Social Security Bankruptcy—Fear or Fact?

Good to Know Social Security consists of two major benefit programs—disability and retirement/survivorship.  We’ll address these programs in just a moment, but first, the author will contrast the crucial difference between Social Security “solvency” and “bankruptcy.” Solvency is the ability to pay 100% of benefits. Bankruptcy is the inability to make any significant benefit payments.…

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Maximum Family Benefit

Course: Insurance PlanningLesson 10: Social Security Student Question: Does the maximum family benefit apply to a husband and wife that are both fully insured if the combined total between the two exceeds the maximum family limit? If I understand correctly, the maximum family limit only applies if there are beneficiaries within the family receiving benefits…

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Will 401(k) Rollovers Equal Advisors’ Fiduciary Responsibility?

CFP® Certificants in the News The CFP Board’s recent news release opined that “The Department of Labor’s new retirement security rule standard expanding fiduciary duties will likely face legal opposition. Advocates for the rule, including CFP Board, plan to submit amicus briefs in support of the DOL in any lawsuits.” The news release cites an…

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Value of Life Insurance in Buy-Sell Agreements

Course: Insurance PlanningLesson 17: Business Uses of Life Insurance Student Question: Do buy sell agreements accounts for projected growth of the company?  Do the life insurance benefits increase over time to account for projected growth, or perhaps can they invest and grow conservatively to keep up with inflation (or COLA on the plan)?  Instructor Response:…

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Fiduciary Rule Rises Again

Good to Know If the term “Department of Labor Fiduciary Rule” sounds familiar, there’s a reason. The DOL’s previous Fiduciary Rule (2016) was a failed regulatory effort that was struck down by the Fifth Circuit Court of Appeals in 2018. The Court held that the DOL exceeded its authority. One perspective of the Court’s ruling…

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Interest Rate Risk in a Bond

Course: Investment PlanningLesson 10: Fixed Income Securities Analysis Student Question: I’m not clear why holders of long-term bonds are subject to interest rate risk. If a 20-year bond is purchased at par with a coupon rate of 6.25% ($62.50/year), it seems to me that the investor would still receive $62.50 a year regardless of interest rate changes. What…

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Annuity Guaranty Pools

Good to Know We’ll address annuity protections in just a moment, but first let’s put a select few other financial protections into context. The Federal Deposit Insurance Corporation (FDIC) extends the full guarantee of the United States of America behind CDs and traditional banking products purchased from a Federally chartered U.S. bank—up to $250,000 per…

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Skewness versus Kurtosis

Course: Investment PlanningLesson 13: Asset Allocation Student Question: Can you help me understand the difference between Kurtosis and Skewness?  I can’t quite piece it together. Instructor Response: Entire books have been written on this topic but the following summary should get the points for you on the CFP® Board exam when these topics are tested. …

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The Myth of High Income Taxes on Social Security Income

Good to Know You and your clients are planning their after-tax retirement income. Your client is apprehensive about how much of their retirement income will be siphoned off by Federal income tax in retirement. For many, if not most, clients you have great news. The combination of Social Security income (SSI) tax breaks and standard…

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Book Value versus Market Cap

Course: Investment PlanningLesson 5: Fundamental Equity Analysis Student Question: How is a company’s book value different from the market cap? Instructor Response: Book value is an accounting concept generally based upon the acquisition costs of and the legally binding amounts of liabilities.  It is the amount of cash that would be left over if all…

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