1. (c) 70, not 75, because once you reach age 70, benefits do not increase further.
2. (b) Medicaid, the federal health plan for the poor. You must be in poverty to have the federal government cover your long-term care needs. Medicare doesn’t pay much in long-term care benefits.
3. False. Medicare pays for 100 days — after you’ve first spent three or more days in a hospital getting skilled nursing care. A lot of folks don’t need that. They go straight to a nursing home, in which case Medicare doesn’t pay anything.
4. (d) 70 and a half. You have until April 1 of the year after you reach that age to take the first distribution, but at that point you’d need to take one for the current year as well.
5. (b) B-rated corporate bonds. The others may be rated higher and have higher quality and safety, but not the highest yield. (Those who don’t know this answer could end up buying bonds that are riskier than they thought or lower in yield than they thought.)
6. (b) less. If inflation is more than your earnings, your buying power goes down. Many people don’t know the basic elements of how inflation works and its impact on paychecks.
7. (a) stocks. Yet today more than half of households don’t own stocks, preferring to have their savings in bonds and CDs, wrongly believing those will protect them against inflation.
8. False. A basket of stocks is safer than a single stock, because if one goes down you still have many others. It’s like having 12 eggs in 12 baskets instead of all 12 in one basket.
9. (b) It will drop substantially. Bond values and interest rates are inversely proportional: When one goes up, the other goes down.