CH 21 - Retirement Needs Analysis Flashcards Preview

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Flashcards in CH 21 - Retirement Needs Analysis Deck (13)
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1
Q

What is the average age of retirement and the full age of retirement?

A

average = 62 or 63

full = 67 if born in 1960 or later

2
Q

What are the FOUR reasons for earlier retirement?

A
  • poor health
  • corporate downsizing
  • financially prepared and met financial goals
  • 45% retire earlier than planned
3
Q

What are FOUR problems early retirement cause?

A
  • later Social Security retirement age
  • reduces pension benefits
  • increased exposure to inflation and debt
  • health insurance coverage issues
4
Q

How should the life expectancy tables be used?

A

Starting at age 65, not at birth.

5
Q

Name the THREE factors to consider in determining life expectancy.

A
  • health status (add a few years if needed)
  • family history
  • use software for estimating
6
Q

This method is used to project FIRST year retirement expenses and more appropriate for older clients.

A. replacement ratio

B. expense method

A

expense method

7
Q

This method is used to project FIRST year of retirement expenses and assumes one will need 60% to 80% to live in same manner.

A. replacement ratio

B. expense method

A

replacement ratio

8
Q

During retirement, what FOUR tax related items would we normally see a benefit from?

A
  • FICA taxes eliminated
  • increased standard deduction
  • state and local tax breaks
  • exclusions or possible tax free Social Security benefits
9
Q

During retirement year, what are THREE expense reduction items?

A
  • reductions in work related expenses
  • dependent children gone
  • elimination of the mortgage expense
10
Q

What are TWO expenses would you expect to INCREASE during retirement?

A

medical

travel/leisure (early years)

11
Q

Forecasting inflation is difficult. However, choosing a _______ rate for modeling is the best option.

A). long-term

B). short-term

A

long-term

12
Q

When choosing a proper inflation rate you should consider the clients risk tolerance. What if the client is risk adverse?

A

Choose a higher inflation rate which requires saving more for retirement.

13
Q

What are FOUR common retirement investing strategies?

A
  • limit investments in employer stock
  • use dollar cost averaging (buy and hold)
  • tax efficiency (bonds in tax deferred plans and stock outside)
  • be aggressive and take more risk in early years