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Chapter 21 QA

The document contains 15 true/false questions about retirement planning topics such as average retirement age, reasons for early retirement, Social Security benefits, mandatory retirement policies, life expectancy, replacement ratios, taxes, expenses, inflation assumptions, risk tolerance, and asset allocation strategies. The answers provided indicate that statements 1, 2, 5, 6, 8, 9, 10, 11, and 12 are true while statements 3, 4, 7, 13, and 15 are false.

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115 views2 pages

Chapter 21 QA

The document contains 15 true/false questions about retirement planning topics such as average retirement age, reasons for early retirement, Social Security benefits, mandatory retirement policies, life expectancy, replacement ratios, taxes, expenses, inflation assumptions, risk tolerance, and asset allocation strategies. The answers provided indicate that statements 1, 2, 5, 6, 8, 9, 10, 11, and 12 are true while statements 3, 4, 7, 13, and 15 are false.

Uploaded by

jdbridges
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Chapter 21 Questions

T - F 1. The average age of retirement is slightly over age 62. [21-1]

T - F 2. Golden handshakes and corporate downsizing are two of the reasons for early
retirement. [21-1]

T - F 3. A client who has a Social Security normal retirement age of 67 will have a 50
percent reduction if benefits start at age 62. [21-1]

T - F 4. Mandatory retirement at age 65 is widely used by employers who have defined-


benefit plans. [21-1]

T - F 5. Life expectancy at age 65 is a better predictor for retirement than life


expectancy at birth. [21-1]

T - F 6. The standard of living enjoyed during the years just prior to retirement largely
influences the client’s expectations for his or her postretirement standard of living. [21-2]

T - F 7. A replacement ratio of 50 percent of final-average salary should be used when


planning an individual’s retirement. [21-2]

T - F 8. Some states grant income tax relief for seniors by providing sliding scale
rebates of property taxes. [21-2]

T - F 9. A retired worker’s income can fall by the amount being saved for retirement
with no concurrent reduction in standard of living. [21-2]

T - F 10. Some expenses that tend to increase for retirees include medical bills,
recreation expenditures, and house repair costs. [21-2]

T - F 11. A 4 percent inflation assumption can be used for retirement planning purposes,
but this rate must be monitored to recognize disparity with the actual inflation rate. [21-4]

T - F 12. Whatever the client’s risk tolerances, he or she should be encouraged to be


aggressive in the early years of building the retirement portfolio. [21-5]

T - F 13. Retirement investing is best served by market timing investments. [21-5]

T - F 14. Investment in company stock should be limited. [21-5]

T - F 15. Fixed income investments should be held in private savings accounts and
equity investments should be held in tax-deferred accounts in order to maximize tax
efficiency. [21-5]
Chapter 21 Answers
1. True.
2. True.
3. False. The reduction is 30 percent.
4. False. Mandatory retirement is illegal in most cases.
5. True.
6. True.
7. False.A replacement ratio of between 60 and 80 percent of final salary can be
used.
8. True.
9. True.
10. True.
11. True.
12. True.
13. False. Buy and hold should be used, not market timing.
14. True.
15. False. Fixed income investments should be in tax-deferred accounts (such as
401(k) plans) and equity investments should be in taxable private savings
accounts.

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