Retirement Planning and Tax Strategies Flashcards
6 cards from real Investment Advisor practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Retirement Planning and Tax Strategies flashcards as text
Tax-loss harvesting involves:
Answer: Selling losing investments to realize losses that can offset capital gains
Tax-loss harvesting is the strategy of selling investments at a loss to generate capital losses that can offset capital gains and reduce tax liability.
The 'wash sale rule' prevents an investor from claiming a tax loss if they purchase a substantially identical security within how many days before or after the sale?
Answer: 30 days
The IRS wash sale rule disallows a tax loss if the investor buys the same or substantially identical security within 30 days before or after the loss sale.
Which type of capital gain is taxed at preferential long-term rates in the US?
Answer: Gains on assets held more than one year
Assets held for more than one year qualify for long-term capital gains tax rates, which are generally 0%, 15%, or 20% — lower than ordinary income rates.
A Roth IRA conversion involves moving assets from a Traditional IRA to a Roth IRA. The converted amount is:
Answer: Subject to ordinary income tax in the year of conversion
A Roth conversion is taxable — the pre-tax Traditional IRA funds converted are included in ordinary income in the conversion year.
Which account type is most appropriate for assets with high expected growth to maximize long-term after-tax wealth?
Answer: Roth IRA or Roth 401(k)
Roth accounts are ideal for high-growth assets because all gains grow and are withdrawn tax-free, maximizing after-tax wealth on appreciated investments.
The Social Security full retirement age (FRA) for individuals born in 1960 or later is:
Answer: 67 years old
For individuals born in 1960 or later, the Social Security full retirement age is 67, though benefits can be claimed as early as 62 at a reduced amount.