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 client has a $1 million portfolio and uses the 4% rule. Approximately how much can they withdraw in the first year, and how are subsequent withdrawals adjusted?
Answer: $40,000 first year; subsequent withdrawals adjusted for inflation
The 4% rule prescribes an initial $40,000 withdrawal (4% of $1M) with subsequent withdrawals increased annually by inflation to maintain purchasing power.
Which type of annuity rider allows a retiree to receive guaranteed minimum income based on a benefit base that grows even when the market declines?
Answer: Guaranteed lifetime withdrawal benefit (GLWB)
A GLWB rider on a variable or indexed annuity allows withdrawals based on a protected benefit base that can ratchet up with market gains but never decreases due to losses.
A retiree has both taxable and tax-deferred accounts. Why might a planner recommend drawing down taxable accounts before tax-deferred accounts in a low-income year?
Answer: Selling appreciated taxable assets when income is low may result in 0% long-term capital gains tax
Long-term capital gains rates can be 0% for taxpayers in the 10–12% ordinary income brackets, making low-income years ideal for realizing gains from taxable accounts.
How does purchasing a deferred income annuity (DIA) early in retirement reduce the required withdrawal rate from a portfolio?
Answer: The future guaranteed income allows the portfolio to be managed for a shorter time horizon, permitting more spending now
Knowing guaranteed income will start at a future date means the portfolio only needs to fund spending until that date, allowing a higher sustainable withdrawal in the interim.
Which factor most strongly determines the monthly payout rate offered by an immediate annuity?
Answer: Interest rates at the time of purchase and the annuitant's life expectancy
Annuity payout rates are primarily driven by current interest rates and actuarial life expectancy tables used by the insurer to price the longevity guarantee.
A planner recommends a 'rising equity glidepath' during retirement. What does this strategy involve?
Answer: Starting retirement with a lower equity allocation and gradually increasing it over time
A rising equity glidepath begins with a conservative allocation to reduce sequence-of-returns risk early in retirement, then increases equity exposure as the portfolio survives the critical early years.
A retiree earns wages of $25,000 before reaching full retirement age while receiving Social Security benefits. Under the earnings test, what happens?
Answer: A portion of their benefit may be temporarily withheld, with amounts restored later via a higher benefit
The earnings test withholds $1 of benefits for every $2 earned above the annual exempt amount, but the SSA recalculates the benefit at FRA to credit back withheld amounts.