CRPC CORRECT COMPREHENSIVE QUESTIONS
AND ANSWERS SURE A+
✔✔Describe the objective of the 4% rule as it related to systematic withdrawals from
retirement savings - ✔✔- developed by Bill Bengen in 1990s based on 50/50 stock/bond
allocation
- he urged that if an initial withdrawal rate of 4% and subsequently increased with
inflation, most portfolios will last through retirement (atleast 30 years)
✔✔Discuss the use of a bucket strategy - ✔✔- used to mitigate the sequence of returns
risk by creating a bucket of cash or money market instruments for immediate cash flow
needs, while also maintaining a diversified portfolio of more volatile assets with high
potential returns for future needs.
✔✔Discuss what michael Kitces and Wade Pfau mean by a rising equity glidepath -
✔✔- asset allocation path that results from spending down fixed income assets in early
years and letting equity exposure rise over time
✔✔Discus the role that a single premium immediate annuity (SPIA) can plan in a clients
retirement income portfolio - ✔✔- the purchase of a lifetime annuity eliminates the need
to manage the investment of those funds, determining which assets should be used to
fund distributions, and the fear of outliving ones assets.
✔✔Identify the order in which retirement savings should be withdrawn in order to
maximize ones life time after-tax benefit - ✔✔1. taxable accounts
2. partially tax deferred assets
3. tax-deferred accounts (IRAs, annuities, qualified plans)
✔✔Some IRAs and qualified plans contain contributions of after-tax dollars. when
distributions from these plans are made through a series of equal installments, how
does one identify which part of each payment is the after tax dollars and which is not? -
✔✔- The nontaxable portion of each payment is determined by dividing the total
, contribution of after tax dollars (cost basis), by the number of anticipated monthly
payments, according to the table
(pg. 95 of module 7)
✔✔Taxation of mutual fund distribution
1. Qualified Dividend
2. Cap gains
3. non qualified dividend - ✔✔1. Taxed at cap gains rate: 0%, 15%, or 20%
2. LT- held for atleast a year; cap gains rate
3. dividends paid on stock not held for required holding period- ordinary income
✔✔Which shares redeemed on mutual fund redemptions - ✔✔you select one of three
choices
1. default: FIFO
2. Average basis method
- total all share purchases and divide by number of shares
3. Share Identification: you select which share to sell
✔✔Cost basis - ✔✔Original price paid for assets + transaction cost + costs associated
with improvements= Basis
✔✔Inherited assets cost basis - ✔✔Step-up cost basis
= FMV at date of death
✔✔Gifted assets cost basis - ✔✔Carryover Cost Basis
= original cost basis
✔✔LT cap gains - ✔✔tax bracket 10-15%: 0% cap gains tax
25%-35%: 15% cap gain tax
39.6%: 20% cap gains tax
✔✔max tax on collectibles: coin, art, stamps etc - ✔✔28%
✔✔taxes of loss - ✔✔- can use up to 3k of losses off ordinary income each year
- unlimited carry forward into future years to counter cap gains
✔✔Roth distribution ordering rules - ✔✔1. contributions
2. conversion
3. earnings
✔✔Tax on section 121 sale - ✔✔- taxes on cap gains on sale of principle residence
$250,000/$500,000 exclusion
qualifications
AND ANSWERS SURE A+
✔✔Describe the objective of the 4% rule as it related to systematic withdrawals from
retirement savings - ✔✔- developed by Bill Bengen in 1990s based on 50/50 stock/bond
allocation
- he urged that if an initial withdrawal rate of 4% and subsequently increased with
inflation, most portfolios will last through retirement (atleast 30 years)
✔✔Discuss the use of a bucket strategy - ✔✔- used to mitigate the sequence of returns
risk by creating a bucket of cash or money market instruments for immediate cash flow
needs, while also maintaining a diversified portfolio of more volatile assets with high
potential returns for future needs.
✔✔Discuss what michael Kitces and Wade Pfau mean by a rising equity glidepath -
✔✔- asset allocation path that results from spending down fixed income assets in early
years and letting equity exposure rise over time
✔✔Discus the role that a single premium immediate annuity (SPIA) can plan in a clients
retirement income portfolio - ✔✔- the purchase of a lifetime annuity eliminates the need
to manage the investment of those funds, determining which assets should be used to
fund distributions, and the fear of outliving ones assets.
✔✔Identify the order in which retirement savings should be withdrawn in order to
maximize ones life time after-tax benefit - ✔✔1. taxable accounts
2. partially tax deferred assets
3. tax-deferred accounts (IRAs, annuities, qualified plans)
✔✔Some IRAs and qualified plans contain contributions of after-tax dollars. when
distributions from these plans are made through a series of equal installments, how
does one identify which part of each payment is the after tax dollars and which is not? -
✔✔- The nontaxable portion of each payment is determined by dividing the total
, contribution of after tax dollars (cost basis), by the number of anticipated monthly
payments, according to the table
(pg. 95 of module 7)
✔✔Taxation of mutual fund distribution
1. Qualified Dividend
2. Cap gains
3. non qualified dividend - ✔✔1. Taxed at cap gains rate: 0%, 15%, or 20%
2. LT- held for atleast a year; cap gains rate
3. dividends paid on stock not held for required holding period- ordinary income
✔✔Which shares redeemed on mutual fund redemptions - ✔✔you select one of three
choices
1. default: FIFO
2. Average basis method
- total all share purchases and divide by number of shares
3. Share Identification: you select which share to sell
✔✔Cost basis - ✔✔Original price paid for assets + transaction cost + costs associated
with improvements= Basis
✔✔Inherited assets cost basis - ✔✔Step-up cost basis
= FMV at date of death
✔✔Gifted assets cost basis - ✔✔Carryover Cost Basis
= original cost basis
✔✔LT cap gains - ✔✔tax bracket 10-15%: 0% cap gains tax
25%-35%: 15% cap gain tax
39.6%: 20% cap gains tax
✔✔max tax on collectibles: coin, art, stamps etc - ✔✔28%
✔✔taxes of loss - ✔✔- can use up to 3k of losses off ordinary income each year
- unlimited carry forward into future years to counter cap gains
✔✔Roth distribution ordering rules - ✔✔1. contributions
2. conversion
3. earnings
✔✔Tax on section 121 sale - ✔✔- taxes on cap gains on sale of principle residence
$250,000/$500,000 exclusion
qualifications
