Financial Advisor Retirement Planning for Financial Advisors 5

Question 1

A self-employed client earns $120,000 net from her business. What is the maximum deductible SEP-IRA contribution she can make for 2024?

Accepted Answer

$22,040 (approximately 20% of net self-employment income after the SE tax deduction)

Answer

Self-employed individuals contribute 20% of net self-employment income (after subtracting half of self-employment tax), subject to the annual dollar limit.

Question 2

Which of the following best describes the 'bucket strategy' for retirement income distribution?

Accepted Answer

Segmenting assets into short-, medium-, and long-term buckets aligned with spending needs over different time horizons

Answer

The bucket strategy allocates assets into time-segmented pools so near-term expenses are funded by liquid assets while growth assets work over longer horizons.

Question 3

A retired client withdraws $50,000 from a traditional IRA and rolls $40,000 back within 60 days. What is the tax treatment of the $10,000 not rolled over?

Accepted Answer

It is included in gross income and subject to a 10% early withdrawal penalty if under age 59½

Answer

The portion of an IRA distribution not rolled back within 60 days is taxable as ordinary income, plus the 10% penalty applies if the client is under age 59½.

Question 4

What is the primary purpose of a Qualified Longevity Annuity Contract (QLAC) within a retirement account?

Accepted Answer

To defer income and RMDs on a portion of IRA or plan assets until as late as age 85

Answer

A QLAC allows up to $200,000 of IRA assets to be used to purchase a deferred income annuity starting no later than age 85, reducing current RMDs.

Question 5

A client is evaluating whether to convert traditional IRA assets to a Roth IRA during a low-income year. Which factor most strongly supports proceeding with the conversion?

Accepted Answer

The client expects to be in a higher marginal tax bracket in retirement than currently

Answer

Roth conversion is most advantageous when current tax rates are lower than anticipated future rates, as taxes are paid now at the cheaper rate.

Financial Advisor Practice Test

Financial Advisor Practice Test

Financial Advisor Retirement Planning for Financial Advisors 5