CSA Financial Aspects of Aging 2 — Questions and Answers
Question 1: A 72-year-old retiree wants to minimize Required Minimum Distributions (RMDs). Which strategy is most appropriate?
- Convert traditional IRA funds to a Roth IRA before age 73 (Correct answer)
- Contribute additional funds to the traditional IRA
- Delay Social Security benefits past age 70
- Purchase a fixed annuity inside the traditional IRA
Correct answer: Convert traditional IRA funds to a Roth IRA before age 73
Converting traditional IRA funds to a Roth IRA eliminates future RMDs since Roth IRAs are not subject to RMD rules during the owner's lifetime.
Question 2: Which Medicare supplement (Medigap) plan covers 100% of Medicare Part A coinsurance and hospital costs after benefits are used up?
- Plan B
- Plan G (Correct answer)
- Plan L
- Plan K
Correct answer: Plan G
Medigap Plan G covers 100% of Medicare Part A coinsurance and all hospital costs, making it the most comprehensive plan available to new enrollees after Plan F was discontinued.
Question 3: A widow aged 60 wants to claim Social Security survivor benefits. What is the reduction she will face compared to full survivor benefits?
- 10.5%
- 28.5% (Correct answer)
- 20.0%
- 17.5%
Correct answer: 28.5%
Widow(er)s who claim survivor benefits at age 60 receive approximately 71.5% of the deceased spouse's benefit, representing a 28.5% reduction.
Question 4: Which type of trust is commonly used to protect assets from Medicaid spend-down while still allowing the grantor to receive income?
- Revocable living trust
- Medicaid Asset Protection Trust (MAPT) (Correct answer)
- Charitable remainder trust
- Spendthrift trust
Correct answer: Medicaid Asset Protection Trust (MAPT)
A Medicaid Asset Protection Trust (MAPT) is an irrevocable trust that removes assets from the grantor's countable resources for Medicaid while allowing income to flow to the grantor.
Question 5: What is the primary purpose of a 'spend-down' strategy in Medicaid planning?
- To maximize investment returns before retirement
- To reduce countable assets below the Medicaid eligibility threshold (Correct answer)
- To eliminate income taxes on retirement distributions
- To increase Social Security benefit amounts
Correct answer: To reduce countable assets below the Medicaid eligibility threshold
Medicaid spend-down involves reducing countable assets to the state-defined threshold so a person qualifies for Medicaid long-term care coverage.
Question 6: A senior owns a home worth $350,000 and is considering a reverse mortgage. Which statement is TRUE about Home Equity Conversion Mortgages (HECMs)?
- The borrower must make monthly principal payments
- The loan becomes due when the last borrower permanently leaves the home (Correct answer)
- Heirs are personally liable for any loan balance exceeding home value
- The borrower loses title to the home at loan origination
Correct answer: The loan becomes due when the last borrower permanently leaves the home
HECMs become due and payable when the last surviving borrower permanently leaves the home, whether through death, sale, or moving to a care facility.
Question 7: Which Social Security claiming strategy was eliminated by the Bipartisan Budget Act of 2015?
- Delayed retirement credits
- File and suspend combined with restricted application for a married couple (Correct answer)
- Spousal benefits for divorced individuals
- Survivor benefits for minor children
Correct answer: File and suspend combined with restricted application for a married couple
The 'file and suspend' strategy combined with a spouse's restricted application to collect spousal benefits was eliminated by the Bipartisan Budget Act of 2015.
CSA Financial Aspects of Aging 2
A 72-year-old retiree wants to minimize Required Minimum Distributions (RMDs).
Which strategy is most appropriate?