Financial Planning & Retirement Solutions Flashcards
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Read the first 7 Financial Planning & Retirement Solutions flashcards as text
A 72-year-old client forgot to take their Required Minimum Distribution (RMD) for the year. What is the IRS excise tax penalty on the amount not withdrawn?
Answer: 25%
The SECURE 2.0 Act reduced the RMD excise tax penalty from 50% to 25%, and further to 10% if corrected within a two-year window.
Which Medicare part covers inpatient hospital stays, skilled nursing facility care, and hospice services?
Answer: Medicare Part A
Medicare Part A covers inpatient hospital care, skilled nursing facility stays, hospice, and some home health care.
A senior client wants to convert a traditional IRA to a Roth IRA. Which factor is MOST important to evaluate before recommending this strategy?
Answer: Current and projected future tax rates
Roth conversion is most beneficial when current tax rates are lower than projected future rates, so comparing present versus future tax brackets is the key consideration.
What is the primary purpose of a Qualified Longevity Annuity Contract (QLAC)?
Answer: To defer RMDs and provide income starting at an advanced age
A QLAC allows retirees to use a portion of their retirement account to purchase a deferred annuity that begins payments at a later age (up to 85), reducing RMDs in the meantime.
Under current rules, at what age does an individual first become eligible to claim Social Security retirement benefits (earliest eligibility)?
Answer: 62
The earliest age to claim Social Security retirement benefits is 62, though doing so results in a permanently reduced monthly benefit.
Which strategy involves an older spouse delaying Social Security benefits while the younger spouse claims early, to maximize lifetime household income?
Answer: Income bridge strategy
The income bridge strategy uses portfolio assets or the younger spouse's early benefits to bridge income gaps, allowing the higher-earning spouse to delay and maximize their benefit.
What is 'sequence of returns risk' in retirement planning?
Answer: The danger that poor investment returns early in retirement can permanently deplete a portfolio
Sequence of returns risk refers to the danger that negative returns occurring early in the withdrawal phase can deplete a portfolio faster than average returns would suggest.
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