RMA Retirement Planning & Strategies 2

Question 1

A client age 58 wants to retire early. Which strategy allows penalty-free IRA withdrawals before age 59½?

Accepted Answer

Substantially Equal Periodic Payments (SEPP) under Rule 72(t)

Answer

Rule 72(t) SEPP allows penalty-free early IRA distributions if taken as substantially equal periodic payments for at least 5 years or until age 59½, whichever is longer.

Question 2

Which Social Security claiming strategy allows a spouse to collect benefits while the higher earner's benefit continues to grow?

Accepted Answer

Restricted application for spousal benefits

Answer

The restricted application strategy (available to those born before January 2, 1954) allows a spouse to claim only spousal benefits while their own benefit accrues delayed retirement credits.

Question 3

A retiree's portfolio uses a 'bucket strategy.' What is the PRIMARY purpose of the short-term bucket?

Accepted Answer

Fund 1–2 years of expenses to avoid selling equities in a downturn

Answer

The short-term bucket holds cash or near-cash to cover near-term living expenses, preventing forced liquidation of growth assets during market downturns.

Question 4

In retirement income planning, what does 'longevity risk' specifically refer to?

Accepted Answer

The risk of outliving one's financial assets

Answer

Longevity risk is the possibility that a retiree will live longer than anticipated and exhaust their savings before death.

Question 5

Which withdrawal rate is commonly cited as the '4% rule' benchmark for retirement portfolios?

Accepted Answer

A first-year withdrawal of 4% of portfolio value, inflation-adjusted annually, with high historical success over 30 years

Answer

The 4% rule, derived from the Bengen study and Trinity Study, suggests withdrawing 4% of initial portfolio value in year one and adjusting for inflation, showing high historical success over 30-year retirements.

RMA Practice Test

RMA Practice Test

RMA Retirement Planning & Strategies 2