CRPC® ACTUAL EXAM 2025 ULTIMATE 100 MCQS: MOST

TESTED, CHALLENGING & HIGH-YIELD QUESTIONS

WITH ANSWERS & EXPLANATIONS

1. Bill and Lisa Hahn will need $6,000 monthly in retirement. They expect $3,500 from
Social Security and want a 6% return during retirement. How much do they need at
retirement to fund the income gap for 25 years?
A. $250,000
B. $310,000
C. $389,957
D. $410,400

Answer: C. $389,957
Explanation:
Gap = $2,500/month.
PVAD calculation at 6% annual = 0 FV, PMT = 2,500, N = 25, I/YR = 6
Set calculator to "BEG" mode (beginning of the month payments):
PV = $389,957

2. Tom and Jenny want to save to accumulate $2 million in 25 years with a 7% return. How
much must they save annually (end-of-year)?
A. $29,500
B. $30,400
C. $31,621
D. $33,900

Answer: C. $31,621
Explanation:
Using TVM: FV = 2,000,000, I/YR = 7, N = 25, PV = 0 → Solve PMT = $31,621
3. Which asset best diversifies long-term government bonds based on correlation?
A. Treasury bills (.12)
B. Gold (-.25)
C. Large stocks (.22)
D. Small stocks (.17)

Answer: B. Gold
Explanation:
Lower correlation = better diversification. Gold has a negative correlation (-.25), best
diversifier.

4. Which one is NOT a key attribute of an investment policy?

A. Realistic
B. Clearly defined
C. Long-term
D. Fluid

Answer: D. Fluid
Explanation:
Policies should be stable, not “fluid.” A fluid policy leads to inconsistent portfolio management.

5. Which of the following is NOT an asset allocation strategy?

A. Alpha
B. Strategic
C. Tactical
D. Core/Satellite

Answer: A. Alpha
Explanation:
Alpha measures performance, not an allocation method. Others are legitimate strategies.

6. At age 63, a client has earned $17,025 and investment income of $30,000. What's the impact
on Social Security?
A. No reduction
B. $1-for-$2 loss over limit
C. $1-for-$1 reduction
D. $1-for-$3 reduction

Answer: A. No reduction
Explanation:
Only earned income counts toward earnings limit. $17,025 < $21,240 (2023 limit).

7. Roth conversion best benefits:

A. George, 28, income $24,000
B. Mandy, 30, high income
C. Rachel, 63, widow, $70K income
D. Tom, 51, income $90,000

Answer: A. George
Explanation:
Low income = tax-free conversion. Long time horizon = maximum growth benefit.

8. If a bond has a 7% coupon, 20 years to maturity, and market rate is 6%, what's the price?
A. $1,000
B. $893.23
C. $1,115.57
D. $1,074.39

Answer: C. $1,115.57

Explanation:
Price > par when coupon > market rate. Semiannual: PMT = $35, N = 40, I/YR = 3
9. Spousal Social Security benefit for 67-year-old Linda whose husband receives $1,500 (PIA)?
A. $750
B. $562.50
C. $1,125
D. $1,500

Answer: A. $750
Explanation:
Spouse at FRA = entitled to 50% of worker’s PIA = $750.

10. Susan delays SS from $1,000/month now to $1,240/month in 3 years. When does delaying
pay off?
A. 3 years
B. 12.5 years
C. 15.5 years
D. Never

Answer: C. 15.5 years

Explanation:
Break-even = $36,000 / $240 = 150 months = 12.5 years + 3 years wait = 15.5 years

11. Best suited for a Roth conversion of $5,000?

A. 28-year-old low-income father
B. 30-year-old executive
C. 63-year-old widow
D. 51-year-old earning $90,000

Answer: A
Explanation:
Young + low tax bracket = ideal for tax-free Roth growth.

12. If an annuity has an expected return of $240,000 and an investment of $60,000, what’s the
exclusion ratio?
A. 25%
B. 50%
C. 60%
D. 75%

Answer: A. 25%
Explanation:
Exclusion Ratio = $60,000 / $240,000 = 25% of each payment is non-taxable return of principal.

13. Charlie withdraws $2,650 from Roth IRA, contributed $4,000 total. Age 26. Tax status?
A. Fully taxable
B. Tax and penalty
C. No tax, no penalty
D. Penalty only

Answer: C.
Explanation:
Withdrawals are first from contributions, which are tax-free at any age.

