CFC Retirement Planning 2

Question 1

Which Social Security strategy for married couples often maximizes lifetime household benefits?

Accepted Answer

Higher earner delays to age 70; lower earner claims earlier

Answer

Having the higher earner delay to age 70 maximizes the survivor benefit and the couple's lifetime income, while the lower earner can claim earlier to provide near-term cash flow.

Question 2

A client converts $50,000 from a traditional IRA to a Roth IRA. The tax consequence is:

Accepted Answer

The $50,000 is added to ordinary income in the conversion year

Answer

Roth conversions are treated as ordinary income in the year of conversion, potentially pushing the client into a higher tax bracket.

Question 3

Under ERISA, plan fiduciaries must act solely in the interest of plan participants and must apply the standard of:

Accepted Answer

A prudent expert investor

Answer

ERISA's prudent expert standard requires fiduciaries to act with the care, skill, prudence, and diligence of a knowledgeable financial professional.

Question 4

Which IRA contribution is NOT tax-deductible at the federal level?

Accepted Answer

Roth IRA contribution

Answer

Roth IRA contributions are always made with after-tax dollars and are never deductible, though qualified withdrawals are tax-free.

Question 5

What is the penalty for taking a distribution from a traditional IRA before age 59½ without a qualifying exception?

Accepted Answer

10%

Answer

Early distributions from traditional IRAs are subject to a 10% federal penalty tax in addition to ordinary income tax, unless an exception applies.

CFC - Certified Financial Consultant Practice Test

CFC - Certified Financial Consultant Practice Test

CFC Retirement Planning 2