Complete the following problems:

| June 8, 2016

Question
Describe the two types of tax-deferred investment accounts [an IRA, and a 401(k) or 403(b)], and
contrast them with a regular taxable investment account. What types of investments are best held in a
tax-deferred account? What types are best held as taxable savings?

Describe the advantages to using a College Savings 529 Plan over gifting money directly to your
children in the form of a Uniform Gift to Minor Account. What are some costs and disadvantages of
529 plans? What types of 529 plans are available in your state?

Using the Social Security Retirement Estimator (http://www.ssa.gov/estimator/), determine your
retirement age and estimate the retirement benefits you will receive from Social Security if you work
to your full retirement age.

Estimate your necessary living expenses when you retire and calculate the shortfall between this
amount and your estimated social security benefit.

Calculate how much you need in savings today to meet that shortfall, or alternatively, how much you
need to save per month between now and your full retirement age to meet the shortfall.

Read Case in Point A Single Fathers Tax Situation in Ch. 3 of your text. Answer the following
questions:
What are Erics major financial concerns in his current situation?
In what ways might Eric improve his tax planning efforts?
Calculate the following:
What is Erics taxable income? (Refer to Exhibit 3-1)

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2

What is his total tax liability (Use the Tax Rate table)? What is his average tax rate?
Based on his withholding, will Eric receive a refund or owe additional tax? What is the
amount?

Use the Figure It Out! workhsheet in Ch. 10 of your textbook in the Estimating Your Life Insurance
Requirements section to calculate your own life insurance needs. Obtain premium rates for $50,000
whole life, universal life, and term life policies. Compare the costs and provisions of these policies.
Read Case in Point Life Insurance for the Young Married in Ch. 10. Answer the following:
What type of policy would you suggest for Jeff and Ann? Why?

In your opinion, do Jeff and Ann need additional insurance? Why or why not?

Read Case in Point Planning for Retirement in Ch. 14 of your text. Answer the following
questions:
In the past, many workers chose to stay with their employers until retirement. What was the major
reason for employees loyalty?
How did Maureen amass $1.4 million for retirement, while Therese could only accumulate
$553,000?
Why do women need to start early to save for retirement?

What expenses may increase or decrease during retirement?

References
Kapoor, J. R., Dlabay, L. R., & Hughes, R. J. (2013). Focus on personal finance (4th ed.). New York, NY:
McGraw-Hill.

Copyright © 2014 by University of Phoenix. All rights reserved.

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