section 1 - The American College Online Learning Center

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a. Employer sponsored tax-advantaged retirement plans, either funded fully bythe employer, like a defined-benefit plan or profit-sharing plan, or funded asa partnership with employees such as a 401(k) plan, require the followingconsiderations:(1) Determining the value of the plan at retirement is difficult because knowinghow much the employer and employee will continue to contribute from nowuntil retirement and the investment returns on plan assets are uncertain.(2) Benefits in a qualified plan are quite secure as assets are held in anirrevocable trust and are outside the claims of the employer's creditors.(3) Even though benefits are stated as a single sum, annuity options areusually available, and institutional pricing may provide for favorable annuityrates if the annuity is purchased inside the plan.b. Supplemental executive benefit plans provided to offer highly compensatedemployees additional retirement benefits may also be available as a sourceof retirement income.(1) Caveat: Participant is only a general creditor and benefits are notcompletely secure.(2) Warning: Benefits cannot be rolled into an IRA.(3) Participant will have limited distribution options.c. Self-employed individuals are allowed to establish their own tax-advantagedretirement plans, including defined-contribution plans, defined-benefit plans and401(k) plans allowing Roth contributions.d. Individuals can also establish nonqualified annuities which provide for tax-deferralon earnings.(1) Benefits are stated as an account balance.(2) Deferred annuities offer favorable annuitization terms or guaranteedlifetime or death benefits.e. Individuals may also be eligible to establish IRAs and Roth IRAs to accept newcontributions or use these vehicles to rollover benefits from employer-sponsoredretirement plans.3. Other investments can also be used to fund retirement needs.a. Savings in taxable investment accountsb. Bank products such as checking accounts, savings accounts and CDsc. Brokerage accounts including money market accounts, mutual funds, stocks andbonds(1) Traditionally available to meet retirement needs, but some may beearmarked for other purposes and will not be available.d. Real estate holdings and other business interests may be available to sell tosupport retirement needs. With these types of assets, valuation may be difficultand it may not always be easy to find a buyer.4. <strong>The</strong>re are a number of other vehicles for saving that can be used to meet multiple needs.a. Owning a home can have the secondary purpose of building home equity thatcan be tapped in retirement through downsizing, moving into senior housing, orthrough a traditional or reverse mortgage.2.14
. An unused emergency fund can support retirement needs. However, anemergency fund is useful in retirement as well to provide funds for unexpectedrisks and expenditures.c. Cash value life insurance is a way to provide for death benefits that can support aspouse or dependent’s retirement needs, and cash-value can also be borrowed orwithdrawn to support retirement needs.d. Unused amounts in health savings accounts (HSAs) can be withdrawn tax-free inretirement to meet qualified medical expenses.e. Vacation homes may not be available to meet retirement needs, but somepurchase vacation homes to enjoy now, with the intent of later supportingretirement needs through selling the vacation home or principal residence.Vacation homes can also be rented to provide some retirement income.f. Even though collectibles are not typically intended for use to fund retirement, itis important to inventory valuable personal property as it provides informationabout what the client may value — and could possibly be used to fund needsif necessary.5. Protecting wealth can be as important as building wealth for retirement.a. Clients need to have regular insurance reviews to ensure that homeowners, auto,liability, and disability insurance are sufficient so that retirement assets do nothave to be tapped if contingencies occur.b. Besides liability insurance, other strategies for protecting assets from the claimsof creditors and in the case of legal liability is an important part of planning,especially for professionals who may be exposed to high levels of liability. Rulesvary state by state, but vehicles such as qualified retirement plans and IRAs offerfairly broad protection from creditors. Homestead rules, and asset protection forlife insurance and annuities may also be available.c. Long-term care insurance is more like an asset, as policy proceeds provide fundsto cover the catastrophic costs of long-term custodial care.SECTION 3: PRELIMINARY CALCULATIONSLO 2-3-1: Choosing assumptions used in calculating retirement incomeneeds1. Advisors use retirement software programs to calculate need in retirement (Video: Whatassumptions should be used when calculating retirement needs? Littell, Tacchino)a. Retirement projection results are based on assumptions and these need tobe considered carefully so the results are more accurate and can be properlyexplained.b. In some cases, failing to include an assumption means relying on the software’sdefault assumptions, which may or may not be correct for your client.c. <strong>The</strong> more accurate the assumptions used in the retirement calculator software,the more accurate the client’s retirement income plan will be.2. Retirement agea. Average retirement age is 62b. Programs that are available for retirement influence (or frame) the decision:(1) Social Security full retirement age(2) Social Security benefits available at age 622.15
Page 1: Huebner School SeriesHS 353 STUDY O
Page 6: THEAMERICANCOLLEGE.EDUThrough The A
Page 10 and 11: c. But it is more comprehensive bec
Page 12 and 13: (3) Work part-time during retiremen
Page 14 and 15: SECTION 2: UNDERSTANDING RETIREMENT
Page 16: d. Solutions(1) The model considers
Page 19 and 20: . Other sources of retirement incom
Page 21 and 22: c. Another option for solving cash
Page 23 and 24: (b) Net worth statements that ident
Page 25 and 26: d. Be ready to reengage with the cl
Page 27 and 28: (b) In financial planning(c) In inv
Page 29 and 30: j. Planning Point: Planners can use
Page 31 and 32: e. We also need them to have a bett
Page 33 and 34: Assignment 2IDENTIFY RETIREMENT INC
Page 35 and 36: (2) Income4. Determining risk toler
Page 37 and 38: collaborative experience which focu
Page 39 and 40: 6. Asset allocation and risk tolera
Page 41 and 42: c. How long will the income last?d.
