CLU Retirement and Wealth Management 4

Question 1

A 72-year-old client fails to take their full Required Minimum Distribution. What excise tax applies to the shortfall amount?

Accepted Answer

25%

Answer

Under SECURE 2.0 Act, the penalty for failing to take an RMD was reduced from 50% to 25% (or 10% if corrected promptly within the correction window).

Question 2

Net Unrealized Appreciation (NUA) is a tax strategy that applies when an employee distributes which specific type of asset from a qualified retirement plan?

Accepted Answer

Employer stock held inside the qualified plan

Answer

NUA applies only to employer stock distributed in a lump sum from a qualified plan, allowing the appreciation to be taxed at favorable long-term capital gains rates rather than ordinary income rates.

Question 3

A client inherits a traditional IRA from a non-spouse who died in 2023. Under the SECURE Act rules, what is the latest the client must fully distribute the inherited IRA?

Accepted Answer

10 years after the year of death

Answer

Most non-spouse beneficiaries are now subject to the 10-year rule under the SECURE Act, requiring full distribution by December 31 of the 10th year following the owner's death.

Question 4

In asset-liability matching for retirement income planning, what does the 'liability' represent?

Accepted Answer

The present value of all future retirement income needs

Answer

In retirement planning, liabilities are the present value of all future spending obligations, and the goal is to match assets (investments) to fund those liabilities.

Question 5

Which qualified plan vesting schedule requires an employee to be at least 20% vested after 2 years, reaching 100% vesting no later than year 6?

Accepted Answer

Graded vesting

Answer

Graded (graduated) vesting increases vesting percentages incrementally each year, with ERISA requiring at least 20% vesting after year 2 and full vesting by year 6 for employer matching contributions.

CLU - Chartered Life Underwriter Practice Test

CLU - Chartered Life Underwriter Practice Test

CLU Retirement and Wealth Management 4