14. Which of these most directly reduces unsystematic risk?

A. Diversification
B. Beta management
C. Hedging
D. Duration matching
Answer: A. Diversification
Explanation:
Unsystematic risk (firm-specific) is reduced/eliminated via diversification.

15. Which individual benefits most from QLAC?

A. Poor health
B. Wealthy investor
C. History of longevity
D. No retirement savings

Answer: C.
Explanation:
QLAC provides longevity protection, ideal for those expecting long lives.

16. If earned income is $60,000 and expenses are $70,000, and the rest are investments, what’s
the cash flow surplus or deficit?
A. Surplus $10,000
B. Deficit $10,000
C. Surplus $2,000
D. Deficit $2,000

Answer: B.
Explanation:
Expenses > income → cash flow deficit of $10,000.

17. Investment with 14.2% return and SD of 8.4%. What’s the 68% confidence range?
A. 5.8% to 22.6%
B. 0% to 28.4%
C. 7% to 21%
D. 6.2% to 22.2%

Answer: A.
Explanation:
68% range = mean ± 1 SD → 14.2% ± 8.4% = 5.8% to 22.6%

18. Client has IRA worth $100,000 and turns 73. What is the RMD (Uniform Table 27.4)?
A. $3,650
B. $3,906
C. $5,000
D. $4,109

Answer: A.
Explanation:
RMD = $100,000 / 27.4 = $3,650

19. Which of the following accurately describes taxation of reinvested dividends?

A. Tax-deferred
B. Taxed when sold
C. Taxed when received
D. Not taxed

Answer: C.
Explanation:
Reinvested dividends are taxed in the year received, even if not cashed out.
20. Which risk affects long-term bonds the most?
A. Business risk
B. Credit risk
C. Interest rate risk
D. Purchasing power risk

Answer: C.
Explanation:
Bond prices fall when interest rates rise → interest rate risk is primary for bonds.

21. Which of the following risks can be effectively eliminated from a portfolio?
A. Market risk
B. Inflation risk
C. Interest rate risk
D. Unsystematic risk

Answer: D. Unsystematic risk

Explanation:
Unsystematic risk is company- or industry-specific and can be diversified away by holding a
broad portfolio.

22. If a security returns 10% on average and has a standard deviation of 5%, what’s the
approximate 95% return range?
A. 0% to 15%
B. 5% to 15%
C. 0% to 20%
D. -5% to 25%

Answer: C. 0% to 20%
Explanation:
95% confidence = mean ± 2 SD → 10% ± (2 × 5%) = 0% to 20%
23. Which asset class is most sensitive to interest rate risk?
A. Common stock
B. Real estate
C. Long-term bonds
D. Preferred stock

Answer: C. Long-term bonds

Explanation:
Long-term bonds have the longest duration and are most affected by changes in interest rates.

24. What is the tax treatment of qualified dividends in a taxable account?

A. Taxed at ordinary rates
B. Tax-deferred
C. Tax-free
D. Taxed at preferential long-term capital gain rates

Answer: D.
Explanation:
Qualified dividends are taxed at 0%, 15%, or 20%, depending on the taxpayer's income level.

25. Which statement about required minimum distributions (RMDs) is correct?

A. RMDs begin at age 65
B. The RMD is based on the beneficiary’s age only
C. First RMD is due April 1 following the year the person turns 73
D. RMDs are optional in Roth IRAs

Answer: C.
Explanation:
SECURE Act 2.0 sets RMD age at 73; first RMD due by April 1 of the following year.
26. What is the value of a portfolio with a beta of 0.5 compared to the market?
A. It is more volatile
B. It is equally volatile
C. It is half as volatile
D. It is uncorrelated

Answer: C.
Explanation:
A beta of 0.5 indicates the security is half as volatile as the market.

27. Which annuity distribution method results in the lowest tax liability over time?
A. Lump sum
B. Life annuity
C. Period certain
D. Joint and survivor

Answer: B. Life annuity

Explanation:
Life annuity stretches tax liability, allowing more principal exclusion and longer tax deferral.

28. Which is a disadvantage of a fixed annuity?

A. Guaranteed principal
B. Inflation risk
C. Predictable payments
D. Safety
Answer: B.
Explanation:
Fixed annuities offer guarantees but do not keep up with inflation, reducing purchasing power.

