Designing Retirement Income Streams Flashcards
7 cards from real CRPC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Designing Retirement Income Streams flashcards as text
A retiree wants inflation-adjusted income that cannot be outlived. Which Social Security claiming strategy best achieves this for a single individual in good health?
Answer: Delay claiming until age 70 to maximize the monthly benefit
Delaying Social Security to age 70 increases the monthly benefit by approximately 8% per year beyond full retirement age and the benefit is automatically adjusted for inflation via COLA.
Which retirement income risk does a TIPS (Treasury Inflation-Protected Securities) bond ladder specifically address?
Answer: Inflation risk
TIPS principal adjusts with the Consumer Price Index, so a TIPS ladder provides cash flows that maintain purchasing power against inflation.
A married couple wants to protect the surviving spouse's income. Which Social Security strategy is most relevant?
Answer: The higher-earning spouse delays to age 70 to maximize the survivor benefit
The surviving spouse inherits the deceased spouse's benefit, so maximizing the higher earner's benefit by delaying to 70 provides the largest possible survivor income.
In the context of retirement income, what does 'sequence-of-returns risk' refer to?
Answer: The risk that poor early-retirement market returns permanently reduce portfolio longevity
Negative returns in the early years of retirement, combined with ongoing withdrawals, can permanently deplete a portfolio even if long-run average returns are acceptable.
Which distribution approach involves withdrawing a fixed percentage of the portfolio's current value each year, rather than a fixed dollar amount?
Answer: Fixed percentage withdrawal
Fixed percentage withdrawals automatically adjust the dollar amount taken based on the portfolio's current value, reducing the risk of depleting the account in a down market.
A client converts a portion of IRA assets to a Roth IRA at retirement. What is the primary income planning benefit of this strategy?
Answer: Roth withdrawals in retirement are tax-free, providing flexibility to manage taxable income
Tax-free Roth withdrawals allow retirees to control their taxable income, which can reduce Medicare IRMAA surcharges, taxes on Social Security, and overall tax liability.
What is the primary disadvantage of purchasing a single-premium immediate annuity (SPIA) with a large lump sum?
Answer: The retiree permanently loses access to the lump-sum principal
Once the premium is paid to the insurer, the client typically cannot reclaim the lump sum, sacrificing liquidity and the ability to respond to unexpected large expenses.