CTFA Retirement and Employee Benefits Planning 3

Question 1

What is the primary purpose of a 529 college savings plan in financial planning?

Accepted Answer

To allow tax-free growth and tax-free withdrawals for qualified education expenses

Answer

529 plans offer tax-deferred growth and tax-free distributions when funds are used for qualified higher education expenses such as tuition, fees, and room and board.

Question 2

Under SECURE 2.0, unused 529 plan funds may be rolled over to which type of account subject to specific conditions?

Accepted Answer

Roth IRA for the 529 beneficiary

Answer

SECURE 2.0 allows unused 529 funds to be rolled over into a Roth IRA for the beneficiary, subject to a $35,000 lifetime limit and annual Roth IRA contribution limits.

Question 3

Which type of employee benefit plan allows both employer and employee to contribute, and contributions are immediately 100% vested?

Accepted Answer

SIMPLE IRA

Answer

SIMPLE IRA contributions—both employee deferrals and employer matching contributions—are immediately 100% vested at the time of contribution.

Question 4

A health savings account (HSA) offers which unique tax advantage not available in a flexible spending account (FSA)?

Accepted Answer

Funds roll over indefinitely and grow tax-free, with no annual use-it-or-lose-it requirement

Answer

Unlike FSAs, HSA balances roll over from year to year and grow tax-free, allowing account holders to accumulate a substantial healthcare reserve.

Question 5

Which retirement planning concept refers to the risk that an individual will outlive their retirement savings?

Accepted Answer

Longevity risk

Answer

Longevity risk is the risk that a retiree will live longer than anticipated and exhaust their financial resources before death.

CTFA - Certified Trust and Fiduciary Advisor Practice Test

CTFA - Certified Trust and Fiduciary Advisor Practice Test

CTFA Retirement and Employee Benefits Planning 3