1. A client has a traditional 401(k) balance of $800,000 and a Roth IRA balance of $200,000.
They are retiring at age 62 with no other income. Assuming a 4% withdrawal rate and
current tax brackets, which withdrawal sequence minimizes total lifetime taxes?
A. Withdraw from the Roth IRA first to allow tax-deferred growth in the 401(k) longer.
B. Withdraw from the traditional 401(k) up to the top of the 12% bracket, then from the
Roth IRA.
C. Withdraw proportionally from both accounts each year to maintain asset allocation.
D. Convert the entire traditional 401(k) to a Roth IRA in the first year to avoid future RMDs.
Correct Answer: B
Rationale: Withdrawing from the traditional 401(k) up to the top of the 12% bracket fills
the lower tax brackets with ordinary income. This strategy reduces future Required
Minimum Distributions (RMDs) and the associated tax burden. Roth IRA withdrawals are
tax-free and should be reserved for later years when RMDs push the client into higher
brackets. Option A wastes low tax brackets, Option C loses the benefit of tax arbitrage, and
Option D would push the client into a high tax bracket immediately.
Reference: CRPC Textbook, Ch. 8: Tax-Efficient Withdrawal Strategies; 2026 ed.
2. A married couple, both age 64, plan to claim Social Security at full retirement age (67).
The primary earner has a PIA of $3,200, the lower earner $1,500. They have sufficient
savings to delay. Which strategy maximizes their combined lifetime benefits?
A. Both claim at 67 as planned.
B. Lower earner claims at 62, primary earner delays until 70.
C. Primary earner claims at 62, lower earner delays until 70.
D. Both delay until 70.
Correct Answer: B
[1]
,Rationale: Having the lower earner claim early provides some income while the primary
earner delays to 70, earning 8% delayed retirement credits per year. This maximizes the
higher earner's benefit, which also determines the survivor benefit for the surviving
spouse. Option D forgoes 8 years of benefits for the lower earner, reducing total household
income. Option C is suboptimal because the lower earner's delay yields smaller credits than
delaying the higher earner.
Reference: Social Security Handbook, 2026; CRPC Ch. 4: Social Security Optimization.
3. A client's traditional IRA balance is $1,200,000 on December 31 of the prior year. They
turn 72 on March 15 of the current year. What is the RMD for the current year, assuming
the IRS Uniform Lifetime Table factor for age 72 is 27.4?
A. $43,795.62
B. $43,795.62 but only if the first RMD is taken by April 1 of the following year.
C. $43,795.62, and the second RMD must also be taken in the same calendar year if the first
is delayed.
D. $43,795.62, but the client may delay the first RMD until April 1 of the year after reaching
72.
Correct Answer: D
Rationale: The RMD is calculated as $1,200,.4 = $43,795.62. The first RMD can be
delayed until April 1 of the year after the year the account owner turns 72. However, if
delayed, a second RMD must be taken by December 31 of that same year, resulting in two
RMDs in one year. Option D correctly states the delay option. Options A and B are
incomplete; C misstates the rule regarding the "second RMD" requirement.
Reference: IRS Publication 590-B, 2026; CRPC Ch. 6: Required Minimum Distributions.
4. A retiree has a $500,000 portfolio with 60% equities and 40% bonds. She plans to
withdraw $25,000 annually, adjusted for inflation. Using a Monte Carlo simulation with a
30-year horizon, the probability of portfolio survival is 85%. If she switches to a 50/50
allocation, the probability increases to 92%. Which behavioral bias is she most likely
exhibiting if she chooses the 50/50 allocation?
A. Loss aversion
B. Overconfidence
[2]
,C. Anchoring
D. Mental accounting
Correct Answer: A
Rationale: Loss aversion is the tendency to prefer avoiding losses over acquiring equivalent
gains. By reducing equity exposure, she lowers the probability of large portfolio losses,
even though the expected return is lower. Overconfidence (B) would lead to taking more
risk. Anchoring (C) would fixate on a reference point. Mental accounting (D) would treat
money in separate buckets differently.
Reference: CRPC Ch. 12: Behavioral Finance in Retirement Planning; Kahneman & Tversky
(1979).
5. A client, age 68, has a $2 million traditional IRA and a $500,000 taxable brokerage
account. They want to leave the IRA to their children and the taxable account to charity.
Which estate planning strategy is most tax-efficient?
A. Name the charity as beneficiary of the IRA and children as beneficiaries of the taxable
account.
B. Name the children as beneficiaries of the IRA and the charity as beneficiary of the taxable
account.
C. Convert the entire IRA to a Roth IRA over 5 years to avoid future income tax for
beneficiaries.
D. Use a charitable remainder trust (CRT) for the IRA and leave the taxable account
outright to children.
