Project #38437 - Retirement planning

Which of the following statements is true?

 

  1. Social Security will provide most individuals with an equal wage replacement percentage during retirement.
  2. Because of the high cost, many small businesses do not offer retirement plans.

C. The U.S. government offers few tax incentives to employers who establish and maintain qualified retirement plans.

D. Small employers typically offer defined benefit plans.

Answer B

 

 

2.

Which of the following must be accounted for in retirement planning?

 

I.   Inflation

II.   Work life savings rate

III.  Health of retiree

1.A. I only

2.B. II only

3.C. III only

4.D. I and II only

5.E. I, II, and III

Answer E

 

3.

Which of the following statements is true?

A. A conservative retirement planner may estimate an individual to have a longer life expectancy than truly expected.

B. To ensure than an individual does not outlive their retirement funds, a retirement planner may use a higher estimated rate of return than realistically expected.

C. A more conservative financial planner uses the annuity method to determine an individual's retirement needs rather than the capital preservation model.

D. A more conservative financial planner uses the annuity method to determine an individual's retirement needs rather than the purchasing power preservation model.

Answer A

 

 

4.

Monica and her friend Linda each believe they have a superior savings plan.  Monica saved $4,500 at the end of each year for 15 years and then let her money grow for 30 years.  Linda did not begin saving until 15 years later, at which time she began to save $4,500 at the end of each year for 30 years.  They both earned 6% on their investments and are 65 years old today and ready to retire.  Which of the following statements is correct?

A. Both strategies are equal as they have equal account balances today.

B. Monica's strategy is better because she has a greater account balance today.

C. Linda's strategy is better because she has a greater account balance today.

D. Neither strategy is better because Linda has a greater account balance, but Monica contributed less.

Answer B

 

5.

Jon, age 48, earns $65,000 per year from his employer.  Jon saves $15,000 per year for retirement and pays $12,000 per year for his home mortgage.  Given this information and considering that Jon will have eliminated his mortgage debt before retirement, what is Jon's expected wage replacement ratio during retirement?

1.A. 43.16%

2.B. 50.81%

3.C. 58.46%

4.D. 73.89%

Answer: I do not know.

 

6.

Which of the following factors may affect a person's individual retirement planning?

 

I.   Retirement life expectancy

II.  Inflation

III.  Savings rate

1.A. I only

2.B. II only

3.C. III only

4.D. II and III only

5.E. I, II, and III

Answer E

 

7.

 

Jordan wants to retire in 15 years when he turns 65.  Jordan wants to have enough money to replace 75% of his current income less what he expects to receive from Social Security at the beginning of each year.  He expects to receive $20,000 per year from Social Security in today's dollars.  Jordan is conservative and wants to assume a 6% annual investment rate of return and assumes that inflation will be 4% per year.  Based on his family history, Jordan expects that he will live to be 95 years old.  If Jordan currently earns $100,000 per year and he expects his raises to equal the inflation rate, approximately how much does he need at retirement to fulfill his retirement goals?

 

1.A. $1,268,887

2.B. $2,242,055

3.C. $2,285,195

4.D. $3,057,348

Answer: I do not know.

8.

 

Over the last 35 years, the number of employer-sponsored defined benefit plans has decreased while the number of employer-sponsored defined contribution plans has increased. One reason for this trend is:

 

A. Investment returns over the past 35 years have been inadequate to fund retirement benefits

B. Outsourcing operations overseas has made defined benefit plans unnecessary

C. Companies offering defined contribution plans had higher earnings

D. The cost of administering defined benefit plans is greater

Answer D

 

9.

 

Mary Jones, CFP(R), is counseling a client who is about to begin receiving withdrawals from her retirement plan. Mary calculates that the client can make inflation-adjusted withdrawals at a 4% withdrawal rate (3% inflation). What is the implied needed earnings rate if the client has a life expectancy of 30 years?

 

1.A. 1.31%

2.B. 2.19%

3.C. 2.268%

4.D. 4.349%

Answer: I do not know.

 

10.

 

Harvey, a drill press operator for a machine shop, is 65 years of age and will retire the first of next month. Harvey has $500,000 in his retirement plan.  He estimates that he will live to age 90 and that he needs $2,000 per month to supplement his Social Security benefit and to maintain his lifestyle. Harvey would also like to have money left over to leave to his grandchildren when he dies. Harvey anticipates that he can earn 5% on his retirement assets.  Which of the following is true?

 

A. Harvey will be unable to meet his goal.

B. Harvey will be able to pull out $2000 per month but only for 20 years.

C. Harvey will be able to reach his goal but there will be nothing left for his heirs.

D. Harvey will be able to pull out $2000 per month for 25 years and still have money left for his heirs.

 

 

Answer D

Subject Business
Due By (Pacific Time) 08/24/2014 11:00 pm
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