1. As of the end of 2014, there were more defined benefit plans in the U.S. than defined contribution plans. T/F?

True

False

2. About 27% of retirees actually work in retirement. T/F?

True

False

3. The ability to maintain a desired lifestyle without employment income is called ______.

surplus

financial independence

nirvana

retirement needs analysis

4. Which one of the following factors is NOT a factor affecting retirement planning?

Education

Work Life Expectancy

Savings amount and rate

Retirement Life Expectancy

Ethnicity

5. The age at which recipients of Social Security can begin receiving benefits is 63. T/F?

True

False

6. The Work Life Expectancy and the Remaining Life Expectancy make up a person's remaining life expectancy post-education. T/F?

True

False

7. Bob, age 35, earns $112,500, pays 7.65% of his gross pay in Social Security payroll taxes, and saves 6% of his annual gross income. Assume that Bob want to maintain his exact pre-retirement lifestyle. What is Bob's wage replacement ratio using the top-down approach (round to the nearest %) and using pre-tax dollars.

91%

84%

86%

88%

8. Melissa has the following expenditures during the current year:

Expense            Amount

1. Health Care        $1,900

2. Savings              $3,500

3. Travel                 $   800

4. Gifts to

Grandchildren     $ 500

Which of these expenses would you expect to decrease during Melissa's retirement?

1, 2, 3, and 4

2 and 3

1 and 4

2 only

9. If Lexie contributes $1,000 to her retirement fund at the end of each year beginning at age 22 through age 52, with an average annual return of 8%, how much does Lexie have in her retirement account at age 52 to use toward a possible early retirement?

110,900

113,283

117,380

122,346

10. Ron and Renee are retiring together today and they wish to receive $40,000 of income (in the equivalent of today's dollars) at the beginning of each year from their portfolio. They assume inflation will be 4% and they expect to realize an after tax return of 8%. Based on life expectancies, they estimate they will live 30 more years. How much should they have in their fund today?

$653,455

$612,289

$731,576

$813,344

11. You have estimated that you will need a total of $280,000 when your infant child attends college in 18 years. You have decided to make payments at the beginning of each period for 18 years so that you will have accumulated $280,000. You can earn 7.5% long term and inflation is expected to be 3% over that period. How much should save annually to accumulate $280,000 in 18 years?

15,103

19,588

10,110

8,734

12. Tina and Ray are approaching retirement. They have a joint life expectancy of 25 years in retirement. Tina anticipates their annual income in retirement will need to increase each year at the rate of inflation, which they assume is 4%. Based on the assumption that their first year retirement need, beginning on the first day of retirement, for annual income will be 85,000, of which they have $37,500 available from other sources, and an annual after-tax rate of return of 6.5%, calculate the total amount that needs to be in place when Roy and Barbara begin their retirement.

$857,220

$757,213

$906,498

$1,119,245

13. Alma saves $3,000 per year, for ten years, at end of each year starting at age 26 and ending at age 35. She invests the funds in an account earning 10% annually until she reaches the age of 65. What is the value of Alma's account at age 65?

$901,130

$802,254

$834,291

$756,783

14. Joe and Rosa, both age 40, have $80,000 of combined retirement assets. They both expect to retire at age 65 with a life expectancy of 100 years old. They expect to earn 10% on the assets within their retirement accounts before retirement and 8% during retirement. If they do not make any additional contributions to their account and they receive a monthly benefit for life, what is the monthly benefit amount they will receive at the beginning of each month? Adjust for monthly payments and monthly interest rates.

$4,775.30

$4,984.20

$5,258.10

$6,115.85

15. Grandpa is 75 and has $1,750,000 in his retirement account. He expects to live another 20 years. He plans to take out of his account $130,000 at the beginning of each year. He anticipates that the inflation adjusted interest rate will be 3.5%. How many years can Grandpa take money out of the retirement account before it is unfunded?

16.29 years

17.65 years

19.46 years

9.03 years

16. Jorge is 52 and earns $60,000 annually. He would like to retire at age 62. He has consistently earned 8% on his investments and inflation has averaged 3%. Assume he is expected to live until age 95 and he has a wage replacement ratio of 80%, how much will Jorge need to have accumulated as of the day he retires to adequately provide for his retirement lifestyle?

1,278,980

950,846

1,101,869

865,890

17. Capital needs analysis is the process of determining how much money a person needs to accumulate to be financially independent during retirement. T/F?

True

False

18. Annuities reduce the risk of superannuation. T/F?

True

False

19. In projecting cash flow requirements in retirement, extending the assumption for RLE (remaining life expectancy) would be a conservative adjustment. T/F?

True

False

20. The savings rate is interpreted as personal saving as a percentage of GDP. T/F?

True

False

21. Traditional IRAs are subject to taxation on Unrelated Business Taxable Income (UBTI) but Roth IRAs are not subject to UBTI. T/F?

True

False

21. The Top-Down approach to estimating retirement income needs is very precise, while the Bottom-Up Approach is less specific. T/F?

True

False

22. Social Security is an adequate wage replacement for most individuals. T/F?

True

False

23. In the serial payment method, the savings amount is increased each year. T/F?

True

False