CRPC Retirement Income and Management 2

Question 1

Which withdrawal strategy involves taking only the income (interest and dividends) generated by a portfolio without touching principal?

Accepted Answer

Income-only strategy

Answer

The income-only strategy preserves principal by limiting withdrawals to interest, dividends, and other portfolio income.

Question 2

A retiree uses the 'floor-and-upside' approach. What does the 'floor' represent?

Accepted Answer

Guaranteed income covering essential expenses

Answer

The 'floor' consists of guaranteed income sources (Social Security, pensions, annuities) designed to cover essential, non-discretionary expenses.

Question 3

What is 'sequence of returns risk' most problematic for retirees compared to accumulators?

Accepted Answer

Early negative returns permanently reduce the portfolio while withdrawals continue

Answer

For retirees making withdrawals, early poor returns deplete the portfolio before it can recover, permanently impairing the income stream.

Question 4

Which annuity payout option provides income for the longer of two lives, with payments continuing to the survivor?

Accepted Answer

Joint and survivor annuity

Answer

A joint and survivor annuity continues payments as long as either annuitant is alive, protecting the surviving spouse.

Question 5

Under IRS rules, what is the penalty for failing to take a required minimum distribution (RMD) on time?

Accepted Answer

25% excise tax on the amount not distributed

Answer

The SECURE 2.0 Act reduced the RMD failure penalty to 25% (down from 50%) of the amount that should have been distributed.

CRPC - Chartered Retirement Planning Counselor Practice Test