RFC Retirement Planning & Strategies 2 — Questions and Answers
Question 1: A 55-year-old client wants to access her 401(k) funds without penalty due to separation from service. Which rule allows this?
- Rule of 55 (Correct answer)
- Rule of 72
- Section 72(t)
- Substantially Equal Periodic Payments
Correct answer: Rule of 55
The Rule of 55 allows penalty-free 401(k) withdrawals for employees who separate from service in or after the year they turn 55.
Question 2: Which Social Security filing strategy involves one spouse filing and immediately suspending benefits to allow the other spouse to claim spousal benefits?
- Restricted Application
- File and Suspend (Correct answer)
- Delayed Retirement Credit
- Deemed Filing
Correct answer: File and Suspend
File and Suspend was a strategy where one spouse filed and suspended benefits so the other could collect spousal benefits while both delayed to earn delayed credits; it was largely eliminated in 2016.
Question 3: What is the primary advantage of a Roth conversion ladder for early retirees?
- Eliminates RMDs permanently
- Creates penalty-free access to funds after a 5-year waiting period (Correct answer)
- Maximizes Social Security benefits
- Provides a tax deduction in the conversion year
Correct answer: Creates penalty-free access to funds after a 5-year waiting period
A Roth conversion ladder allows early retirees to access converted funds penalty-free after each conversion has aged 5 years.
Question 4: Under the 4% safe withdrawal rule, how much could a retiree with a $1,000,000 portfolio withdraw annually while maintaining a high probability of not outliving assets over 30 years?
- $20,000
- $30,000
- $40,000 (Correct answer)
- $50,000
Correct answer: $40,000
The 4% rule suggests withdrawing 4% of the initial portfolio value, or $40,000 from a $1,000,000 portfolio, adjusted for inflation annually.
Question 5: A defined benefit pension plan's benefit formula is 1.5% × years of service × final average salary. An employee with 25 years of service and a $100,000 final average salary would receive an annual pension of:
- $25,000
- $37,500 (Correct answer)
- $50,000
- $62,500
Correct answer: $37,500
The calculation is 0.015 × 25 × $100,000 = $37,500 annual pension benefit.
Question 6: Which type of annuity provides guaranteed income for life but ceases payments upon the annuitant's death, leaving nothing for heirs?
- Period-certain annuity
- Joint and survivor annuity
- Straight life annuity (Correct answer)
- Variable annuity with GMWB
Correct answer: Straight life annuity
A straight life (single life) annuity pays the highest monthly income but stops at the annuitant's death with no residual benefit to beneficiaries.
Question 7: What is the SECURE 2.0 Act provision that allows employers to make matching contributions to a retirement plan when employees make student loan payments?
- Student Loan Match
- Educational Employer Contribution
- Debt-to-Savings Bridge
- Qualified Student Loan Payment Match (Correct answer)
Correct answer: Qualified Student Loan Payment Match
SECURE 2.0 introduced Qualified Student Loan Payment (QSLP) matching, allowing employers to match employee student loan payments as if they were retirement plan contributions.
RFC Retirement Planning & Strategies 2
A 55-year-old client wants to access her 401(k) funds without penalty due to separation from service.
Which rule allows this?