HS 354 Sources of Retirement Income Questions 100% Correct Answers | Verified | Latest 2024 Version
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Social Security as also know as? - Old Age, Survivors and Disability Insurance system
(OASDI)
What is Social Security combined with to provide a level of retirement security for the vast majority of
Americans? - Medicare
How might a planner use other forms of insurance when communicating with c...
HS 354 Sources of Retirement Income Questions
| 100% Correct Answers | Verified |
Latest 2024 Version
Social Security as also know as? - ✔✔Old Age, Survivors and Disability Insurance system
(OASDI)
What is Social Security combined with to provide a level of retirement security for the vast majority of
Americans? - ✔✔Medicare
How might a planner use other forms of insurance when communicating with clients? - ✔✔Most would
not complain that they don't get their money's worth from a policy because it didn't burn down. They
would be content with protection from catastrophic loss and happy that nothing happened. Planners
need to show that lack of adequacy of retirement income is a real catastrophic concern. Explaining to the
clients that losing money if they die after 62 is just one way to look at the decision. Insurance from
extreme poverty in old age may be more important than extra dollars to enhance a lifestyle in the early
years of retirement.
How many people receive Social Security benefits? - ✔✔A. One of six Americans receives benefits from
the system.
B. Approximately 96 percent of working-age Americans are covered by the system.
C. Who receives Social Security?
(1) 34.7 million retired workers
(2) 8.2 million disabled workers
(3) 4.4 million widows and widowers
(4) 2.5 million spouses
(5) 1 million adults disabled since childhood
(6) 3.4 million children
How is Social Security funded? - ✔✔A. There is a 6.2% payroll tax (also known as FICA) up to the taxable
wage base. Both the employer and employee pay this tax.
B. There is a 1.45% FICA tax on all income.
,C. There is a 12.4% Social Security self-employment tax (aka SECA tax) up to the taxable wage base; half
of the tax is deductible from income. 2% lower in 2012.
D. There is a 2.9% SECA tax on all income.
What are the 2 Social Security trust funds and Medicare fund? - ✔✔A. Old-age and survivors insurance
B. Disability insurance
C. Medicare Part A
D. Medicare Part B
What is the eligibility for worker's retirement benefits? - ✔✔A. Worker must earn 40 coverage credits to
earn the basic retirement benefit.
B. Must earn a minimum of $4,800 (2014) and earn 4 quarters of coverage.
C. That means only 10 years of substantial employment to qualify.
D. Benefit formula is applied to what is referred to a average indexed earnings looking at 35 highest years
of wage history.
E. If fewer than 35 years of work, 0's go into the calculation of the formula. A person would benefit from
additional years of work.
F. Full benefits begin at full retirement age, but reduced benefits can begin at 62 and deferral credits can
be earned till 70.
What are the additional Social Security benefits paid once an eligible worker claims benefits? - ✔✔A. A
nonworking spouse age 62 can claim benefits if there is a benefit based on their own work history. Can
get the greater of the worker's or spousal benefit.
B. Spouse caring for a child under 16 can receive full benefits regardless of the spouse's age.
C. Benefits can also be paid to dependent, unmarried children under 18 (under 20 if in secondary
school).
D. Benefits to children 18 or older who were disabled before age 22.
E. There is a family maximum for 2 benefit families.
F. Divorced spousal benefit is paid to an unmarried divorced spouse as long as the marriage lasted 10
years, this doesn't affect the total family benefit.
What is the amount of Social Security retirement benefits? - ✔✔A. Discriminates in favor of lower paid
workers.
B. The amount of income SS replaces is called the SS replacement ratio.
,C. $18.8k in 2013 (and comparable amounts in previous years) would receive about $10.4k which
replaces about 55% of earnings. A worker in the maximum taxable amount ($117k in 2014) would get
benefits to replace about 25% of prior earnings.
D. This means affluent clients need to save more. No SS benefits for earnings over the base.
When did Social Security paper benefit statements end? - ✔✔In 2011 due to budget cuts the paper
statements stopped. Due to demand, in February of 2012 those 60 and over started receiving paper
statements. In May of 2012 the online statement started. Late 2012 those turning 25 received received
paper statements.
The online Social Security statement - ✔✔It's created by the individual. The account is created with
personal information and is protected with a username and password. The statement contains client
information:
A) The full retirement age and their estimated benefit
B) Estimate benefit at 62 and 70
C) Estimated eligible disability benefit
D) Estimated survivors benefit for children and spouse
E) Medicare eligibility
F) Earnings record (should be verified for full benefit)
G) Estimated taxes by the client and employer
It provides information:
A) The windfall-elimination provision
B) The government pension offset
C) Potential benefit changes due to law
D) Phone numbers for Social Security and Medicare
E) Social Security's future
F) Links to qualify
G) How the benefits are estimated
H) Considerations for retirement
I) Relevant publications
What do the source of income statistics tell us? - ✔✔A) For 1 in 5 it's their only source of income.
B) For 1 in 3 it's 90% of their income.
, C) For 2 in 3 it's 50% of their income.
D) These are not expected to change.
Why are people reluctant to defer Social Security? - ✔✔Theory 1: Men only think of themselves and
ignore their wives needs (this is not likely).
Theory 2: Financial ignorance. People more financially literate are more likely to defer Social Security.
Theory 3: Social convention. The standards and norms practiced by a majority of the population.
Theory 4: For those with a defined benefit plan it could be the retirement age for the plan. The defined
benefit may not be enough to sustain the client. Those with a 401(k) may be able to use this to delay
taking Social Security.
Theory 5: Fears of Social Security failing. This is irrational thinking, it will change, but it won't end.
Theory 6: People believe they won't live long so they won't break even and don't see the benefit of
delaying. The only way to win this bet is to die young.
Theory 7: Misunderstanding of what Social Security is. Some believe it's salary continuation rather than
insurance. If there is an insurance or longevity mind-set people may delay.
What is the Primary Insurance Amount (PIA)? - ✔✔The basic building block of all Social Security benefits.
At full retirement age what can an eligible worker receive? - ✔✔100% of their primary insurance amount
(PIA).
Explain how Social Security benefits are indexed. - ✔✔They're indexed for growth. Previous earnings and
the benefit formula itself are restated in term of today's wages by indexing past earnings and formula
parameters to wage growth to age 60. Actual earnings in 1984 of $20k. In 2001 at age 60 the earnings
are idexed to $40,807.90.
How are Social Security earnings capped? - ✔✔At the taxable wage base. Someone earns $150k. Their
benefit is calculated at the cap of $113,700.
How many years of earnings are calculated in the PIA formula? - ✔✔35 years. Replacing 0 years with
salary will increase the amount. You should always encourage replacing low earning or 0 years.
What is the PIA formula? - ✔✔1.) 90% of the first $816 of AIME + 32% of the AIME over $816 - $4,917 +
15% of AIME > $4,917 (2014).
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