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Taxation & Legal Considerations in Retirement 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 Taxation & Legal Considerations in Retirement flashcards as text

  1. A retiree converts $50,000 from a traditional IRA to a Roth IRA in 2024. How is this conversion taxed?

    Answer: The $50,000 is added to ordinary income and taxed at the retiree's marginal rate

    Roth conversions are fully taxable as ordinary income in the year of conversion, regardless of the account owner's age.

  2. Which of the following Social Security benefit strategies was eliminated by the Bipartisan Budget Act of 2015?

    Answer: File-and-suspend for spousal benefits

    The file-and-suspend strategy that allowed one spouse to suspend benefits while the other collected spousal benefits was eliminated in 2015.

  3. Under the Government Pension Offset (GPO), how much is a spousal Social Security benefit reduced for each dollar of a government pension?

    Answer: Two-thirds of the government pension amount

    The GPO reduces spousal or survivor Social Security benefits by two-thirds of the amount of the government pension.

  4. A married couple filing jointly has $85,000 in combined income including Social Security. What percentage of Social Security benefits may be subject to federal tax?

    Answer: Up to 85%

    Up to 85% of Social Security benefits are taxable for married couples filing jointly with combined income above $44,000.

  5. What is the primary purpose of a Qualified Longevity Annuity Contract (QLAC) in retirement planning?

    Answer: To defer RMDs on a portion of IRA assets and provide income at advanced ages

    A QLAC allows retirees to use a portion of IRA assets to purchase a deferred annuity that starts at a later age, reducing RMDs in the interim.

  6. Which legal document authorizes a designated person to make financial decisions on behalf of an incapacitated individual?

    Answer: A durable power of attorney

    A durable power of attorney remains effective even if the principal becomes incapacitated, allowing the agent to manage financial affairs.

  7. Under current law, at what age does the RMD period begin for a person born in 1951?

    Answer: Age 73

    SECURE 2.0 raised the RMD starting age to 73 for individuals born between 1951 and 1959.