Risk Assessment & Mitigation Flashcards
7 cards from real RMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Assessment & Mitigation flashcards as text
A client retiring at 60 wants to know her 'safe withdrawal rate.' Which factor would MOST likely cause an adviser to recommend a LOWER initial withdrawal rate than the traditional 4%?
Answer: A longer retirement horizon because of early retirement age
A longer retirement horizon increases longevity risk and the number of years the portfolio must sustain withdrawals, requiring a more conservative initial rate.
Which of the following is the PRIMARY purpose of purchasing a deferred income annuity (DIA) for longevity risk mitigation?
Answer: To guarantee income starting at an advanced age, covering the tail of longevity risk
A DIA (often called longevity insurance) begins payments at a future date—such as age 80 or 85—providing guaranteed income if the client lives to advanced ages.
An adviser evaluates a client's exposure to taxes on required minimum distributions (RMDs). This is an example of managing which type of risk?
Answer: Tax risk
Tax risk in retirement includes the possibility that RMDs push taxable income into higher brackets, increasing the tax burden on retirement assets.
A couple's retirement plan fails in Monte Carlo simulations at a 25% rate. Which action would MOST directly improve plan survivability?
Answer: Reducing planned annual spending
Reducing planned annual spending lowers the withdrawal rate and directly decreases the amount drawn from the portfolio each year, improving survival probability.
Which risk is BEST addressed by laddering Treasury Inflation-Protected Securities (TIPS) in a retirement portfolio?
Answer: Inflation risk
TIPS provide principal and interest payments that adjust with the CPI, directly protecting purchasing power against inflation.
A client's entire retirement income depends on variable annuity payments with no guaranteed minimum. Which risk is MOST prominent?
Answer: Market risk affecting the income amount
Without a guaranteed minimum, variable annuity income fluctuates directly with underlying sub-account performance, exposing the retiree to full market risk.
An adviser recommends delaying Social Security to age 70 to reduce retirement income risk. Which statement BEST supports this recommendation?
Answer: It maximizes the inflation-adjusted, longevity-protected guaranteed benefit
Delaying Social Security to 70 increases the monthly benefit by roughly 8% per year beyond full retirement age and provides a larger inflation-indexed, guaranteed lifetime income.