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Retirement Planning Flashcards

6 cards from real CFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Retirement Planning flashcards as text

  1. A CFC client turns 73 in 2024 and has a traditional IRA valued at $500,000 on December 31, 2023. The IRS Uniform Lifetime Table factor for age 73 is 26.5. What is the approximate RMD?

    Answer: $18,868

    RMD is calculated by dividing the prior year-end account balance by the applicable distribution period: $500,000 ÷ 26.5 = approximately $18,868.

  2. Which retirement planning strategy involves purchasing a deferred income annuity (DIA) to cover expenses beginning at an advanced age like 85?

    Answer: Longevity insurance strategy

    Using a DIA as longevity insurance covers the risk of outliving assets by guaranteeing income if the client reaches an advanced age, at relatively low cost.

  3. In a 'bucket strategy,' the short-term bucket typically holds assets designed to cover:

    Answer: 1–3 years of living expenses in cash or short-term bonds

    The short-term bucket holds liquid, stable assets covering near-term expenses so the client can avoid selling growth assets during market downturns.

  4. What is a major advantage of a cash balance plan compared to a traditional defined benefit plan for a high-income business owner?

    Answer: Higher annual contribution limits and tax deductions

    Cash balance plans allow much higher tax-deductible contributions than 401(k)s, particularly for older, high-income business owners who want to accelerate retirement savings.

  5. The 'catch-up contribution' provision allows workers aged 50 and older to contribute an additional $7,500 to their 401(k) in 2024. This provision primarily benefits:

    Answer: Workers who started saving late or need to boost retirement savings near retirement

    Catch-up contributions help older workers who may have started saving late or experienced financial setbacks to accelerate tax-advantaged retirement savings in their peak earning years.

  6. When calculating a client's retirement income need, which approach subtracts work-related expenses, savings contributions, and mortgage payments that will end at retirement?

    Answer: Expense projection approach

    The expense projection approach directly estimates actual retirement spending by removing costs that cease at retirement, often giving a more accurate picture than a flat replacement ratio.