 23

Most experts agree that the best way to protect against inflation is to have a…

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. Diversified portfolio of stocks

Correct
1

The correct answer is A. There is some disagreement about how well stock investments protect an investor from inflation. But as compared to bonds and CDs there is little disagreement that stock investments are superior.

Should have chosen

B. Diversified portfolio of bonds

0

The correct answer is A. There is some disagreement about how well stock investments protect an investor from inflation. But as compared to bonds and CDs there is little disagreement that stock investments are superior.

C. Diversified portfolio of CDs (certificates of deposit)

0

The correct answer is A. There is some disagreement about how well stock investments protect an investor from inflation. But as compared to bonds and CDs there is little disagreement that stock investments are superior.

D. Don’t know

0

The correct answer is A. There is some disagreement about how well stock investments protect an investor from inflation. But as compared to bonds and CDs there is little disagreement that stock investments are superior.

The correct answer is A. There is some disagreement about how well stock investments protect an investor from inflation. But as compared to bonds and CDs there is little disagreement that stock investments are superior.

Question 24

True or false: Buying a single company’s stock usually provides a safer return than a stock mutual fund.

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. True

0

The correct answer is B. This is another question commonly used to test basic financial literacy. The concept of diversification is important, as certain risks can be minimized by holding a portfolio of stocks. Individual companies have many risks around product offerings, legal exposure, business cycles and others that make holding one stock too risky. Financial advisors worry that people end up with too much invested in the company stock of their employer.

B. False

Correct
1

The correct answer is B. This is another question commonly used to test basic financial literacy. The concept of diversification is important, as certain risks can be minimized by holding a portfolio of stocks. Individual companies have many risks around product offerings, legal exposure, business cycles and others that make holding one stock too risky. Financial advisors worry that people end up with too much invested in the company stock of their employer.

Should have chosen

C. Don't know

0

The correct answer is B. This is another question commonly used to test basic financial literacy. The concept of diversification is important, as certain risks can be minimized by holding a portfolio of stocks. Individual companies have many risks around product offerings, legal exposure, business cycles and others that make holding one stock too risky. Financial advisors worry that people end up with too much invested in the company stock of their employer.

The correct answer is B. This is another question commonly used to test basic financial literacy. The concept of diversification is important, as certain risks can be minimized by holding a portfolio of stocks. Individual companies have many risks around product offerings, legal exposure, business cycles and others that make holding one stock too risky. Financial advisors worry that people end up with too much invested in the company stock of their employer.

Question 25

If 100% of a mutual fund’s assets are invested in long-term bonds and the investment climate changes so that interest rates rise significantly, then the value of the mutual fund shares…

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. Increase significantly

0

The correct answer is B. Investors often think of bonds as low-risk investments. They forget that the value of bonds vary depending upon the relationship between the interest rate paid by the bonds and the interest rates available in the market. When interest rates are rising—the market is offering higher rates than the bond holdings, reducing the value of the bonds. In retirement income planning sometimes individual bonds are purchased to provide income needs. If the interest and principal of the bond is going to be spent to meet income needs, the price variation of the bond is less important. In this case, what is more important is that bonds can provide specific income with certainty for a predictable cost.

B. Decrease significantly

Correct
1

The correct answer is B. Investors often think of bonds as low-risk investments. They forget that the value of bonds vary depending upon the relationship between the interest rate paid by the bonds and the interest rates available in the market. When interest rates are rising—the market is offering higher rates than the bond holdings, reducing the value of the bonds. In retirement income planning sometimes individual bonds are purchased to provide income needs. If the interest and principal of the bond is going to be spent to meet income needs, the price variation of the bond is less important. In this case, what is more important is that bonds can provide specific income with certainty for a predictable cost.

Should have chosen

C. Will not change at all

0

The correct answer is B. Investors often think of bonds as low-risk investments. They forget that the value of bonds vary depending upon the relationship between the interest rate paid by the bonds and the interest rates available in the market. When interest rates are rising—the market is offering higher rates than the bond holdings, reducing the value of the bonds. In retirement income planning sometimes individual bonds are purchased to provide income needs. If the interest and principal of the bond is going to be spent to meet income needs, the price variation of the bond is less important. In this case, what is more important is that bonds can provide specific income with certainty for a predictable cost.

D. May rise or fall depending upon the type of bond

0

The correct answer is B. Investors often think of bonds as low-risk investments. They forget that the value of bonds vary depending upon the relationship between the interest rate paid by the bonds and the interest rates available in the market. When interest rates are rising—the market is offering higher rates than the bond holdings, reducing the value of the bonds. In retirement income planning sometimes individual bonds are purchased to provide income needs. If the interest and principal of the bond is going to be spent to meet income needs, the price variation of the bond is less important. In this case, what is more important is that bonds can provide specific income with certainty for a predictable cost.