Page 43 and 44: . Durationc. Reliabilityd. Other6.
Page 45: c. Supplemental Security Income (SS
Page 49 and 50: 5. Inflation(2) The expense method
Page 51 and 52: Assignment 3CHOOSE APPROPRIATE STRA
Page 53 and 54: . Save as a percentage of income an
Page 55 and 56: (1) Note that 38% of second income
Page 57 and 58: (4) The AARP website has a national
Page 59 and 60: 4. Contributions to IRAs and Roth I
Page 61 and 62: carve out the nondeductible contrib
Page 63 and 64: (2) Plus salary deferrals (for an i
Page 65 and 66: a. Example:(1) Save $10,000 in 25%
Page 67 and 68: (a) This requires knowing four fact
Page 69 and 70: . Solution(1) Li and Lin Lin are bo
Page 71 and 72: (1) The increase in dollar amounts
Page 73 and 74: 9. In some circumstances, an indivi
Page 75 and 76: 2. Reverse mortgage basicsa. Almost
Page 77 and 78: 5. Planning considerations(b) Keep
Page 79 and 80: (2) Some funds that are promoted as
Page 81 and 82: (1) Berstresser, Chalmers, and Tufa
Page 83 and 84: RESOURCES FOR COMPETENCY 3: CHOOSE
Page 85 and 86: (2) From the previous employer(s) p
Page 87 and 88: 8. IRA funded plans (IRAs, SEPs, SI
Page 89 and 90: . Does the distribution election fi
Page 91 and 92: 6. Net unrealized appreciation rule
Page 93 and 94: a. Tax-exempt plans include Roth IR
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8. Calculating required distributio
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(2) Exception: If there are separat
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5. Impactc. Tax rates are low in ea
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(7) Based on ordering rules, identi
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7. A married couple who file jointl
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(1) Needed to provide the appropria
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13. Transfers at deatha. Wills(2) A
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(1) The Retirement Equity Act manda
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(2) Beneficiary designation of bene
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13. Overview14. Types(2) The donor
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(1) Charity needs only to payout in
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c. Access should be granted to an a
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nightmare of living probate might h
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(6) Powers to represent their princ
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c. If the policy is term coverage w
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e. Factoring personal and family he
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problem. On the other hand, we can
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d. Adding a cost of living adjustme
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g. Planning Point: Sometimes a high
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(2) Clients may not be able to “a
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c. Ensure that the client is receiv
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a. Example: Because of physical and
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options about where to get his/her
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(2) Facilities, monthly fees, and s
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8. Other strategies that help to co
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standard deviations of the returns
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a collapse in the real estate marke
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a. In a later competency we will di
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years of service with the employer)
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a. Planning Point: Planners should
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(2) If you have locked in food, ren
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(4) Loss-of-spouse risk—Deferred
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(1) Excess withdrawal risk—The us
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(5) Frailty risk—Managing assets
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7. Practice good career management:
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Assignment 6CHOOSE APPROPRIATE STRA
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c. Example: Chuck and Sarah divide
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e. The bucket approach can be thoug
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3. Understanding systematic withdra
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(1) The time horizon used in the ca
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12. Four percent is not the number.
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markets have declined by a specifie
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(2) Annuities and long-term care an
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anticipates ramping down her activi
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c. Each of the three portfolios wil
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SECTION 4: THE ESSENTIAL VERSUS DIS
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d. Clients give up investment contr
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geared toward long-term growth. Thi
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. Trade-offs involve:(1) Irrevocabl
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(1) Rate at which banks lend to the
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. Dollar-denominated liabilities of
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(a) Dividend taxed in year paid out
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4. Taxationtheir return generating
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. Close ended(1) IPO style launch(2
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(3) Tax control17. Conversations in
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(3) Mutual funds provide lower cost
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way to obtain increasing payments t
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protection from the downside risk w
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6. Today’s annuitization rates ar
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h. Planning Point: Markets are very
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a. The client may not be clear abou
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a. Problems with implementation are
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c. Product solutions work together
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(1) A problem is that if the client
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(b) A traditional fund company(c) A
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d. Evelyn is in great health and he
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RESOURCES FOR COMPETENCY 7: INTEGRA
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section 1 - The American College Online Learning Center

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