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Flexibility is the key word that describes
whole life.
variable life.
term life.
universal life. - CORRECT ANSWER -universal life.
The key word for term life is low-cost (relative to other options). The key word for whole life is guaranteed. For variable life, the key term is variable. Universal life offers a significant degree of flexibility.
Sam, age 62, retired two years ago and is currently relying on his Social Security retirement benefit for income. Faced with a tight budget, Sam is considering going back to work. Which one of the following would not be true if he returned to work?
-He may be eligible for employer-paid health care coverage.
-Regardless of the income he earns, he will continue to receive his full Social Security benefit.
-When he fully retires he will have fewer years of retirement to finance.
-He could establish and fund an IRA with his earned income. - CORRECT ANSWER - Regardless of the income he earns, he will continue to receive his full Social Security benefit.
Old-age benefits of Social Security recipients may be reduced if the client earns income from wages and salary during retirement prior to Social Security's full retirement age. Benefits paid to persons in the years prior to attaining full retirement age are reduced by $1 for every $2 earned over the limit.
Earned income, as defined by the Internal Revenue Code, includes all of the following except
alimony.
salary.
bonuses.
Social Security income. - CORRECT ANSWER -Social Security income.
Earned income only includes salary, fees, bonuses, commissions, and taxable alimony.
An individual is not considered an "active participant" in an employer-sponsored defined contribution plan if they receive only which one of the following annual additions?
a $1,000 catch-up provision is available to individuals age 50 and older. - CORRECT ANSWER -a $1,000 catch-up provision is available to individuals age 50 and older.
In 2019, participants age 50 and older can contribute an additional $6,000 as a catch-up provision; this is in addition to the regular deferral limit of $19,000.
Which one of the following statements applies to fixed annuities?
Their objective is to outpace inflation.
The premiums are invested in the company's general account.
A rider can be added so that the value at death is guaranteed to be at least equal to the amount of the premium investment.
Premium contributions purchase units of separate accounts. - CORRECT ANSWER - The premiums are invested in the company's general account.
The premiums in a fixed annuity are invested in the company's general account. The other statements are applicable to variable annuities.
Sara is ready to annuitize her contract. She would like to receive the largest lifetime monthly income possible. Which one of the following income options should she select?
single life annuity
fixed period annuity
life income with refund
pension maximization - CORRECT ANSWER -single life annuity
A single-life annuity will provide the largest lifetime monthly income. Pension maximization is a strategy using a pure life annuity, but is not an income option per se.
Mark, age 54, funded a nonqualified annuity with a $1,000 deposit. His annuity is now worth $2,500. He would like to make a $500 withdrawal. How will this distribution be taxed? - CORRECT ANSWER -It will be fully taxable and subject to an early withdrawal penalty.
Lump sum distributions from an annuity are fully taxable until all earnings have been distributed; this is referred to as last-in, first-out. Because Mark is under age 59½, his distribution will be subject to a 10% early withdrawal penalty. If the contract were annuitized, payments would be taxed on a pro rata basis.
All of the following are correct about the surrender charges associated with an annuity, except
-a typical surrender charge period is four to nine years.
-surrender charges are a way for the insurance company to recoup expenses associated with the establishment of the contract.
-surrender charges are a way for the insurance company to recoup expenses associated with the cost of the contract guarantees.
life insurance cost basis can be withdrawn tax-free.
loans are available and repayment is not required.
investing under a life insurance wrapper is expensive.
a cash value life insurance contract is always an appropriate vehicle for saving additional dollars for retirement. - CORRECT ANSWER -a cash value life insurance contract is always an appropriate vehicle for saving additional dollars for retirement.
A cash value life insurance contract may be an appropriate vehicle for saving additional dollars for retirement. A number of things must be considered including the expenses and a client's need for the underlying life insurance coverage.
The amount paid from a reverse mortgage can come in any of the following forms except
lump sum.
tenure payments.
term payments.
interest only. - CORRECT ANSWER -interest only.