E. Don’t know

0

The correct answer is B. Investors often think of bonds as low-risk investments. They forget that the value of bonds vary depending upon the relationship between the interest rate paid by the bonds and the interest rates available in the market. When interest rates are rising—the market is offering higher rates than the bond holdings, reducing the value of the bonds. In retirement income planning sometimes individual bonds are purchased to provide income needs. If the interest and principal of the bond is going to be spent to meet income needs, the price variation of the bond is less important. In this case, what is more important is that bonds can provide specific income with certainty for a predictable cost.

The correct answer is B. Investors often think of bonds as low-risk investments. They forget that the value of bonds vary depending upon the relationship between the interest rate paid by the bonds and the interest rates available in the market. When interest rates are rising—the market is offering higher rates than the bond holdings, reducing the value of the bonds. In retirement income planning sometimes individual bonds are purchased to provide income needs. If the interest and principal of the bond is going to be spent to meet income needs, the price variation of the bond is less important. In this case, what is more important is that bonds can provide specific income with certainty for a predictable cost.

Question 26

Historically, which one of the following generates the highest returns over a long time period?

Score: 0 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. Small company stock funds

0

The correct answer is A. Small company stock funds carry more risk, which means that performance varies a lot from year to year. But on average, to compensate for that risk, returns are generally higher. From 1926 through 2012, small-cap stocks averaged an annual return of 12.28% compared to 10.08% for large cap, according to Morningstar Ibbotson data.

Should have chosen

B. Large company stock funds

0

The correct answer is A. Small company stock funds carry more risk, which means that performance varies a lot from year to year. But on average, to compensate for that risk, returns are generally higher. From 1926 through 2012, small-cap stocks averaged an annual return of 12.28% compared to 10.08% for large cap, according to Morningstar Ibbotson data.

C. Dividend paying stock funds

Incorrect
0

The correct answer is A. Small company stock funds carry more risk, which means that performance varies a lot from year to year. But on average, to compensate for that risk, returns are generally higher. From 1926 through 2012, small-cap stocks averaged an annual return of 12.28% compared to 10.08% for large cap, according to Morningstar Ibbotson data.

D. High yield bond funds

0

The correct answer is A. Small company stock funds carry more risk, which means that performance varies a lot from year to year. But on average, to compensate for that risk, returns are generally higher. From 1926 through 2012, small-cap stocks averaged an annual return of 12.28% compared to 10.08% for large cap, according to Morningstar Ibbotson data.

E. Don’t know

0

The correct answer is A. Small company stock funds carry more risk, which means that performance varies a lot from year to year. But on average, to compensate for that risk, returns are generally higher. From 1926 through 2012, small-cap stocks averaged an annual return of 12.28% compared to 10.08% for large cap, according to Morningstar Ibbotson data.

The correct answer is A. Small company stock funds carry more risk, which means that performance varies a lot from year to year. But on average, to compensate for that risk, returns are generally higher. From 1926 through 2012, small-cap stocks averaged an annual return of 12.28% compared to 10.08% for large cap, according to Morningstar Ibbotson data.

Question 27

True or false: Exchange traded funds generally have higher expenses than actively managed mutual funds.

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. True

0

The correct answer is B. One of the factors driving investors to exchange traded funds is the lower costs. This is in part due to the fact that most are “indexed” versus actively managed funds. Indexed funds pick a portfolio based on external factors and do not require the managers to execute discretion in picking the right stocks—lowering management fees.

B. False

Correct
1

The correct answer is B. One of the factors driving investors to exchange traded funds is the lower costs. This is in part due to the fact that most are “indexed” versus actively managed funds. Indexed funds pick a portfolio based on external factors and do not require the managers to execute discretion in picking the right stocks—lowering management fees.

Should have chosen

C. Don't know

0

The correct answer is B. One of the factors driving investors to exchange traded funds is the lower costs. This is in part due to the fact that most are “indexed” versus actively managed funds. Indexed funds pick a portfolio based on external factors and do not require the managers to execute discretion in picking the right stocks—lowering management fees.

The correct answer is B. One of the factors driving investors to exchange traded funds is the lower costs. This is in part due to the fact that most are “indexed” versus actively managed funds. Indexed funds pick a portfolio based on external factors and do not require the managers to execute discretion in picking the right stocks—lowering management fees.

Question 28

A PE ratio means…

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. Profits to expense

0

The correct answer is B. Price to earnings is one of those indicators that investors keep a close watch on—as it is an indication of whether the stock is a good value.

B. Price to earnings

Correct
1

The correct answer is B. Price to earnings is one of those indicators that investors keep a close watch on—as it is an indication of whether the stock is a good value.

Should have chosen

C. Par value to earnings

0

The correct answer is B. Price to earnings is one of those indicators that investors keep a close watch on—as it is an indication of whether the stock is a good value.

D. Price to expense

0

The correct answer is B. Price to earnings is one of those indicators that investors keep a close watch on—as it is an indication of whether the stock is a good value.

E. Don’t know

0

The correct answer is B. Price to earnings is one of those indicators that investors keep a close watch on—as it is an indication of whether the stock is a good value.

The correct answer is B. Price to earnings is one of those indicators that investors keep a close watch on—as it is an indication of whether the stock is a good value.

