CSA Financial Aspects of Aging 4 — Questions and Answers
Question 1: A senior advisor is helping a client select a Medicare Part D plan. Which factor is MOST important when comparing plans?
- The insurer's financial strength rating
- The total annual cost including premiums, deductibles, and copays for the client's specific medications (Correct answer)
- The plan's star rating alone
- Whether the plan is offered by the same company as their Medigap policy
Correct answer: The total annual cost including premiums, deductibles, and copays for the client's specific medications
The total annual out-of-pocket cost for the individual's specific drug regimen is the most relevant factor, as formularies and cost-sharing vary widely between plans.
Question 2: What is the 'elimination period' in a long-term care insurance policy?
- The period after which benefits are reduced due to inflation
- The number of days the insured must pay for care before benefits begin (Correct answer)
- The grace period for late premium payments
- The time limit on total lifetime benefits
Correct answer: The number of days the insured must pay for care before benefits begin
The elimination period is a deductible measured in days during which the policyholder pays for care out-of-pocket before the insurance begins paying.
Question 3: Which of the following qualified accounts is NOT subject to Required Minimum Distributions (RMDs) during the account owner's lifetime?
- Traditional IRA
- Roth IRA (Correct answer)
- 403(b) plan
- SEP-IRA
Correct answer: Roth IRA
Roth IRAs are not subject to RMDs during the owner's lifetime, making them a valuable tool for tax-efficient estate planning.
Question 4: A client aged 65 is newly eligible for Medicare but is still covered by employer group health insurance. What is the PRIMARY rule about Medicare and employer coverage?
- Medicare always pays first regardless of employer plan size
- If the employer has 20 or more employees, the employer plan pays primary and Medicare pays secondary (Correct answer)
- The client must drop employer coverage when enrolling in Medicare
- Medicare Part B is automatic and mandatory at age 65
Correct answer: If the employer has 20 or more employees, the employer plan pays primary and Medicare pays secondary
For employers with 20+ employees, the employer group health plan is the primary payer and Medicare is secondary; the reverse applies for employers with fewer than 20 employees.
Question 5: A 78-year-old client wants to make a charitable gift and reduce her RMD impact. Which strategy achieves both goals?
- Donor-advised fund contribution
- Qualified Charitable Distribution (QCD) from her IRA (Correct answer)
- Charitable remainder unitrust
- Appreciated stock gift to charity
Correct answer: Qualified Charitable Distribution (QCD) from her IRA
A Qualified Charitable Distribution (QCD) allows IRA owners age 70½ or older to transfer up to $105,000 annually directly to charity, satisfying RMD requirements without increasing taxable income.
Question 6: The 'four percent rule' for retirement income withdrawal is based on which underlying assumption?
- A 100% equity portfolio with no rebalancing
- A balanced portfolio can sustain 4% annual withdrawals adjusted for inflation over a 30-year period (Correct answer)
- Government guaranteed returns of 4% on Treasury bonds
- Social Security provides 4% of pre-retirement income annually
Correct answer: A balanced portfolio can sustain 4% annual withdrawals adjusted for inflation over a 30-year period
The 4% rule, derived from the Trinity Study, found that a balanced stock and bond portfolio could sustain inflation-adjusted withdrawals of 4% annually for 30 years with high probability.
Question 7: Which of the following scenarios would trigger Medicare's 'Income-Related Monthly Adjustment Amount' (IRMAA)?
- A senior's modified adjusted gross income (MAGI) exceeds the annual threshold two years prior (Correct answer)
- A senior enrolls in Medicare Advantage instead of Original Medicare
- A senior collects Social Security before full retirement age
- A senior has a long-term care insurance policy
Correct answer: A senior's modified adjusted gross income (MAGI) exceeds the annual threshold two years prior
IRMAA surcharges on Medicare Part B and Part D premiums are triggered when a beneficiary's MAGI from two years prior exceeds the annual income threshold.
CSA Financial Aspects of Aging 4
A senior advisor is helping a client select a Medicare Part D plan.
Which factor is MOST important when comparing plans?