Retirement Planning & Distribution Strategies Flashcards
7 cards from real AAMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Retirement Planning & Distribution Strategies flashcards as text
Which Social Security claiming strategy generally maximizes lifetime benefits for a healthy individual who can afford to wait?
Answer: Delaying until age 70
Delaying Social Security benefits until age 70 results in the maximum monthly benefit, increasing by approximately 8% per year beyond FRA.
What is the primary tax advantage of a SEP IRA for a self-employed individual?
Answer: Higher contribution limits than a traditional IRA
A SEP IRA allows self-employed individuals to contribute up to 25% of net self-employment income (up to $69,000 in 2024), far exceeding traditional IRA limits.
The 'bucket strategy' in retirement income planning divides assets into buckets based on:
Answer: Time horizon and liquidity needs
The bucket strategy separates assets into short-term (liquid), medium-term, and long-term buckets based on when funds will be needed, matching time horizon to investment risk.
Which factor does NOT affect the calculation of an individual's Social Security retirement benefit?
Answer: Number of dependents at time of claiming
Social Security retirement benefits are calculated based on the 35 highest earning years, the claiming age, and years of covered employment — not the number of dependents.
A client wants guaranteed income they cannot outlive. Which product is most appropriate?
Answer: Single Premium Immediate Annuity (SPIA)
A Single Premium Immediate Annuity (SPIA) converts a lump sum into guaranteed income payments for life, directly addressing longevity risk.
What is the 'sequence of returns risk' in retirement income planning?
Answer: The risk that poor early returns in retirement permanently impair a portfolio
Sequence of returns risk is the danger that experiencing negative portfolio returns early in retirement — when withdrawals begin — can permanently reduce the portfolio's longevity compared to experiencing those same returns later.
Which of the following best describes a 'Roth conversion ladder' strategy?
Answer: Converting IRA funds to Roth over multiple years to manage tax brackets
A Roth conversion ladder involves converting IRA funds to Roth accounts incrementally over multiple years to stay within lower tax brackets and build a future source of tax-free income.