Question 29

If you had a well diversified portfolio of 50% stocks and 50% bonds that was worth $100,000 at retirement, based on historical returns in the United States the most you can afford to withdraw is ____ plus inflation each year to have 95% chance that your assets will last for 30 years.

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. $2,000

0

The correct answer is B. This question reflects the 4% safe withdrawal rule that has been highly publicized and discussed in the press. The 4% rule is based on research that looks back at investment returns in the 20th century in the U.S. The research indicates that if you retire with $1,000,000, you could afford to take a withdrawal of $40,000 (4%) in the first year of retirement, increase it for inflation each year, and sustain that income stream for 30 years. The rule is good to know as it begins to help retirees understand how much can be safely withdrawn each year. It dispels the common misunderstanding that if the average return on the portfolio was 7%-8% then that amount can be withdrawn each year. Because of the ups and downs of the market, the sustainable withdrawal amount is much less than the average return on the portfolio. The rule also is a quick way to get a sense of just how much income can be provided by a lump sum amount. For example, $1,000,000 under this rule only generates $40,000 of inflation-adjusted income. The research is based on historical returns and many question whether it is sustainable going forward. It’s also just one of many factors that should be considered in determining how much can be withdrawn in retirement.

B. $4,000

Correct
1

The correct answer is B. This question reflects the 4% safe withdrawal rule that has been highly publicized and discussed in the press. The 4% rule is based on research that looks back at investment returns in the 20th century in the U.S. The research indicates that if you retire with $1,000,000, you could afford to take a withdrawal of $40,000 (4%) in the first year of retirement, increase it for inflation each year, and sustain that income stream for 30 years. The rule is good to know as it begins to help retirees understand how much can be safely withdrawn each year. It dispels the common misunderstanding that if the average return on the portfolio was 7%-8% then that amount can be withdrawn each year. Because of the ups and downs of the market, the sustainable withdrawal amount is much less than the average return on the portfolio. The rule also is a quick way to get a sense of just how much income can be provided by a lump sum amount. For example, $1,000,000 under this rule only generates $40,000 of inflation-adjusted income. The research is based on historical returns and many question whether it is sustainable going forward. It’s also just one of many factors that should be considered in determining how much can be withdrawn in retirement.

Should have chosen

C. $6,000

0

The correct answer is B. This question reflects the 4% safe withdrawal rule that has been highly publicized and discussed in the press. The 4% rule is based on research that looks back at investment returns in the 20th century in the U.S. The research indicates that if you retire with $1,000,000, you could afford to take a withdrawal of $40,000 (4%) in the first year of retirement, increase it for inflation each year, and sustain that income stream for 30 years. The rule is good to know as it begins to help retirees understand how much can be safely withdrawn each year. It dispels the common misunderstanding that if the average return on the portfolio was 7%-8% then that amount can be withdrawn each year. Because of the ups and downs of the market, the sustainable withdrawal amount is much less than the average return on the portfolio. The rule also is a quick way to get a sense of just how much income can be provided by a lump sum amount. For example, $1,000,000 under this rule only generates $40,000 of inflation-adjusted income. The research is based on historical returns and many question whether it is sustainable going forward. It’s also just one of many factors that should be considered in determining how much can be withdrawn in retirement.

D. $8,000

0

The correct answer is B. This question reflects the 4% safe withdrawal rule that has been highly publicized and discussed in the press. The 4% rule is based on research that looks back at investment returns in the 20th century in the U.S. The research indicates that if you retire with $1,000,000, you could afford to take a withdrawal of $40,000 (4%) in the first year of retirement, increase it for inflation each year, and sustain that income stream for 30 years. The rule is good to know as it begins to help retirees understand how much can be safely withdrawn each year. It dispels the common misunderstanding that if the average return on the portfolio was 7%-8% then that amount can be withdrawn each year. Because of the ups and downs of the market, the sustainable withdrawal amount is much less than the average return on the portfolio. The rule also is a quick way to get a sense of just how much income can be provided by a lump sum amount. For example, $1,000,000 under this rule only generates $40,000 of inflation-adjusted income. The research is based on historical returns and many question whether it is sustainable going forward. It’s also just one of many factors that should be considered in determining how much can be withdrawn in retirement.

E. Don’t know

0

The correct answer is B. This question reflects the 4% safe withdrawal rule that has been highly publicized and discussed in the press. The 4% rule is based on research that looks back at investment returns in the 20th century in the U.S. The research indicates that if you retire with $1,000,000, you could afford to take a withdrawal of $40,000 (4%) in the first year of retirement, increase it for inflation each year, and sustain that income stream for 30 years. The rule is good to know as it begins to help retirees understand how much can be safely withdrawn each year. It dispels the common misunderstanding that if the average return on the portfolio was 7%-8% then that amount can be withdrawn each year. Because of the ups and downs of the market, the sustainable withdrawal amount is much less than the average return on the portfolio. The rule also is a quick way to get a sense of just how much income can be provided by a lump sum amount. For example, $1,000,000 under this rule only generates $40,000 of inflation-adjusted income. The research is based on historical returns and many question whether it is sustainable going forward. It’s also just one of many factors that should be considered in determining how much can be withdrawn in retirement.

