CSA Financial Aspects of Aging 5 — Questions and Answers
Question 1: A senior's Social Security benefit at full retirement age (FRA) is $2,000/month. If she delays claiming until age 70, what is her approximate monthly benefit?
- $2,160
- $2,480
- $2,640 (Correct answer)
- $2,800
Correct answer: $2,640
Delayed retirement credits increase benefits by 8% per year beyond FRA; delaying from FRA of 67 to age 70 equals 3 years × 8% = 24% increase, yielding $2,000 × 1.24 = $2,480.
Question 2: What is the primary financial risk that longevity annuities (deferred income annuities) are designed to address?
- Inflation risk in the early retirement years
- Outliving one's assets (longevity risk) (Correct answer)
- Stock market volatility in the first decade of retirement
- Healthcare cost spikes before Medicare eligibility
Correct answer: Outliving one's assets (longevity risk)
Longevity annuities (DIAs) are specifically designed to provide guaranteed income starting at an advanced age (e.g., 80 or 85), protecting against the risk of outliving retirement savings.
Question 3: Under the SECURE 2.0 Act (2022), at what age must participants in employer-sponsored retirement plans begin taking Required Minimum Distributions?
- 70½
- 72
- 73 (Correct answer)
- 75
Correct answer: 73
SECURE 2.0 raised the RMD starting age to 73 for individuals who turn 72 after December 31, 2022, with a further increase to 75 scheduled for 2033.
Question 4: A senior wants to transfer wealth to grandchildren while minimizing gift tax. Which annual exclusion amount applies per recipient for 2024?
- $15,000
- $16,000
- $17,000
- $18,000 (Correct answer)
Correct answer: $18,000
The annual gift tax exclusion for 2024 is $18,000 per recipient, allowing tax-free gifts to any number of individuals without using the lifetime exemption.
Question 5: Which document authorizes a trusted person to make financial decisions on behalf of a senior who becomes incapacitated?
- Healthcare proxy
- Living will
- Durable power of attorney for finances (Correct answer)
- Revocable living trust alone
Correct answer: Durable power of attorney for finances
A durable power of attorney for finances designates an agent to manage financial affairs and remains effective even if the principal becomes incapacitated.
Question 6: A 70-year-old client has $800,000 in a traditional IRA and wants to purchase long-term care coverage cost-effectively. Which hybrid product structure achieves this?
- Term life insurance with an LTC rider
- Asset-based long-term care insurance funded by a 1035 exchange or IRA rollover (Correct answer)
- A standard Medigap plan with LTC endorsement
- Medicaid spend-down combined with a SPIA
Correct answer: Asset-based long-term care insurance funded by a 1035 exchange or IRA rollover
Asset-based (hybrid) LTC policies allow clients to reposition existing savings into a product that provides LTC benefits and a death benefit if care is never needed.
Question 7: The Medicaid look-back period for nursing home care is designed to detect which type of activity?
- Undisclosed income from retirement accounts
- Asset transfers made for less than fair market value to qualify for Medicaid (Correct answer)
- Failure to file federal income tax returns
- Unreported Social Security earnings before retirement
Correct answer: Asset transfers made for less than fair market value to qualify for Medicaid
The 60-month Medicaid look-back period reviews asset transfers made below fair market value to prevent individuals from gifting assets to qualify for Medicaid.
CSA Financial Aspects of Aging 5
A senior's Social Security benefit at full retirement age (FRA) is $2,000/month.
If she delays claiming until age 70, what is her approximate monthly benefit?