***(PLEASE SHOW WORK DOWN TO SOLVE OR EXPLANATION TO THE PROBLEM)***

1. Which of the following expenditures will most likely decrease during retirement?

a. Home maintenance. b. Health care costs. c. Vacation and travel costs. d. Retirement savings.

2. Jasmine is 53-years old and earns $115,000 a year. She saves 12% of her annual gross income for retirement. Jasmine will pay off her mortgage by the time she retires. Her monthly payment is $1,950.21. Calculate Jasmine's wage replacement ratio using the top-down approach (round to the nearest %) and using pre-tax dollars. Assume that she wants to maintain her lifestyle.

a. 60%. b. 68%. c. 80%. d. 88%.

3. Ralph, a 40-year-old nurse who earns $80,000 a year, saves 14% of his annual gross income. Assume that Ralph wants to maintain his exact pre-retirement lifestyle. Calculate Ralphs wage replacement ratio using the top-down approach (round to the nearest %) and using pre-tax dollars.

a. 70%. b. 78%. c. 86%. d. 92%.

4. Sean will be retiring soon. All of the following expenditures could be eliminated in his retirement needs calculation except: a. The $2,200 per year he spends on his work suits and dress clothes. b. The $18,000 annual mortgage payment he makes that is scheduled to end seven years into retirement. c. The FICA taxes he pays each year. d. The $22,000 per year he contributes to his 401(k) plan.

5. Colin is 40 years old and wants to retire in 27 years. His family has a history of living well into their 90s. Therefore, he estimates that he will live to age 95. He currently has a salary of $150,000 and expects that he will need about 75% of that amount annually if he were retired. He can earn 8 percent from his portfolio and expects inflation to continue at 3 percent. Some years ago, he worked for the government and expects to receive an annuity that will pay him $20,000 in todays dollars per year beginning at age 67. The annuity includes a cost of living adjustment, which is equal to inflation. Colin currently has $200,000 invested for his retirement. His Social Security benefit in todays dollars is $30,000 per year at normal age retirement of age 67. How much does he need to accumulate at age 67 exclusive of his pension and Social Security benefits?

a. $2.1 million. b. $2.2 million. c. $2.8 million. d. $2.9 million.

6. Jordan is 55 and wants to retire in 12 years. His family has a history of living well into their 90s. Therefore, he estimates that he will live to age 97. He currently has a salary of $100,000 and expects that he will need about 82% of that amount annually if he were retired. He can earn 9 percent in his portfolio and expects inflation to continue at 3 percent. Jordan currently has $325,000 invested for his retirement. His Social Security benefit in todays dollars is $30,000 per year at normal age retirement of age 67. How much does he need to save each year at year end to meet his retirement goals?

a. $6,245. b. $7,659. c. $8,432. d. $9,252.

7. Parker is 50 and wants to retire in 15 years. His family has a history of living well into their 90s. Therefore, he estimates that he will live to age 95. He currently has a salary of $120,000 and expects that he will need about 65% of that amount annually if he were retired. He can earn 9 percent in his portfolio while he is working. However, he expects that he will only earn 7 percent in his portfolio during retirement. He expects inflation to continue at 3 percent. Parker currently has $350,000 invested for his retirement. His Social Security benefit in todays dollars is $30,000 per year at normal age retirement of age 67. His Social Security benefit will be reduced by 6 2/3 percent for each year he begins collecting before full age retirement. How much does he need to save each year to meet his retirement goals?

a. $2,465. b. $2,987. c. $4,975. d. $6,855.

8. Larry is 58 and wants to retire by age 65. He expects that he will live to age 95. He currently has a salary of $140,000 and expects that he will need about 72% of that amount annually if he were retired. He can earn 9 percent in his portfolio while he is working. However, he expects that he will only earn 7 percent in his portfolio during retirement because he will adjust his asset allocation so that his portfolio is more conservative. He expects inflation to continue at 3 percent. Larry currently has $800,000 invested for his retirement. His Social Security benefit in todays dollars is $24,000 per year, assuming a retirement of age 65. He just calculated what he needs to save each year and it is more than he can afford. Which of the following is his best alternative to achieve his retirement goals? a. Modify his portfolio during retirement to achieve an 8% rate of return instead of a 7% rate of return. b. Delay his retirement by 2 years. c. Reduce his expected needs by $10,000 in todays dollars. d. None of the above will help him achieve his goals.

9. Which of the following are risks to financial independence?

a. A shortened work life expectancy. b. An extended retirement life expectancy. c. Inadequate investment rate of return. d. All of the above.

10. Which of the following are generally correct about spending during retirement years.

a. Given the length of time in retirement, it is unlikely that inflation will have a significant impact on annual spending. b. Retirees generally spend the most during their last five years of life. c. Retirement spending tends to decline during the later part of retirement. d. Spending on an inflation adjusted basis is fairly constant during retirement.

11. There have been significant changes in demographics over the last twenty to fifty years. Which of the following statements is correct?

a. There has been a consistent and continuing decrease in the age at which people retire in the USA. b. The life expectancy of men and women has leveled off and is expected to remain steady over the next fifty years. c. While the savings rate in the USA has declined since the 1980s, it has increased since 2007. d. Based on recent studies, spending of retirees tends to be fairly steady throughout retirement.