The correct answer is B. This question reflects the 4% safe withdrawal rule that has been highly publicized and discussed in the press. The 4% rule is based on research that looks back at investment returns in the 20th century in the U.S. The research indicates that if you retire with $1,000,000, you could afford to take a withdrawal of $40,000 (4%) in the first year of retirement, increase it for inflation each year, and sustain that income stream for 30 years. The rule is good to know as it begins to help retirees understand how much can be safely withdrawn each year. It dispels the common misunderstanding that if the average return on the portfolio was 7%-8% then that amount can be withdrawn each year. Because of the ups and downs of the market, the sustainable withdrawal amount is much less than the average return on the portfolio. The rule also is a quick way to get a sense of just how much income can be provided by a lump sum amount. For example, $1,000,000 under this rule only generates $40,000 of inflation-adjusted income. The research is based on historical returns and many question whether it is sustainable going forward. It’s also just one of many factors that should be considered in determining how much can be withdrawn in retirement.

Question 30

To maximize the withdrawal rate from a portfolio over a 30-year retirement period, it is best to hold ___ in equities throughout retirement.

Score: 0 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. 0-10%

0

The correct answer is C. Research has shown that holding significant equities in a retirement portfolio allows the individual to maximize withdrawals over lifetime and still have a good chance of leaving a substantial amount to heirs. When the equity percentage is too high (90 to 100%), the volatility in the returns increases the chances of depleting the portfolio.

B. 25-35%

Incorrect
0

The correct answer is C. Research has shown that holding significant equities in a retirement portfolio allows the individual to maximize withdrawals over lifetime and still have a good chance of leaving a substantial amount to heirs. When the equity percentage is too high (90 to 100%), the volatility in the returns increases the chances of depleting the portfolio.

C. 50-60%

0

The correct answer is C. Research has shown that holding significant equities in a retirement portfolio allows the individual to maximize withdrawals over lifetime and still have a good chance of leaving a substantial amount to heirs. When the equity percentage is too high (90 to 100%), the volatility in the returns increases the chances of depleting the portfolio.

Should have chosen

D. 90-100%

0

The correct answer is C. Research has shown that holding significant equities in a retirement portfolio allows the individual to maximize withdrawals over lifetime and still have a good chance of leaving a substantial amount to heirs. When the equity percentage is too high (90 to 100%), the volatility in the returns increases the chances of depleting the portfolio.

E. Don’t know

0

The correct answer is C. Research has shown that holding significant equities in a retirement portfolio allows the individual to maximize withdrawals over lifetime and still have a good chance of leaving a substantial amount to heirs. When the equity percentage is too high (90 to 100%), the volatility in the returns increases the chances of depleting the portfolio.

The correct answer is C. Research has shown that holding significant equities in a retirement portfolio allows the individual to maximize withdrawals over lifetime and still have a good chance of leaving a substantial amount to heirs. When the equity percentage is too high (90 to 100%), the volatility in the returns increases the chances of depleting the portfolio.

Question 31

True or false: Taking a portion (20-40%) of a retirement portfolio and buying a life annuity can protect against the uncertainty of life expectancy, ensuring that a basic level of spending is available throughout retirement.

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. True

Correct
1

The correct answer is A. A life annuity pays the annuitant for as long as he or she lives. Taking a portion of a portfolio and purchasing an annuity ensures that even if the portfolio is depleted, the annuity will continue to pay out monthly benefits. Deferring Social Security benefits to 70 (which increases the annuity payments) and electing a life annuity option with a pension at work are other ways to increase guaranteed lifetime income.

Should have chosen

B. False

0

The correct answer is A. A life annuity pays the annuitant for as long as he or she lives. Taking a portion of a portfolio and purchasing an annuity ensures that even if the portfolio is depleted, the annuity will continue to pay out monthly benefits. Deferring Social Security benefits to 70 (which increases the annuity payments) and electing a life annuity option with a pension at work are other ways to increase guaranteed lifetime income.

C. Don't know

0

The correct answer is A. A life annuity pays the annuitant for as long as he or she lives. Taking a portion of a portfolio and purchasing an annuity ensures that even if the portfolio is depleted, the annuity will continue to pay out monthly benefits. Deferring Social Security benefits to 70 (which increases the annuity payments) and electing a life annuity option with a pension at work are other ways to increase guaranteed lifetime income.

The correct answer is A. A life annuity pays the annuitant for as long as he or she lives. Taking a portion of a portfolio and purchasing an annuity ensures that even if the portfolio is depleted, the annuity will continue to pay out monthly benefits. Deferring Social Security benefits to 70 (which increases the annuity payments) and electing a life annuity option with a pension at work are other ways to increase guaranteed lifetime income.

