AAMS Retirement Planning & Distribution Strategies 1 — Questions and Answers
Question 1: What is the required minimum distribution (RMD) age for traditional IRA owners under the SECURE 2.0 Act?
- 70½
- 72
- 73 (Correct answer)
- 75
Correct answer: 73
The SECURE 2.0 Act raised the RMD starting age to 73 for individuals who turn 72 after December 31, 2022.
Question 2: Which retirement account type allows tax-free qualified withdrawals in retirement?
- Traditional IRA
- SIMPLE IRA
- Roth IRA (Correct answer)
- SEP IRA
Correct answer: Roth IRA
Roth IRA contributions are made with after-tax dollars, so qualified distributions in retirement are entirely tax-free.
Question 3: An employee earns $120,000/year. The employer offers a 3% SIMPLE IRA match. What is the maximum employer match contribution?
- $3,600 (Correct answer)
- $3,000
- $4,200
- $2,400
Correct answer: $3,600
The employer match is 3% of compensation: $120,000 × 0.03 = $3,600.
Question 4: What is the primary purpose of a stretch IRA strategy?
- Maximize contributions each year
- Extend tax-deferred growth across generations (Correct answer)
- Convert assets to Roth accounts
- Reduce annual RMDs
Correct answer: Extend tax-deferred growth across generations
A stretch IRA allows non-spouse beneficiaries to take distributions over their own life expectancy, extending tax-deferred or tax-free growth over multiple generations.
Question 5: Which of the following distributions from a traditional IRA is subject to the 10% early withdrawal penalty?
- Distribution at age 60 due to disability (Correct answer)
- Distribution at age 55 after separation from service
- Distribution used for a first-home purchase up to $10,000
- Distribution used to pay substantially equal periodic payments (SEPP)
Correct answer: Distribution at age 60 due to disability
While disability is an exception for most penalty rules, distributions before age 59½ from an IRA for disability are exempt only if the disability is total and permanent; a distribution solely due to age 60 (before 59½) for disability must meet strict IRS criteria — but distributions at age 60 are generally penalty-free regardless; the trick here is the age-55 separation rule applies only to qualified plans, not IRAs, making that choice the real penalty trap. The question is testing that the age-55 rule (choice B) does NOT apply to IRAs — that rule applies only to employer-sponsored plans — so a 55-year-old taking IRA funds after leaving a job would owe the penalty.
Question 6: What is the annual contribution limit for a 401(k) plan for employees under age 50 in 2024?
- $19,500
- $22,500
- $23,000 (Correct answer)
- $30,500
Correct answer: $23,000
For 2024, the elective deferral limit for 401(k) plans is $23,000 for employees under age 50.
Question 7: A client uses the '4% rule' for retirement income. If their portfolio is $1.5 million, what is the suggested first-year withdrawal?
- $45,000
- $60,000 (Correct answer)
- $75,000
- $80,000
Correct answer: $60,000
The 4% rule suggests withdrawing 4% of the portfolio in the first year: $1,500,000 × 0.04 = $60,000.
AAMS Retirement Planning & Distribution Strategies 1
What is the required minimum distribution (RMD) age for traditional IRA owners under the SECURE 2.0 Act?