AAMS Questions and Verified Solutions

The sources of retirement income typically referred to as the "three-legged stool of retirement income" are? - Social Security, pension income, and individual investments. Social Security, pension income, and individual investments are all important sources of retirement income. A client can best estimate his or her old age Social Security benefits by? - obtaining an estimate of future benefits directly from the Social Security Administration. The Social Security Administration is the best source for an estimate of Social Security old-age benefits. Sam was born in 1954, so his FRA is 66. If he begins receiving Social Security benefits early, the amount of his monthly Social Security checks will be - reduced for the rest of his life. Early retirees born in 1954 will have their retirement benefits reduced throughout the remainder of their lives. Which one of the following best explains a fundamental investment strategy for accumulating funds to be used during retirement? - You should begin investing many years before retirement so that compounded returns increase your retirement fund. Time is one of the greatest assets available to an investor, so the sooner an investor starts saving for retirement, the better. A client, age 55, takes a $3,000 distribution from his rollover IRA to pay for a semester of college tuition for his 21-year-old son. Which one of the following correctly explains the tax consequences for the father? - The entire distribution is subject to income tax, but it is free from the 10% early withdrawal penalty. A client has decided to move the funds from her former employer's 403(b) plan into an IRA. The best way to avoid a 20% withholding tax or any taxable income, would be if she - instruct the pension plan to roll over the funds directly to her new IRA. Which one of the following best explains why a client would select a single life annuity distribution option from a retirement plan? - to maximize the periodic payment if the client had no need or desire to have any portion of the plan benefits left after death Since payments will cease upon the annuitant's death, the single life option will provide the highest periodic payment from an annuity. Which one of the following explains an investment planning consideration during retirement that is related to the length of the retirement period? - Because the retirement period can be long, clients should consider taking greater risk for greater return to keep up with inflation.