Question 32

Recent research has shown that a person planning to retire at age 65 should take the least amount of investment risk at:

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. Age 50

0

The correct answer is B. The long-held notion that exposure to equities (stocks) should continue to decrease throughout retirement has been dispelled by recent research. In fact, the research shows that the equity exposure should be lowest in the few years prior to and after retirement. As retirement progresses, a retiree can actually afford to increase exposure to equities. A strategy that includes equities and life annuities would have this natural increasing allocation to equities as the value of the annuities decreases as the retiree ages and there are fewer remaining payments.

B. Age 65 

Correct
1

The correct answer is B. The long-held notion that exposure to equities (stocks) should continue to decrease throughout retirement has been dispelled by recent research. In fact, the research shows that the equity exposure should be lowest in the few years prior to and after retirement. As retirement progresses, a retiree can actually afford to increase exposure to equities. A strategy that includes equities and life annuities would have this natural increasing allocation to equities as the value of the annuities decreases as the retiree ages and there are fewer remaining payments.

Should have chosen

C. Age 80

0

The correct answer is B. The long-held notion that exposure to equities (stocks) should continue to decrease throughout retirement has been dispelled by recent research. In fact, the research shows that the equity exposure should be lowest in the few years prior to and after retirement. As retirement progresses, a retiree can actually afford to increase exposure to equities. A strategy that includes equities and life annuities would have this natural increasing allocation to equities as the value of the annuities decreases as the retiree ages and there are fewer remaining payments.

D. Don’t know

0

The correct answer is B. The long-held notion that exposure to equities (stocks) should continue to decrease throughout retirement has been dispelled by recent research. In fact, the research shows that the equity exposure should be lowest in the few years prior to and after retirement. As retirement progresses, a retiree can actually afford to increase exposure to equities. A strategy that includes equities and life annuities would have this natural increasing allocation to equities as the value of the annuities decreases as the retiree ages and there are fewer remaining payments.

The correct answer is B. The long-held notion that exposure to equities (stocks) should continue to decrease throughout retirement has been dispelled by recent research. In fact, the research shows that the equity exposure should be lowest in the few years prior to and after retirement. As retirement progresses, a retiree can actually afford to increase exposure to equities. A strategy that includes equities and life annuities would have this natural increasing allocation to equities as the value of the annuities decreases as the retiree ages and there are fewer remaining payments.

Question 33

Which of the following strategies is least likely to improve retirement security?

Score: 0 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. Saving an additional 3% of salary in the five years prior to retirement

0

The correct answer is A. This is an important one to understand. Working longer and deferring Social Security are the two best ways to improve financial security. Saving a little bit more in the years just prior to retirement will not have a big impact on retirement savings as the money does not have a lot of time to grow with investment earnings.

Should have chosen

B. Working for two years past the planned retirement date

0

The correct answer is A. This is an important one to understand. Working longer and deferring Social Security are the two best ways to improve financial security. Saving a little bit more in the years just prior to retirement will not have a big impact on retirement savings as the money does not have a lot of time to grow with investment earnings.

C. Deferring Social Security benefits for two years longer than originally planned

Incorrect
0

The correct answer is A. This is an important one to understand. Working longer and deferring Social Security are the two best ways to improve financial security. Saving a little bit more in the years just prior to retirement will not have a big impact on retirement savings as the money does not have a lot of time to grow with investment earnings.

D. Don’t know

0

The correct answer is A. This is an important one to understand. Working longer and deferring Social Security are the two best ways to improve financial security. Saving a little bit more in the years just prior to retirement will not have a big impact on retirement savings as the money does not have a lot of time to grow with investment earnings.

The correct answer is A. This is an important one to understand. Working longer and deferring Social Security are the two best ways to improve financial security. Saving a little bit more in the years just prior to retirement will not have a big impact on retirement savings as the money does not have a lot of time to grow with investment earnings.

Question 34

The lifetime income payout rate (the annual annuity payment as a percentage of the purchase price) for an immediate income annuity for a 65-year-old male today is roughly…

Score: 0 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. 3-4%

Incorrect
0

The correct answer is B. This is a hard question, but if a retiree is considering purchasing a life annuity as part of a retirement plan, it is helpful to know how much it will cost. If the safe withdrawal rate from a portfolio is 4% and the payout rate for an annuity for a male age 65 is 6% to 7% the annuity begins to look attractive considering it is low risk and requires no ongoing consideration while investing the portfolio is full of complexity.

B. 6-7%

0

The correct answer is B. This is a hard question, but if a retiree is considering purchasing a life annuity as part of a retirement plan, it is helpful to know how much it will cost. If the safe withdrawal rate from a portfolio is 4% and the payout rate for an annuity for a male age 65 is 6% to 7% the annuity begins to look attractive considering it is low risk and requires no ongoing consideration while investing the portfolio is full of complexity.

Should have chosen

C. 10-12%

0

The correct answer is B. This is a hard question, but if a retiree is considering purchasing a life annuity as part of a retirement plan, it is helpful to know how much it will cost. If the safe withdrawal rate from a portfolio is 4% and the payout rate for an annuity for a male age 65 is 6% to 7% the annuity begins to look attractive considering it is low risk and requires no ongoing consideration while investing the portfolio is full of complexity.

