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 of the following is a key advantage of a defined benefit (DB) pension plan over a defined contribution (DC) plan?
Answer: Employer bears the investment risk and guarantees benefits
In a defined benefit plan, the employer shoulders the investment risk and guarantees a specific retirement benefit based on a formula.
What does the term 'vesting' mean in the context of employer-sponsored retirement plans?
Answer: Employee's non-forfeitable right to employer contributions
Vesting refers to the employee's right to keep employer contributions; once fully vested, those contributions cannot be forfeited.
Which distribution strategy systematically withdraws from taxable accounts first, then tax-deferred, then tax-free to maximize tax efficiency?
Answer: Traditional sequencing strategy
The traditional sequencing strategy withdraws from taxable accounts first, then tax-deferred (e.g., traditional IRA), then tax-free (e.g., Roth) accounts to manage tax brackets efficiently over time.
Under the SECURE Act (2019), most non-spouse beneficiaries inheriting an IRA must deplete the account within:
Answer: 10 years
The SECURE Act eliminated the stretch IRA for most non-spouse beneficiaries and required full distribution within 10 years of the account owner's death.
Which of the following individuals qualifies for a Health Savings Account (HSA) to supplement retirement medical expenses?
Answer: An employee enrolled in a High-Deductible Health Plan (HDHP)
Only individuals enrolled in a qualified High-Deductible Health Plan (HDHP) are eligible to contribute to an HSA.
A client converts $50,000 from a traditional IRA to a Roth IRA. The primary tax consequence is:
Answer: The $50,000 is added to ordinary income for the year
Roth conversions from traditional IRAs are taxable events; the converted amount is treated as ordinary income in the year of conversion.
What is 'longevity risk' in retirement planning?
Answer: The risk of outliving one's assets
Longevity risk is the risk that a retiree will outlive their financial assets, leaving them without sufficient income in late retirement.