Marginal Tax Rate

(a) Select the CORRECT answer for the following statements:    (8 marks)
1. When additional savings are needed to meet one’s retirement objectives, the additional aggregate amount needed for one’s retirement fund should be based on which of the following?
A The present value at retirement of inflation-adjusted additional savings.
B The future value of inflation-adjusted additional savings.
C The present value of tax-adjusted additional savings.
D Available disposable income not otherwise committed.
2. The amount that must be saved annually for retirement would logically be reduced by
A The dissipation of savings and investment prior to retirement.
B A return on one’s investments greater than anticipated.
C An increase in the rate of inflation.
D An increase in one’s expected lifestyle upon retirement.

3. To calculate the future value of income-producing investments in the retirement planning calculations, the most CORRECT interest factor to use is the

A Marginal tax rate.
B Rate of return.
C Expected rate of inflation.
D Modified interest rate.

4. Which of the following statements concerning inflation is/are CORRECT?

I. Inflation affects the dollar amount of a person’s assets available at retirement.
II. Some retirement plans adjust benefits to take inflation into consideration.
A I only.
B II only.
C Both I and II.
D Neither I and II.

5. Which of the following are features of Supplementary Retirement Scheme?
I. It offers flexibility in the contribution amount and timing with tax deduction for contributions made.
II. Investment gains accumulated are tax-free but dividends earned are taxable at personal tax rate.
III. Contributions to SRS are not revocable and any premature withdrawal of SRS savings is subjected to penalty and loss of tax benefits.
A I only
B I and II only.
C I and III only.
D All of the above.
6. The following statement(s) on the CPF is/are correct EXCEPT:
I. Self-employed persons with net trade income exceeding $6,000 are required to contribute to their Medisave accounts only.
II. To enhance employability for older workers, the compulsory employers’
contribution for workers aged above 50 will be lower.
III. There is no limit to the amount of contribution, both compulsory and
voluntarily, that can be paid to a member’s CPF account.
A I only.
B II only.
C I and II only.
D I and III only.

7. Which of the following statement(s) about Eldershield and IDAPE is (are) TRUE?
I. IDAPE is an alternative premium paying plan to Eldershield for those age 70 and above during the first launch.
II. Singaporeans between age 40 and 69 at the time of launch of Eldershield can apply for IDAPE if they suffer from only two existing ADLs.
III. IDAPE is a government scheme and it is free for those who qualify.
A I only.
B I and III only.
C III only.
D II and III only.
8. When considering taking on an insurance policy for retirement purposes, which of the following factors is most applicable?
A Regular premium Endowment is more suitable for pre-retirement than
retirement.
B Whole life is for indefinite coverage and useful for estate costs.
C Ageing population may lead to an increase in demand for major medical and long-term care insurance.
D All the above.
Using the information given in the case study above, answer questions 3b(i) and 3b(ii).
(b)(i) Demonstrate how close Mr T will come to his goal of a capital sum of $2,354,000.    (12 marks)
(b)(ii) Calculate the amount of retirement income Mr T can expect to receive when he retires at age 65.    (4 marks)
(c) If inflation was at a higher value, how will this affect Mr T and why?
List FOUR (4) possible impacts (assume investment returns cannot be safely improved).    (8 marks)