Retirement Planning & Income Strategies Flashcards

Which of the following is a key disadvantage of annuitizing versus taking systematic withdrawals from an annuity contract?

Answer: Annuitization is generally irrevocable and eliminates access to the lump sum

Once an annuity is annuitized, the contract value is converted to an income stream and the owner typically cannot access the principal as a lump sum.

A 'mortality credit' in an annuity refers to the income enhancement that comes from:

Answer: Risk pooling where those who die early subsidize income for survivors

Mortality credits arise from pooling longevity risk; annuitants who die early forfeit their remaining value, which is redistributed to fund payments for those who live longer.

When evaluating whether a client should use after-tax dollars to fund a non-qualified annuity vs. a taxable brokerage account for retirement, the annuity's primary tax advantage is:

Answer: Tax-deferred growth on earnings until withdrawal

Non-qualified annuities grow tax-deferred, meaning earnings compound without annual taxation, though withdrawals are taxed as ordinary income under the LIFO rule.

A client aged 70 has a $500,000 IRA and a life expectancy factor of 27.4 per the IRS Uniform Lifetime Table. What is the approximate RMD for this year?

Answer: $18,248

The RMD is calculated by dividing the prior year-end account balance by the distribution period: $500,000 ÷ 27.4 ≈ $18,248.

The 'glide path' in a target-date retirement fund refers to the fund's strategy of:

Answer: Progressively becoming more conservative by increasing fixed-income allocation as the target date nears

A glide path automatically reduces equity exposure and increases fixed-income holdings as the investor approaches and enters retirement to lower portfolio volatility.

A client wants to maximize the estate value passed to heirs while still receiving retirement income from an annuity. Which annuity payout option is MOST appropriate?

Answer: Period-certain annuity with a 20-year guarantee period

A period-certain annuity guarantees payments for a specified number of years; if the annuitant dies before the period ends, payments continue to beneficiaries, preserving estate value.

Which of the following statements about Social Security spousal benefits is CORRECT?

Answer: A spouse is eligible for up to 50% of the worker's full retirement age benefit if claimed at the spouse's full retirement age

A qualifying spouse can receive up to 50% of the worker's primary insurance amount if the spouse claims at their own full retirement age, with reductions for earlier claiming.