CRPC Designing Retirement Income Streams 2

Question 1

A retiree wants to maximize guaranteed lifetime income but also leave assets to heirs. Which annuity feature best balances these goals?

Accepted Answer

Life with period-certain annuity

Answer

A life with period-certain annuity guarantees payments for life while ensuring a minimum payout period to beneficiaries if the annuitant dies early.

Question 2

Which withdrawal sequencing strategy typically minimizes a retiree's overall tax burden over a long retirement?

Accepted Answer

Withdraw from taxable accounts first, then tax-deferred, then Roth

Answer

Withdrawing from taxable accounts first allows tax-deferred and Roth accounts to continue growing, generally producing lower lifetime taxes.

Question 3

A 70-year-old client is concerned about outliving assets. Which strategy directly addresses longevity risk by providing income starting at advanced age?

Accepted Answer

Deferred income annuity (longevity annuity) starting at age 85

Answer

A deferred income annuity (longevity annuity) begins payments at a future advanced age, insuring specifically against outliving other assets.

Question 4

Under the IRS rules, what is the primary purpose of Required Minimum Distributions (RMDs) from traditional IRAs?

Accepted Answer

To ensure tax-deferred money is eventually taxed as ordinary income

Answer

RMDs force distributions from tax-deferred accounts so the government can collect income taxes on previously untaxed contributions and earnings.

Question 5

When applying the 'flooring' retirement income approach, which assets are typically used to create the income floor?

Accepted Answer

Social Security, pensions, and annuities

Answer

The flooring approach uses guaranteed income sources like Social Security, pensions, and annuities to cover essential non-discretionary expenses.

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC Designing Retirement Income Streams 2