The amount paid from a reverse mortgage can come in the form of a lump sum, monthly payments for as long as the individual resides in the home (tenure payments), a term payment (a certain amount paid out over a specified period of time), or even a line of credit. Interest only payments are not an option.
All of the following are true regarding living wills except
they must be signed.
they must be witnessed by people who are not heirs of the maker.
they allow the maker to dictate what life-sustaining measures may be taken if the maker becomes incapable of consenting to treatment.
they apply to routine illnesses. - CORRECT ANSWER -they apply to routine illnesses.
Living wills apply only when the maker has a terminal illness and death is imminent.
Which one of the following is true regarding Medicare Part A?
It pays doctor bills.
Inpatient hospital care includes costs for semiprivate rooms, meals, operating and recovery rooms, and prescription drugs. It does not cover the cost of private rooms.
Which of the following costs is not normally covered by Medicare Part B?
physician services
home health care
prescription drugs
preventive care - CORRECT ANSWER -prescription drugs
Medicare Part B does not normally cover eyeglasses, cosmetic surgery, most prescription drugs, and other types of expenses. Note that preventive care is covered under Part B.
Which of the following is not an acceptable strategy for filling gaps between actual costs and Medicare coverage?
-purchasing Medigap policies from private vendors
-enrolling in Medicare Advantage and purchasing a coordinating Medigap policy
-maintaining coverage through an employer-provided health plan
-for low-income seniors, qualifying for Medicaid - CORRECT ANSWER -enrolling in Medicare Advantage and purchasing a coordinating Medigap policy
People who enroll in a Medicare Advantage plan cannot also maintain a Medigap insurance policy. Purchasing Medigap insurance, maintaining coverage through an employer-provided health plan, and qualifying for Medicaid are all plausible strategies to fill gaps between actual costs and Medicare coverage.
All the following are health plan options under Medicare Advantage plans except
Medicaid provider plans (MPPs).
health maintenance organizations (HMOs).
preferred provider organizations (PPOs).
private fee-for-service plans. - CORRECT ANSWER -Medicaid provider plans (MPPs).
There is no such entity as a Medicaid provider plan. All other options are available under Medicare Advantage plans.
Driving is not an ADL. Dressing, bathing, eating, toileting, continence, transferring, and feeding oneself are considered ADLs.
Which of the following is not true regarding the tax-deductibility of qualified long- term care insurance (QLTCI) premiums?
Individuals and couples filing jointly can deduct medical expenses that exceed 10% of adjusted gross income (AGI). QLTCI premiums qualify as medical expenses.
Self-employed individuals can deduct QLTCI premiums as a business expense.
Partners can deduct QLTCI premiums as a business expense.
QLTCI premiums are deductible for this year only, after which they are no longer deductible. - CORRECT ANSWER -QLTCI premiums are deductible for this year only, after which they are no longer deductible.
The deductibility of QLTCI premiums does not expire after the current year. There are no known plans for such an expiration date to be implemented.
Which one of the following is not a feature of health savings accounts (HSAs)?
Contributions are tax-deductible.
Funds may be used to pay for qualified medical expenses during retirement.
Individuals who are enrolled in Medicare can continue to use HSA funds for qualified medical expenses.
Individuals who are enrolled in Medicare can continue to make contributions. - CORRECT ANSWER -Individuals who are enrolled in Medicare can continue to make contributions.
Individuals who are enrolled in Medicare are not eligible to make tax-deductible contributions to an HSA. Otherwise, contributions are tax-deductible and withdrawals used to pay for qualified medical expenses are tax free. Individuals enrolled in Medicare may use funds remaining in an HSA, but can no longer make contributions to one.
In long-term care insurance policies, "benefit trigger" refers to an event or condition that must occur before benefits can be paid. These include all of the following except
inability to bathe.
inability to dress
inability to work.
inability to reason. - CORRECT ANSWER -inability to work.
Benefit triggers may be physical (e.g., inability to bathe, dress, or eat) or cognitive (e.g., inability to think, reason, or orient). Normally, insurers require that more than one impairment exist before benefits are triggered. Inability to work does not trigger benefits in a long-term care policy.