D. 14-15%

0

The correct answer is B. This is a hard question, but if a retiree is considering purchasing a life annuity as part of a retirement plan, it is helpful to know how much it will cost. If the safe withdrawal rate from a portfolio is 4% and the payout rate for an annuity for a male age 65 is 6% to 7% the annuity begins to look attractive considering it is low risk and requires no ongoing consideration while investing the portfolio is full of complexity.

E. Don’t know

0

The correct answer is B. This is a hard question, but if a retiree is considering purchasing a life annuity as part of a retirement plan, it is helpful to know how much it will cost. If the safe withdrawal rate from a portfolio is 4% and the payout rate for an annuity for a male age 65 is 6% to 7% the annuity begins to look attractive considering it is low risk and requires no ongoing consideration while investing the portfolio is full of complexity.

The correct answer is B. This is a hard question, but if a retiree is considering purchasing a life annuity as part of a retirement plan, it is helpful to know how much it will cost. If the safe withdrawal rate from a portfolio is 4% and the payout rate for an annuity for a male age 65 is 6% to 7% the annuity begins to look attractive considering it is low risk and requires no ongoing consideration while investing the portfolio is full of complexity.

Question 35

An immediate income annuity that pays income of $1,000 a month is generally going to be more expensive…

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. The younger the owner is when the annuity begins

Correct
1

The correct answer is A. If you are in the market for a life annuity it is good to know something about costs. Annuity payments that begin at a younger age cost more simply because of the longer expected payout period. For that reason, some consider adding additional annuity income at later ages (70 or older) to reduce the cost. This can be done by purchasing an immediate annuity when payments are going to begin or buying a deferred annuity that will begin payments at a later age. Annuities are less expensive for men than women, as women live longer. If interest rates increase and higher interest rates are used to price the annuity the annuity price will become cheaper. Life annuities cost more when benefits are paid over a couple’s joint life expectancy than over a single life expectancy.

Should have chosen

B. For a man rather than for a woman

0

The correct answer is A. If you are in the market for a life annuity it is good to know something about costs. Annuity payments that begin at a younger age cost more simply because of the longer expected payout period. For that reason, some consider adding additional annuity income at later ages (70 or older) to reduce the cost. This can be done by purchasing an immediate annuity when payments are going to begin or buying a deferred annuity that will begin payments at a later age. Annuities are less expensive for men than women, as women live longer. If interest rates increase and higher interest rates are used to price the annuity the annuity price will become cheaper. Life annuities cost more when benefits are paid over a couple’s joint life expectancy than over a single life expectancy.

C. If interest rates rise

0

The correct answer is A. If you are in the market for a life annuity it is good to know something about costs. Annuity payments that begin at a younger age cost more simply because of the longer expected payout period. For that reason, some consider adding additional annuity income at later ages (70 or older) to reduce the cost. This can be done by purchasing an immediate annuity when payments are going to begin or buying a deferred annuity that will begin payments at a later age. Annuities are less expensive for men than women, as women live longer. If interest rates increase and higher interest rates are used to price the annuity the annuity price will become cheaper. Life annuities cost more when benefits are paid over a couple’s joint life expectancy than over a single life expectancy.

D. For a single person than for a couple

0

The correct answer is A. If you are in the market for a life annuity it is good to know something about costs. Annuity payments that begin at a younger age cost more simply because of the longer expected payout period. For that reason, some consider adding additional annuity income at later ages (70 or older) to reduce the cost. This can be done by purchasing an immediate annuity when payments are going to begin or buying a deferred annuity that will begin payments at a later age. Annuities are less expensive for men than women, as women live longer. If interest rates increase and higher interest rates are used to price the annuity the annuity price will become cheaper. Life annuities cost more when benefits are paid over a couple’s joint life expectancy than over a single life expectancy.

E. Don’t know

0

The correct answer is A. If you are in the market for a life annuity it is good to know something about costs. Annuity payments that begin at a younger age cost more simply because of the longer expected payout period. For that reason, some consider adding additional annuity income at later ages (70 or older) to reduce the cost. This can be done by purchasing an immediate annuity when payments are going to begin or buying a deferred annuity that will begin payments at a later age. Annuities are less expensive for men than women, as women live longer. If interest rates increase and higher interest rates are used to price the annuity the annuity price will become cheaper. Life annuities cost more when benefits are paid over a couple’s joint life expectancy than over a single life expectancy.

The correct answer is A. If you are in the market for a life annuity it is good to know something about costs. Annuity payments that begin at a younger age cost more simply because of the longer expected payout period. For that reason, some consider adding additional annuity income at later ages (70 or older) to reduce the cost. This can be done by purchasing an immediate annuity when payments are going to begin or buying a deferred annuity that will begin payments at a later age. Annuities are less expensive for men than women, as women live longer. If interest rates increase and higher interest rates are used to price the annuity the annuity price will become cheaper. Life annuities cost more when benefits are paid over a couple’s joint life expectancy than over a single life expectancy.

