Retirement and Long-Term Planning Flashcards

A 55-year-old client separates from their employer and wants penalty-free access to their 401(k). Which rule allows this?

Answer: The Rule of 55 for separation from service

The Rule of 55 allows penalty-free 401(k) distributions if the employee separates from service in or after the year they turn 55.

When integrating mortgage planning with retirement income, what is the primary advantage of a 'housing wealth first' strategy?

Answer: It preserves investment portfolio longevity by using home equity early and allowing investments to grow

Using home equity early in retirement (via HECM or downsizing) allows the investment portfolio more time to compound, which can extend overall retirement sustainability.

Which scenario correctly describes how a Roth conversion ladder benefits a client who retires early at age 50?

Answer: Converted amounts can be withdrawn penalty-free after a 5-year waiting period per conversion

Each Roth conversion has its own 5-year clock; after 5 years, the converted principal (not earnings) can be withdrawn penalty-free, enabling a ladder for early retirees.

A CMPS professional is analyzing a client's debt-to-income ratio for mortgage qualification at age 60. Which retirement income source is typically excluded from qualifying income?

Answer: Unemployment benefits

Unemployment benefits are temporary and typically not counted as qualifying income for mortgage underwriting, unlike stable retirement income sources.

What is the primary purpose of a Qualified Longevity Annuity Contract (QLAC) within a retirement account?

Answer: To defer RMDs on the QLAC portion of the account and provide guaranteed income in advanced age

A QLAC allows retirees to use a portion of their IRA or 401(k) to purchase a deferred income annuity, reducing RMDs and guaranteeing income starting as late as age 85.

A married couple asks whether they should take a joint-and-survivor benefit or the higher single-life pension option. Which factor most strongly supports choosing the single-life option?

Answer: The spouse has substantial independent income and the pensioner is in poor health

If the spouse has independent income and the pensioner is in poor health (shorter life expectancy), the higher single-life payment may provide more total lifetime income.

Under the SECURE 2.0 Act, what change was made to the age at which RMDs must begin for those born in 1951 or later?

Answer: RMD age was increased from 72 to 73, and will increase to 75 for those born in 1960 or later

SECURE 2.0 raised the RMD age to 73 for those born between 1951 and 1959, and to 75 for those born in 1960 or later.