AFIP AFIP Tax Planning and Retirement Strategies 2

Question 1

Which retirement savings vehicle allows employees to contribute pre-tax dollars and is sponsored by a for-profit employer?

Accepted Answer

401(k) plan

Answer

403(b) plan

Answer

457(b) plan

Answer

SIMPLE IRA

Question 2

What distinguishes a 'defined benefit' plan from a 'defined contribution' plan?

Accepted Answer

Defined benefit plans guarantee a specific retirement income; defined contribution plans depend on investment performance

Answer

Defined benefit plans are funded entirely by employees; defined contribution plans are funded by employers

Answer

Defined contribution plans are only available in the public sector

Answer

Defined benefit plans have no vesting requirements

Question 3

What is the primary purpose of a 'Section 1035 exchange' in the context of insurance and annuity products?

Accepted Answer

To exchange one annuity or life insurance policy for another without triggering a taxable event

Answer

To convert term life insurance into whole life insurance without a medical exam

Answer

To transfer retirement plan assets from one employer plan to another

Answer

To move funds from a taxable investment account into a tax-deferred annuity

Question 4

For a married couple filing jointly in the U.S., what is the primary benefit of 'income splitting' in retirement planning?

Accepted Answer

It may reduce the couple's overall tax burden by utilizing lower marginal tax brackets

Answer

It doubles the allowed IRA contribution limits

Answer

It allows each spouse to claim the full standard deduction separately

Answer

It eliminates the requirement for Required Minimum Distributions

Question 5

What is the 'catch-up contribution' provision in U.S. retirement law?

Accepted Answer

An additional contribution amount permitted for individuals aged 50 and older in retirement accounts

Answer

A provision allowing employees to make up for missed employer matches

Answer

A tax credit for low-income earners who contribute to retirement plans

Answer

A provision allowing self-employed individuals to contribute more than salaried workers

Question 6

What is a 'qualified longevity annuity contract' (QLAC) and what planning problem does it address?

Accepted Answer

A deferred annuity that begins payments at an advanced age, reducing RMDs and insuring against outliving assets

Answer

A life insurance contract that eliminates estate taxes for long-lived individuals

Answer

A joint annuity that covers both spouses for their combined lifetimes

Answer

An annuity structured to replace Social Security income for high earners