RAA Retirement Planning & Income Strategies 2

Question 1

A retiree wants guaranteed income that cannot be outlived and is willing to give up liquidity. Which annuity payout option BEST satisfies this goal?

Accepted Answer

Life-only annuity

Answer

A life-only annuity provides payments for the annuitant's entire life, eliminating longevity risk at the cost of liquidity and death benefits.

Question 2

The 'sequence of returns' risk is most damaging to a retiree who is:

Accepted Answer

Making systematic withdrawals from a portfolio

Answer

Sequence of returns risk causes the most harm during the distribution phase when negative early returns permanently reduce the portfolio base from which withdrawals are taken.

Question 3

Under the 4% rule for retirement income, a retiree with a $1,000,000 portfolio would withdraw how much in the first year?

Accepted Answer

$40,000

Answer

The 4% rule prescribes an initial withdrawal of 4% of the portfolio, which equals $40,000 on a $1,000,000 balance.

Question 4

Which Social Security claiming strategy generally maximizes lifetime benefits for a healthy individual with an average life expectancy above 82?

Accepted Answer

Delaying until age 70 to earn delayed retirement credits

Answer

Delaying Social Security until age 70 earns 8% per year in delayed retirement credits, substantially increasing the monthly benefit for long-lived individuals.

Question 5

A bucket strategy for retirement income typically separates assets into how many 'buckets' based on time horizon?

Accepted Answer

Three (near, mid, and long-term)

Answer

The classic bucket strategy uses three buckets: a near-term liquid bucket, a mid-term moderate-growth bucket, and a long-term growth bucket.

(RAA) Registered Annuity Advisor Practice Test

(RAA) Registered Annuity Advisor Practice Test

RAA Retirement Planning & Income Strategies 2