Which one of the following is correct regarding Medicare Part D?
beneficiaries must live in the service area of a health plan.
to qualify, the beneficiary normally must be covered by Medicare Part A. Coverage for Part B is optional.
Medigap plans are available to help with the out-of-pocket costs Medicare Advantage plans leave to individuals. - CORRECT ANSWER -to qualify, the beneficiary normally must be covered by Medicare Part A. Coverage for Part B is optional.
To qualify, beneficiaries normally must be covered by parts A and B of Medicare and live in the plan's service area. Individuals with ESRD are not eligible for Medicare Advantage Plans; however, ESRD beneficiaries currently in a Medicare health plan can remain in the plan. Individuals enrolled in Part C of Medicare (Medicare Advantage) cannot purchase and do not need Medigap policies.
A standardized Medigap plan is designed to cover - CORRECT ANSWER -Medicare- approved charges that are not paid by Medicare.
Medigap insurance is designed to supplement Medicare's benefits by filling in some of what Medicare does not cover, such as deductibles and coinsurance; it covers only Medicare-approved charges. Standardized Medigap plans pay only for long-term care while the beneficiary qualifies for benefits from Medicare, and is limited to paying the coinsurance from the 21st through 100th days.
Which is true of Medicare benefits?
They vary depending on an individual's AGI.
They vary depending on an individual's age.
They are not available until Social Security full retirement age.
They are available even if a client continues to work after age 65. - CORRECT ANSWER -They are available even if a client continues to work after age 65.
It is true that Medicare benefits are available even if a client continues to work after age 65. The only difference is that they would need to file an application if not yet receiving Social Security benefits. Individuals become eligible for Medicare at age 65; the change in Social Security's FRA does not change the age an individual may be eligible for Medicare. Also, unlike Social Security, Medicare benefits are not affected by an individual's earnings or the amount he or she has paid into the system over the years.
Coverage under Part A of Medicare includes all of the following except
inpatient hospital care.
hospice care.
psychiatric hospital care.
physician services. - CORRECT ANSWER -physician services.
Physician services are covered by Part B of Medicare. Part A covers up to 190 days of psychiatric care, 90 days on inpatient hospital care per benefit period (with a 60-day lifetime reserve), and unlimited hospice care.
The mandatory retirement age was decreased by legislation.
Defined benefit plans largely replaced defined contribution plans.
Workers near normal retirement age (63 to 67 years old) are more likely to find jobs in periods of high unemployment.
There has been a decline in employers offering retiree health care insurance. - CORRECT ANSWER -There has been a decline in employers offering retiree health care insurance.
There has been a decline in employers offering retiree health care insurance. Legislation passed in 1986 outlawed mandatory retirement almost entirely yet age discrimination is alive and well; as compared to their younger peers, workers in the 63- to 67-year-old age range are less likely to find jobs and more likely to be passed over for promotions. Defined contribution plans continue to supplant defined benefit plans.
It would not be appropriate for individuals whose sources of income are insufficient for retirement to take which of the following actions?
postponing retirement
eliminating health insurance coverage
planning for part-time work
reducing lifestyle expectations - CORRECT ANSWER -eliminating health insurance coverage
By working longer, individuals can save more, reduce the number of years over which retirement income will be required, and increase their benefits from company plans and Social Security. Other options include working part-time and reducing expectations regarding your lifestyle in retirement. Eliminating health insurance coverage would be a short-term solution for cash flow problems. Ultimately, many illnesses will require much more out-of-pocket expense than the insurance premiums required to cover them.
Which one of the following classes of employees is protected from early mandatory retirement laws?
police officers
airline pilots
executives
blue-collar employees - CORRECT ANSWER -blue-collar employees
Police officers and airline pilots are not protected against early mandatory retirement. This is due to the danger and physical demands of keeping us safe. Also subject to mandatory early retirement are high-level executives, and "high policy-making" employees—positions that require significant mental skill.
All of the following may prompt companies to offer early retirement programs except
