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Retirement and Wealth Management Flashcards

7 cards from real CLU 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 and Wealth Management flashcards as text

  1. A 403(b) plan participant at a public school wants to make additional contributions. Which catch-up contribution provision is UNIQUE to 403(b) plans and not available in 401(k) plans?

    Answer: 15-year rule allowing up to $3,000 additional if average contributions were low

    The 15-year rule is exclusive to 403(b) plans and allows employees with 15+ years of service and low historical contributions to contribute an additional $3,000 per year.

  2. Which type of annuity contract feature guarantees that the annuitant will receive payments for a minimum period even if they die shortly after annuitization?

    Answer: Life with Period Certain

    A Life with Period Certain annuity guarantees payments for the annuitant's lifetime but also specifies a minimum payment period (e.g., 10 or 20 years) payable to beneficiaries if death occurs early.

  3. Under the 4% withdrawal rule, a retiree with a $1.5 million portfolio should withdraw how much in the first year of retirement?

    Answer: $60,000

    The 4% rule prescribes withdrawing 4% of the initial portfolio value: $1,500,000 × 0.04 = $60,000 in year one.

  4. A client is evaluating a variable annuity with a Guaranteed Minimum Withdrawal Benefit (GMWB). What is the PRIMARY risk this rider is designed to mitigate?

    Answer: Longevity risk — outliving assets

    A GMWB rider guarantees a minimum level of lifetime withdrawals regardless of investment performance, directly addressing the risk of outliving one's assets.

  5. What distinguishes a SIMPLE IRA from a SEP-IRA regarding employee participation?

    Answer: SIMPLE IRA allows employee elective deferrals; SEP-IRA is employer-contribution only

    SIMPLE IRAs allow employees to make elective salary deferrals, while SEP-IRAs are funded exclusively by employer contributions.

  6. A married couple with a $4 million estate wants to use portability to maximize their federal estate tax exemption. What must the executor do to utilize the deceased spouse's unused exemption (DSUE)?

    Answer: File a timely estate tax return (Form 706) even if no tax is owed

    To preserve the DSUE, the executor must file a federal estate tax return (Form 706) within 9 months of death (or 15 months with extension) even if no estate tax is due.

  7. Which retirement plan design feature automatically re-enrolls existing employees at a higher default deferral rate each year?

    Answer: Automatic Escalation (also called Auto-Increase)

    Automatic Escalation features gradually increase an employee's deferral rate — often by 1% per year — until a cap is reached, boosting long-term retirement savings.