Correct Answer: A
Rationale: Charities are tax-exempt, so they can receive IRA proceeds without paying
income tax, whereas children would owe income tax on IRA distributions. Taxable accounts
receive a step-up in basis at death, making them more tax-efficient for children. Option B
would subject children to income tax on the IRA and waste the step-up for charity. Option C
may trigger high taxes during conversion. Option D would be complex and unnecessary.
Reference: CRPC Ch. 10: Estate Planning and Beneficiary Designations; IRC §691.
[3]
, 6. A client has a defined benefit pension plan that offers a lump sum of $400,000 or a life
annuity of $2,000 per month starting at age 65. The client is age 65 and in good health.
Using a 3% discount rate, the present value of the annuity for a 20-year life expectancy is
approximately $360,000. Which factor would most strongly justify choosing the lump sum?
A. The client has a family history of longevity.
B. The client has a terminal illness with a life expectancy of 2 years.
C. The client wants to leave a legacy to heirs.
D. The client expects interest rates to rise significantly.
Correct Answer: B
Rationale: A terminal illness means the client will not receive the full annuity payments, so
the lump sum is worth more than the expected annuity payments. Family history of
longevity (A) favors the annuity. Legacy motive (C) favors the lump sum, but is secondary
to the terminal illness factor. Rising interest rates (D) would reduce the present value of
the annuity, but the lump sum is fixed.
Reference: CRPC Ch. 5: Pension and Annuity Analysis; PBGC rules.
7. A retiree is considering purchasing a single-premium immediate annuity (SPIA) to cover
essential expenses. They have a $500,000 portfolio and require $30,000 annually. The SPIA
quote provides $2,500 monthly for life. The portfolio yields 4% annually. Which of the
following describes the primary advantage of the SPIA in this scenario?
A. It increases the liquidity of the client's assets.
B. It guarantees a fixed rate of return over the expected life of the annuitant.
C. It eliminates longevity risk, protecting against outliving assets.
D. It is always more tax-efficient than a managed portfolio.
Correct Answer: C
Rationale: The primary advantage of a SPIA is the transfer of longevity risk to the insurance
company. It guarantees income for life regardless of how long the client lives. Option A is
incorrect as SPIAs are illiquid. Option B is partially true, but the rate of return is not the
primary goal; it's the guaranteed income floor. Option D is false; tax efficiency depends on
the source of funds.
Reference: CRPC Ch. 5: Longevity Risk and Annuity Products.
[4]
They are retiring at age 62 with no other income. Assuming a 4% withdrawal rate and
current tax brackets, which withdrawal sequence minimizes total lifetime taxes?
A. Withdraw from the Roth IRA first to allow tax-deferred growth in the 401(k) longer.
B. Withdraw from the traditional 401(k) up to the top of the 12% bracket, then from the
Roth IRA.
C. Withdraw proportionally from both accounts each year to maintain asset allocation.
D. Convert the entire traditional 401(k) to a Roth IRA in the first year to avoid future RMDs.
Correct Answer: B
Rationale: Withdrawing from the traditional 401(k) up to the top of the 12% bracket fills
the lower tax brackets with ordinary income. This strategy reduces future Required
Minimum Distributions (RMDs) and the associated tax burden. Roth IRA withdrawals are
tax-free and should be reserved for later years when RMDs push the client into higher
brackets. Option A wastes low tax brackets, Option C loses the benefit of tax arbitrage, and
Option D would push the client into a high tax bracket immediately.
Reference: CRPC Textbook, Ch. 8: Tax-Efficient Withdrawal Strategies; 2026 ed.
2. A married couple, both age 64, plan to claim Social Security at full retirement age (67).
The primary earner has a PIA of $3,200, the lower earner $1,500. They have sufficient
savings to delay. Which strategy maximizes their combined lifetime benefits?
A. Both claim at 67 as planned.
B. Lower earner claims at 62, primary earner delays until 70.
C. Primary earner claims at 62, lower earner delays until 70.
D. Both delay until 70.
Correct Answer: B
[1]
,Rationale: Having the lower earner claim early provides some income while the primary
earner delays to 70, earning 8% delayed retirement credits per year. This maximizes the
higher earner's benefit, which also determines the survivor benefit for the surviving
spouse. Option D forgoes 8 years of benefits for the lower earner, reducing total household
income. Option C is suboptimal because the lower earner's delay yields smaller credits than
delaying the higher earner.
Reference: Social Security Handbook, 2026; CRPC Ch. 4: Social Security Optimization.
3. A client's traditional IRA balance is $1,200,000 on December 31 of the prior year. They
turn 72 on March 15 of the current year. What is the RMD for the current year, assuming
the IRS Uniform Lifetime Table factor for age 72 is 27.4?
