PFS Retirement Planning 3

Question 1

Which of the following best describes a Qualified Longevity Annuity Contract (QLAC)?

Accepted Answer

A deferred income annuity purchased with IRA funds that reduces RMD calculations

Answer

A QLAC is a deferred income annuity purchased with qualified funds; up to $200,000 of IRA assets used to buy a QLAC are excluded from RMD calculations until payments begin (max age 85).

Question 2

Under the SECURE 2.0 Act, what is the catch-up contribution limit for employees ages 60–63 in a 401(k) plan beginning in 2025?

Accepted Answer

$11,250

Answer

SECURE 2.0 created a super catch-up for ages 60–63 at the greater of $10,000 or 150% of the regular catch-up limit, which equals $11,250 in 2025.

Question 3

A client is 58, has $800,000 in a 401(k), and wants to access funds without penalty using 72(t) SEPP. Which statement is correct?

Accepted Answer

Payments must continue until the later of 5 years or age 59½

Answer

SEPP payments must continue for the longer of 5 years or until the account owner reaches age 59½; modifying them before that period ends triggers the 10% penalty retroactively.

Question 4

What is the primary advantage of a Cash Balance Plan over a traditional defined benefit plan for a high-earning business owner?

Accepted Answer

Much higher annual contribution limits than 401(k) alone

Answer

Cash balance plans can allow contributions far exceeding 401(k) limits—sometimes $100,000–$300,000+ per year—making them ideal for high-earning owners wanting accelerated retirement savings.

Question 5

When is the 'four percent rule' most appropriate for a retirement income plan?

Accepted Answer

For a 30-year retirement with a balanced portfolio

Answer

The 4% rule (Bengen's research) was derived for a 30-year retirement using a balanced stock/bond portfolio and is most applicable in that context.

(PFS) Personal Financial Specialist Practice Test

(PFS) Personal Financial Specialist Practice Test

PFS Retirement Planning 3