Investment Strategies for Retirement 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 Investment Strategies for Retirement flashcards as text
A retiree wants to minimize the impact of a severe market downturn in year two of retirement. Which tactical approach BEST addresses this concern?
Answer: Maintain a cash reserve of 1-2 years of expenses to avoid selling equities at depressed prices
Holding a cash buffer allows the retiree to fund near-term withdrawals without liquidating equities at low prices, giving the equity portion time to recover.
Which of the following BEST describes 'Monte Carlo simulation' as used in retirement planning?
Answer: A statistical technique that runs thousands of random return scenarios to estimate the probability a plan will succeed
Monte Carlo simulation generates thousands of randomized return sequences to calculate the probability that a retirement portfolio and withdrawal strategy will not run out of money.
A client aged 72 has a traditional IRA valued at $500,000. He does not need the RMD for living expenses. The MOST tax-efficient strategy for these funds is:
Answer: Donate the RMD directly to charity as a qualified charitable distribution (QCD)
A QCD counts toward the RMD requirement and is excluded from taxable income (up to $105,000/year), making it the most tax-efficient disposition of unwanted RMDs for charitable clients.
In a low-interest-rate environment, a retiree seeking income should be MOST cautious about:
Answer: Reaching for yield by purchasing lower-quality bonds to boost income
Reaching for yield by moving into high-yield or lower-rated bonds exposes the portfolio to credit risk that can result in losses far exceeding the additional income earned.
A 60-year-old client wants to retire at 62 and delay Social Security until 70. Which investment strategy BEST bridges the income gap between ages 62 and 70?
Answer: Use a bond ladder maturing annually from ages 62 through 70 to fund living expenses
A bond ladder with annual maturities from 62 to 70 provides predictable cash flows to replace the income the client foregoes by delaying Social Security, with minimal market risk.
Which asset allocation approach is MOST appropriate for a retiree whose Social Security and pension income already cover all essential expenses?
Answer: Aggressive growth (90% equities) since income needs are met and the portfolio is for legacy or discretionary spending
When guaranteed income covers all necessities, the investment portfolio can tolerate higher equity exposure because short-term volatility won't force unfavorable liquidations.
A retiree learns that her required minimum distributions will push her into a higher tax bracket. Which strategy can REDUCE future RMDs?
Answer: Execute partial Roth conversions during lower-income years before RMDs begin
Converting traditional IRA balances to a Roth IRA in years with lower income reduces the tax-deferred balance subject to RMDs, lowering future mandatory taxable distributions.