RFC Retirement Planning & Strategies 3

Question 1

A retiree has a traditional IRA with a December 31 prior-year balance of $500,000 and a life expectancy factor of 25.6. What is the required minimum distribution?

Accepted Answer

$19,531

Answer

RMD = $500,000 ÷ 25.6 = $19,531.25, using the Uniform Lifetime Table divisor for the applicable age.

Question 2

Which retirement income strategy segments assets into time-based buckets to manage sequence-of-returns risk?

Accepted Answer

Bucket strategy

Answer

The bucket strategy divides assets into short-, medium-, and long-term segments so market downturns don't force liquidation of growth assets to fund near-term expenses.

Question 3

What is the penalty for failing to take a required minimum distribution from a traditional IRA under current law (post-SECURE 2.0)?

Accepted Answer

25% of the amount not withdrawn

Answer

SECURE 2.0 reduced the RMD failure penalty from 50% to 25% (further reducible to 10% if corrected timely).

Question 4

A 70-year-old retiree delays claiming Social Security from age 67 to age 70. Approximately how much larger will the monthly benefit be?

Accepted Answer

24% larger

Answer

Delayed retirement credits increase benefits by 8% per year beyond full retirement age, so 3 years of delay (67 to 70) yields approximately 24% larger benefits.

Question 5

Which strategy involves converting a portion of a traditional IRA to a Roth IRA in years when taxable income is unusually low to minimize lifetime taxes?

Accepted Answer

Bracket filling

Answer

Bracket filling (or bracket management) involves converting just enough traditional IRA funds to Roth to 'fill up' a lower tax bracket in low-income years.

(RFC) Registered Financial Consultant Practice Test

(RFC) Registered Financial Consultant Practice Test

RFC Retirement Planning & Strategies 3