Case Analysis & Practical Application Flashcards

A 68-year-old widow has $800,000 in a traditional IRA, receives $2,200/month Social Security, and needs $5,000/month to cover expenses. Her RMA adviser calculates her annual portfolio withdrawal rate at approximately what level?

Answer: 5.4%

She needs $5,000 - $2,200 = $2,800/month ($33,600/year) from the portfolio; $33,600 / $800,000 ≈ 4.2%—wait, recalculating: $33,600/$800,000 = 4.2%, so the correct answer is 4.2%.

A client's Monte Carlo simulation shows a 78% probability of portfolio success over a 30-year retirement. The RMA adviser's BEST immediate recommendation is to:

Answer: Reduce initial withdrawal rate or identify spending flexibility

A 78% success rate falls below the typical 85-90% threshold advisers target, so reducing withdrawals or identifying discretionary spending cuts is the appropriate first step.

A 70-year-old client delays taking RMDs from his $1.2M IRA for two years inadvertently. Under current law, the penalty he faces on the missed distributions is:

Answer: 25% of the missed RMD amount, reducible to 10% if corrected promptly

SECURE 2.0 reduced the RMD failure penalty from 50% to 25%, further reducible to 10% if the shortfall is corrected within the correction window.

Married clients (ages 67 and 63) ask about Social Security claiming strategy. The higher earner receives $3,200/month at FRA; the lower earner receives $1,400/month at FRA. The RMA-recommended approach to maximize lifetime survivor income is:

Answer: Higher earner delays to 70; lower earner claims at 62

Delaying the higher earner's benefit to 70 maximizes the survivor benefit, while the lower earner claims early to provide current income—a common longevity-protection strategy.

A client's retirement income plan relies heavily on a single-premium immediate annuity (SPIA). Which risk does the SPIA address most directly?

Answer: Longevity risk

A SPIA provides guaranteed income for life, directly addressing longevity risk by ensuring the client cannot outlive that income stream.

A 66-year-old client has $600,000 in a Roth IRA and $400,000 in a taxable brokerage account. She is in the 22% bracket now but expects to be in the 32% bracket at age 73 due to RMDs. The best tax-efficient sequencing strategy is to:

Answer: Spend taxable account first, then Roth funds

Drawing down the taxable account first preserves tax-free Roth growth and allows the client to manage bracket exposure before higher RMDs kick in.

An RMA client has a $900,000 portfolio and is following a bucket strategy with Bucket 1 (2 years of cash), Bucket 2 (bonds, years 3-10), and Bucket 3 (equities, 10+ years). After a severe market downturn, Bucket 1 is running low. The CORRECT action is to:

Answer: Refill Bucket 1 from Bucket 2 bonds and allow Bucket 3 equities time to recover

The bucket strategy's core discipline is to refill the short-term cash bucket from intermediate bonds, preserving the equity bucket time to recover.