Tax Planning in Retirement Flashcards
7 cards from real CRC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Tax Planning in Retirement flashcards as text
Under the SECURE 2.0 Act, at what age must individuals born between 1951 and 1959 begin taking Required Minimum Distributions (RMDs) from traditional IRAs?
Answer: Age 73
The SECURE 2.0 Act raised the RMD starting age to 73 for individuals born between 1951 and 1959, effective January 1, 2023.
What is the excise tax penalty for failing to take a Required Minimum Distribution on time, as updated by the SECURE 2.0 Act?
Answer: 25% of the undistributed amount
SECURE 2.0 reduced the RMD penalty from 50% to 25%, and further to 10% if the missed RMD is corrected within a two-year correction window.
Which withdrawal sequencing strategy is generally considered most tax-efficient for retirees holding taxable, tax-deferred, and Roth accounts?
Answer: Withdraw from taxable accounts first, then tax-deferred, then Roth last
The conventional sequence—taxable first, then tax-deferred, then Roth—allows tax-advantaged assets to continue compounding longest while minimizing current-year tax liability.
For a single filer in 2023, long-term capital gains are taxed at 0% if taxable income falls below approximately which threshold?
Answer: $44,625
In 2023, the 0% long-term capital gains rate applies to single filers with taxable income up to approximately $44,625, creating a strategic harvesting opportunity for retirees in lower brackets.
What percentage of Social Security benefits may be subject to federal income tax for a single filer whose combined income falls between $25,000 and $34,000?
Answer: 50%
Up to 50% of Social Security benefits become taxable when combined income (AGI + nontaxable interest + half of SS benefits) falls between $25,000 and $34,000 for single filers.
How are distributions from a traditional IRA taxed when withdrawn in retirement?
Answer: As ordinary income in the year of distribution
Traditional IRA withdrawals are taxed as ordinary income because contributions were made on a pre-tax basis, deferring the tax obligation to the distribution year.
What is the Income-Related Monthly Adjustment Amount (IRMAA) in the context of retirement tax planning?
Answer: An additional Medicare premium surcharge applied to higher-income beneficiaries
IRMAA is a surcharge added to Medicare Parts B and D premiums for beneficiaries whose modified adjusted gross income exceeds certain IRS thresholds, making income management a key planning tool.