section 1 - The American College Online Learning Center

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SECTION 2: ADDITIONAL WORKLO 3-2-1: Understand the impact of working longer on retirement security1. The impact of deferring retirement age on income adequacy 2 (Video: What is the impactof deferring retirement age on retirement income adequacy? Littell, Tacchino, VanDerhei)a. Recent research has indicated that many people at age 65 do not have a decentchance at having adequate retirement income.(1) Objective of the research is to try to identify what would be the impact ofdeferring retirement(2) Deferring retirement improves the retirement income plan(a) The retirement period is shortened.(b) Social Security benefits increase.(c) Defined-benefit payments may increase.(d) The defined-contribution account increases with additionalemployee and employer contributions.b. What does the research show about how much one year of deferring retirementwould improve retirement adequacy?(1) Deferral has a tremendously positive effect on low-income workers.(2) Those with high income already have a high probability of adequateretirement income that another year or two in most cases does not matterthat much.(3) Planning Point: Use the retirement savings calculator to demonstrate howmuch needs to be saved. Extending the retirement date a few years willhelp to make the savings goal more manageable.c. Deferring retirement is important to consider as part of the planning process.(1) When doing retirement modeling, besides manipulating the savings rateand rate of investment returns, also consider looking at the impact ofdeferring retirement age.(2) The study validates that the best tool for low-income and middle-incomeclients is often deferring retirement a little bit longer.(3) Be aware that deferral of retirement may not always be a viable option —about 40% report that they retire earlier than planned.(a) Usually because of a health situation(b) Individual may no longer have marketable skillsd. Improving retirement income adequacyIncome Adequate at 65 Defer to 67 Defer to 69Lowest quartile 29.6% 34.6% 46.5%Second quartile 60.6% 67.0% 75.6%Third quartile 79.0% 82.0% 89.0%Highest quartile 89.1% 91.0% 94.5%2. EBRI Issue Brief #388 “The Impact of Deferring Retirement Age on Retirement Adequacy.” June, 2011.3.4
(1) Note that 38% of second income quartile that did not have adequateincome at age 65 have sufficient income at 69.(2) Note that 44% of third income quartile that did not have adequate incomeat age 65 have sufficient income if retirement is deferred to age 69. 3(3) Planning Point: Delaying retirement has a positive impact for all groupsbased on income adequacy.2. Retirement readiness indexa. In a 2009 report by McKinsey called “Restoring Americans’ Retirement Security,”they identified what they called the retirement readiness index (RRI).(1) In their model, an RRI of 100 is required to maintain the same lifestyle.(2) An RRI of 80 requires a reduction in the standard of living — reducingdiscretionary spending.(3) The average American has an RRI of 63.b. The report recommended four ways to improve retirement readiness, includingretiring later.c. The report indicated that the impact of retiring four years later on the averageAmerican improves the RRI by 23 points!3. Impact of working longer on an individual’s retirement securitya. Additional full-time work shortens the retirement period.b. Additional full-time work allows for increases in Social Security (at least up toage 70).c. Additional full-time work lowers health costs. Health insurance coverage can bequite expensive between retirement and eligibility for Medicare at age 65.d. Additional full-time work increases defined-benefit plan benefits(1) Additional benefit accruals — higher wages(2) Actuarial increases for deferrale. Additional full-time work increases defined-contribution plan benefits4. Sample calculations(1) Additional contributions(2) Deferring withdrawal means additional earningsa. Using the Smart Money Retirement Calculator (available at smartmoney.com),review the following example using these assumptions:(1) Return on investments: 7 percent preretirement, 6 percent postretirement(2) 2.7 percent inflation rate(3) 19 percent effective tax rate(4) Assume life expectancy is age 90.b. Take a 58 year old single individual with $100,000 of income, assets of $500,000,saving 20% of earnings each year, and needing 85 percent of preretirementincome in retirement.(1) Retire at age 65 and calculator identifies an income shortfall at age 81.(2) Retire at age 66 and calculator identifies an income shortfall at age 86.3. EBRI Issue Brief #338 “The Impact of Deferring Retirement Age on Retirement Income Adequacy.” June, 2011.3.5
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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 and 46: c. Supplemental Security Income (SS
Page 47 and 48: . An unused emergency fund can supp
Page 49 and 50: 5. Inflation(2) The expense method
Page 51 and 52: Assignment 3CHOOSE APPROPRIATE STRA
Page 53: . Save as a percentage of income an
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
Page 96 and 97: 8. Calculating required distributio
Page 98 and 99: (2) Exception: If there are separat
Page 100 and 101: 5. Impactc. Tax rates are low in ea
Page 102 and 103: (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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