A. $43,795.62
B. $43,795.62 but only if the first RMD is taken by April 1 of the following year.
C. $43,795.62, and the second RMD must also be taken in the same calendar year if the first
is delayed.
D. $43,795.62, but the client may delay the first RMD until April 1 of the year after reaching
72.
Correct Answer: D
Rationale: The RMD is calculated as $1,200,.4 = $43,795.62. The first RMD can be
delayed until April 1 of the year after the year the account owner turns 72. However, if
delayed, a second RMD must be taken by December 31 of that same year, resulting in two
RMDs in one year. Option D correctly states the delay option. Options A and B are
incomplete; C misstates the rule regarding the "second RMD" requirement.
Reference: IRS Publication 590-B, 2026; CRPC Ch. 6: Required Minimum Distributions.
4. A retiree has a $500,000 portfolio with 60% equities and 40% bonds. She plans to
withdraw $25,000 annually, adjusted for inflation. Using a Monte Carlo simulation with a
30-year horizon, the probability of portfolio survival is 85%. If she switches to a 50/50
allocation, the probability increases to 92%. Which behavioral bias is she most likely
exhibiting if she chooses the 50/50 allocation?
A. Loss aversion
B. Overconfidence
[2]
,C. Anchoring
D. Mental accounting
Correct Answer: A
Rationale: Loss aversion is the tendency to prefer avoiding losses over acquiring equivalent
gains. By reducing equity exposure, she lowers the probability of large portfolio losses,
even though the expected return is lower. Overconfidence (B) would lead to taking more
risk. Anchoring (C) would fixate on a reference point. Mental accounting (D) would treat
money in separate buckets differently.
Reference: CRPC Ch. 12: Behavioral Finance in Retirement Planning; Kahneman & Tversky
(1979).
5. A client, age 68, has a $2 million traditional IRA and a $500,000 taxable brokerage
account. They want to leave the IRA to their children and the taxable account to charity.
Which estate planning strategy is most tax-efficient?
A. Name the charity as beneficiary of the IRA and children as beneficiaries of the taxable
account.
B. Name the children as beneficiaries of the IRA and the charity as beneficiary of the taxable
account.
C. Convert the entire IRA to a Roth IRA over 5 years to avoid future income tax for
beneficiaries.
D. Use a charitable remainder trust (CRT) for the IRA and leave the taxable account
outright to children.
Correct Answer: A
Rationale: Charities are tax-exempt, so they can receive IRA proceeds without paying
income tax, whereas children would owe income tax on IRA distributions. Taxable accounts
receive a step-up in basis at death, making them more tax-efficient for children. Option B
would subject children to income tax on the IRA and waste the step-up for charity. Option C
may trigger high taxes during conversion. Option D would be complex and unnecessary.
Reference: CRPC Ch. 10: Estate Planning and Beneficiary Designations; IRC §691.
[3]
, 6. A client has a defined benefit pension plan that offers a lump sum of $400,000 or a life
annuity of $2,000 per month starting at age 65. The client is age 65 and in good health.
Using a 3% discount rate, the present value of the annuity for a 20-year life expectancy is
approximately $360,000. Which factor would most strongly justify choosing the lump sum?
A. The client has a family history of longevity.
B. The client has a terminal illness with a life expectancy of 2 years.
C. The client wants to leave a legacy to heirs.
D. The client expects interest rates to rise significantly.
Correct Answer: B
Rationale: A terminal illness means the client will not receive the full annuity payments, so
the lump sum is worth more than the expected annuity payments. Family history of
longevity (A) favors the annuity. Legacy motive (C) favors the lump sum, but is secondary
to the terminal illness factor. Rising interest rates (D) would reduce the present value of
the annuity, but the lump sum is fixed.
Reference: CRPC Ch. 5: Pension and Annuity Analysis; PBGC rules.
7. A retiree is considering purchasing a single-premium immediate annuity (SPIA) to cover
essential expenses. They have a $500,000 portfolio and require $30,000 annually. The SPIA
quote provides $2,500 monthly for life. The portfolio yields 4% annually. Which of the
following describes the primary advantage of the SPIA in this scenario?
A. It increases the liquidity of the client's assets.
B. It guarantees a fixed rate of return over the expected life of the annuitant.
C. It eliminates longevity risk, protecting against outliving assets.
D. It is always more tax-efficient than a managed portfolio.
Correct Answer: C
Rationale: The primary advantage of a SPIA is the transfer of longevity risk to the insurance
company. It guarantees income for life regardless of how long the client lives. Option A is
incorrect as SPIAs are illiquid. Option B is partially true, but the rate of return is not the
primary goal; it's the guaranteed income floor. Option D is false; tax efficiency depends on
the source of funds.
Reference: CRPC Ch. 5: Longevity Risk and Annuity Products.
[4]
