Retirement Planning and Tax Strategies Flashcards
6 cards from real Investment Advisor practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Retirement Planning and Tax Strategies flashcards as text
Which Social Security claiming strategy generally results in the highest lifetime benefit for a healthy individual with a long life expectancy?
Answer: Delaying until age 70 to maximize monthly benefit
Delaying Social Security benefits until age 70 earns delayed retirement credits (8% per year after FRA), maximizing the monthly benefit for those with long life expectancies.
An investor in the 37% marginal income tax bracket would generally prefer which type of bond for taxable accounts?
Answer: Municipal bonds with tax-exempt interest
Municipal bond interest is generally exempt from federal income tax, making them particularly attractive for investors in high marginal tax brackets.
A client wants to minimize current taxable income while building retirement savings. Which strategy is MOST effective?
Answer: Maximizing pre-tax contributions to a 401(k)
Maximizing pre-tax 401(k) contributions directly reduces current taxable income, deferring taxes until retirement when income (and tax rates) may be lower.
Which type of retirement plan requires the employer to fund benefits based on a formula using years of service and final salary?
Answer: Defined benefit plan (pension)
Defined benefit plans (traditional pensions) promise a specific retirement benefit calculated using years of service and final salary, with the employer bearing investment risk.
The 'sequence of returns risk' is most significant for:
Answer: Retired clients in the distribution phase who are withdrawing assets
Sequence of returns risk is greatest for retirees who are drawing down assets — poor early returns combined with withdrawals can permanently deplete a portfolio.
A qualified longevity annuity contract (QLAC) can be purchased within a Traditional IRA to:
Answer: Defer RMDs on the amount used to purchase the QLAC until age 85
A QLAC allows IRA owners to use a portion of IRA funds to purchase a deferred annuity that starts paying at a later age (up to 85), with that amount excluded from RMD calculations.