Question 36

A deferred variable annuity with guaranteed lifetime withdrawal benefits…

Score: 0 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. Ensures that the investment account will not lose value

0

The correct answer is D. One of the most popular annuity options today when purchased at a younger age to accumulate assets for retirement is the deferred variable annuity with guaranteed lifetime withdrawal benefits. This is a complex product, and unfortunately some who own it do not fully understand its terms. The product combines the opportunity to benefit from the returns on the underlying investment choices, while the guarantee provides minimum income payments for a single or joint life (for a couple) in case the policy underperforms. The guarantee is a specific payment based on contract terms. The guarantee ensures lifetime payments even when the investment account is depleted. The investment account will vary depending upon investment performance, and investment alternatives will include both equities and fixed income investments.

B. Only offers investment alternatives with fixed returns

0

The correct answer is D. One of the most popular annuity options today when purchased at a younger age to accumulate assets for retirement is the deferred variable annuity with guaranteed lifetime withdrawal benefits. This is a complex product, and unfortunately some who own it do not fully understand its terms. The product combines the opportunity to benefit from the returns on the underlying investment choices, while the guarantee provides minimum income payments for a single or joint life (for a couple) in case the policy underperforms. The guarantee is a specific payment based on contract terms. The guarantee ensures lifetime payments even when the investment account is depleted. The investment account will vary depending upon investment performance, and investment alternatives will include both equities and fixed income investments.

C. Pays guaranteed income that varies based on market performance

Incorrect
0

The correct answer is D. One of the most popular annuity options today when purchased at a younger age to accumulate assets for retirement is the deferred variable annuity with guaranteed lifetime withdrawal benefits. This is a complex product, and unfortunately some who own it do not fully understand its terms. The product combines the opportunity to benefit from the returns on the underlying investment choices, while the guarantee provides minimum income payments for a single or joint life (for a couple) in case the policy underperforms. The guarantee is a specific payment based on contract terms. The guarantee ensures lifetime payments even when the investment account is depleted. The investment account will vary depending upon investment performance, and investment alternatives will include both equities and fixed income investments.

D. Can pay income even if the investment account goes to zero

0

The correct answer is D. One of the most popular annuity options today when purchased at a younger age to accumulate assets for retirement is the deferred variable annuity with guaranteed lifetime withdrawal benefits. This is a complex product, and unfortunately some who own it do not fully understand its terms. The product combines the opportunity to benefit from the returns on the underlying investment choices, while the guarantee provides minimum income payments for a single or joint life (for a couple) in case the policy underperforms. The guarantee is a specific payment based on contract terms. The guarantee ensures lifetime payments even when the investment account is depleted. The investment account will vary depending upon investment performance, and investment alternatives will include both equities and fixed income investments.

Should have chosen

E. Don’t know

0

The correct answer is D. One of the most popular annuity options today when purchased at a younger age to accumulate assets for retirement is the deferred variable annuity with guaranteed lifetime withdrawal benefits. This is a complex product, and unfortunately some who own it do not fully understand its terms. The product combines the opportunity to benefit from the returns on the underlying investment choices, while the guarantee provides minimum income payments for a single or joint life (for a couple) in case the policy underperforms. The guarantee is a specific payment based on contract terms. The guarantee ensures lifetime payments even when the investment account is depleted. The investment account will vary depending upon investment performance, and investment alternatives will include both equities and fixed income investments.

The correct answer is D. One of the most popular annuity options today when purchased at a younger age to accumulate assets for retirement is the deferred variable annuity with guaranteed lifetime withdrawal benefits. This is a complex product, and unfortunately some who own it do not fully understand its terms. The product combines the opportunity to benefit from the returns on the underlying investment choices, while the guarantee provides minimum income payments for a single or joint life (for a couple) in case the policy underperforms. The guarantee is a specific payment based on contract terms. The guarantee ensures lifetime payments even when the investment account is depleted. The investment account will vary depending upon investment performance, and investment alternatives will include both equities and fixed income investments.

Question 37

Which one of the following is true about cash value life insurance?

Score: 1 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. The cash value portion will accumulate tax deferred

Correct
1

The correct answer is A. Like annuities, earnings are not taxed inside a life insurance policy. The earnings are never taxed if the benefit is paid out as a death benefit and premiums can be withdrawn without income tax consequences during the insured’s lifetime. Cash value life insurance is intended to stay in force throughout life—although policies mature at a particular age (newer policies mature at 120). This is in contrast to term insurance that expires after a term of years. Cash value life insurance will have higher premiums than term insurance, because there is both a death benefit and a cash value which can be accessed during the insured’s lifetime. Cash value policies typically allow for loans—as a way to access cash value if needed.

Should have chosen

B. You typically cannot borrow from the cash value

0

The correct answer is A. Like annuities, earnings are not taxed inside a life insurance policy. The earnings are never taxed if the benefit is paid out as a death benefit and premiums can be withdrawn without income tax consequences during the insured’s lifetime. Cash value life insurance is intended to stay in force throughout life—although policies mature at a particular age (newer policies mature at 120). This is in contrast to term insurance that expires after a term of years. Cash value life insurance will have higher premiums than term insurance, because there is both a death benefit and a cash value which can be accessed during the insured’s lifetime. Cash value policies typically allow for loans—as a way to access cash value if needed.

C. The policy will expire after a specified period of time

0

The correct answer is A. Like annuities, earnings are not taxed inside a life insurance policy. The earnings are never taxed if the benefit is paid out as a death benefit and premiums can be withdrawn without income tax consequences during the insured’s lifetime. Cash value life insurance is intended to stay in force throughout life—although policies mature at a particular age (newer policies mature at 120). This is in contrast to term insurance that expires after a term of years. Cash value life insurance will have higher premiums than term insurance, because there is both a death benefit and a cash value which can be accessed during the insured’s lifetime. Cash value policies typically allow for loans—as a way to access cash value if needed.

D. The policy will typically cost less than a term insurance policy

0

The correct answer is A. Like annuities, earnings are not taxed inside a life insurance policy. The earnings are never taxed if the benefit is paid out as a death benefit and premiums can be withdrawn without income tax consequences during the insured’s lifetime. Cash value life insurance is intended to stay in force throughout life—although policies mature at a particular age (newer policies mature at 120). This is in contrast to term insurance that expires after a term of years. Cash value life insurance will have higher premiums than term insurance, because there is both a death benefit and a cash value which can be accessed during the insured’s lifetime. Cash value policies typically allow for loans—as a way to access cash value if needed.

E. Don’t know

0

The correct answer is A. Like annuities, earnings are not taxed inside a life insurance policy. The earnings are never taxed if the benefit is paid out as a death benefit and premiums can be withdrawn without income tax consequences during the insured’s lifetime. Cash value life insurance is intended to stay in force throughout life—although policies mature at a particular age (newer policies mature at 120). This is in contrast to term insurance that expires after a term of years. Cash value life insurance will have higher premiums than term insurance, because there is both a death benefit and a cash value which can be accessed during the insured’s lifetime. Cash value policies typically allow for loans—as a way to access cash value if needed.

The correct answer is A. Like annuities, earnings are not taxed inside a life insurance policy. The earnings are never taxed if the benefit is paid out as a death benefit and premiums can be withdrawn without income tax consequences during the insured’s lifetime. Cash value life insurance is intended to stay in force throughout life—although policies mature at a particular age (newer policies mature at 120). This is in contrast to term insurance that expires after a term of years. Cash value life insurance will have higher premiums than term insurance, because there is both a death benefit and a cash value which can be accessed during the insured’s lifetime. Cash value policies typically allow for loans—as a way to access cash value if needed.

Question 38

Which one of the following is false about the federal taxation of life insurance purchased by an individual?

Score: 0 of 1
ChoiceCorrect?ScoreFeedbackCorrect answer

A. The life insurance death benefit is income tax free

0

The correct answer is D. All of these are attributes of life insurance except that proceeds will generally be included in the insured’s estate. The tax treatment is quite favorable allowing cash value life insurance to be a common retirement planning strategy for those who have already saved the maximum amount in tax-advantaged retirement plans (for example IRAs, Roth IRAs and 401(k) plans).

B. Earnings in the policy are tax-deferred

0

The correct answer is D. All of these are attributes of life insurance except that proceeds will generally be included in the insured’s estate. The tax treatment is quite favorable allowing cash value life insurance to be a common retirement planning strategy for those who have already saved the maximum amount in tax-advantaged retirement plans (for example IRAs, Roth IRAs and 401(k) plans).

C. You can access premiums at any time without income tax consequences

Incorrect
0

The correct answer is D. All of these are attributes of life insurance except that proceeds will generally be included in the insured’s estate. The tax treatment is quite favorable allowing cash value life insurance to be a common retirement planning strategy for those who have already saved the maximum amount in tax-advantaged retirement plans (for example IRAs, Roth IRAs and 401(k) plans).

D. Life insurance death benefits are not subject to estate taxes

0

The correct answer is D. All of these are attributes of life insurance except that proceeds will generally be included in the insured’s estate. The tax treatment is quite favorable allowing cash value life insurance to be a common retirement planning strategy for those who have already saved the maximum amount in tax-advantaged retirement plans (for example IRAs, Roth IRAs and 401(k) plans).

Should have chosen

E. Don’t know

0

The correct answer is D. All of these are attributes of life insurance except that proceeds will generally be included in the insured’s estate. The tax treatment is quite favorable allowing cash value life insurance to be a common retirement planning strategy for those who have already saved the maximum amount in tax-advantaged retirement plans (for example IRAs, Roth IRAs and 401(k) plans).

The correct answer is D. All of these are attributes of life insurance except that proceeds will generally be included in the insured’s estate. The tax treatment is quite favorable allowing cash value life insurance to be a common retirement planning strategy for those who have already saved the maximum amount in tax-advantaged retirement plans (for example IRAs, Roth IRAs and 401(k) plans).

You passed.