29. Which of the following gifts is taxable in the current year?

A. $10,000 gift to spouse
B. $18,000 gift to child
C. $17,000 gift to friend
D. $25,000 gift to charity

Answer: B.
Explanation:
Annual exclusion for 2025 is $17,000. Gifts above that amount (like $18,000) may require filing
a gift tax return.

30. What happens if an annuitant surrenders a deferred annuity early and takes a full
withdrawal?
A. No tax owed
B. Only penalties apply
C. Earnings taxed as income and possible 10% penalty
D. Only principal is withdrawn

Answer: C.
Explanation:
Earnings are taxed as ordinary income, and if under 59½, a 10% penalty may apply.

31. A 55-year-old separates from service and takes a 401(k) withdrawal. Is it subject to penalty?
A. Yes, 10% penalty
B. No, separation after age 55 qualifies for exemption
C. Only taxed if over $50,000
D. Only Roth withdrawals are exempt

Answer: B.
Explanation:
Age 55 separation is an exception to the 10% early withdrawal penalty for qualified plans.

32. Which of the following is not a benefit of Roth IRAs?

A. Tax-free growth
B. No RMDs
C. Contributions are tax-deductible
D. Qualified withdrawals are tax-free

Answer: C.
Explanation:
Roth contributions are not tax-deductible. Benefits include tax-free growth and no RMDs.

33. Which of the following accurately describes Social Security survivor benefits?
A. Available to spouses only
B. Payable only if deceased was fully insured
C. May be payable even if worker was currently insured
D. Taxable in all cases

Answer: C.
Explanation:
Some survivor benefits (like child or spouse with child) are payable if the worker is currently
insured.
34. At age 45, Mark withdraws $40,000 from a non-deductible IRA. His basis is $20,000. What
are the taxes due at a 35% bracket?
A. $9,000
B. $14,000
C. $7,000
D. $2,000

Answer: A.
Explanation:
$20,000 is earnings, taxed at 35% + 10% penalty = 45%
→ 0.45 × $20,000 = $9,000

35. Which asset offers a stepped-up cost basis to heirs?

A. 401(k)
B. Roth IRA
C. Individually held stock
D. Traditional IRA

Answer: C.
Explanation:
Capital assets like stock receive a step-up in basis at death; IRAs do not.

36. Which of the following is a source of long-term care funding?

A. Health insurance
B. Medicaid
C. Life insurance cash value
D. COBRA

Answer: B.
Explanation:
Medicaid is a common LTC funding source. Health insurance/COBRA don’t cover LTC.
37. Which of the following most impacts sequence of return risk in retirement?
A. Investment fees
B. Early losses in portfolio
C. Social Security timing
D. Dividend reinvestment

Answer: B.
Explanation:
Losses early in retirement severely impact sustainability due to withdrawals locking in losses.

38. Which withdrawal method gives most control over timing and tax efficiency?
A. Fixed annuity
B. Immediate annuity
C. Systematic withdrawal
D. Period-certain annuity

Answer: C.
Explanation:
Systematic withdrawals offer flexibility and control over amounts and timing.

39. The exclusion ratio is used for which purpose?

A. Calculating estate tax
B. Determining RMDs
C. Identifying taxable portion of annuity payments
D. Exempting Roth conversions

Answer: C.
Explanation:
Exclusion ratio = portion of each annuity payment that is non-taxable return of principal.
40. Which of the following can contribute to a Traditional IRA?
A. A 78-year-old retiree with pension income
B. A 45-year-old homemaker with earned alimony
C. A student with scholarship income
D. A 35-year-old with only dividend income

Answer: B.
Explanation:
Taxable alimony (pre-2019) counts as earned income, making IRA contributions allowable

41. Which of the following best defines a strategic asset allocation?

A. Adjusting asset classes based on economic forecasts
B. Buying undervalued securities only
C. Maintaining fixed percentages across asset classes
D. Chasing alpha by reallocating quarterly

Answer: C
Explanation:
Strategic asset allocation involves maintaining a predetermined target mix of asset classes,
rebalanced periodically to return to those targets.

42. In which situation would a spousal IRA contribution be fully deductible?

A. Couple earns $220,000 jointly, one spouse is covered by a plan
B. Couple earns $150,000 jointly, both covered by a plan
C. Couple earns $180,000 jointly, only one covered
D. Couple earns $100,000, non-covered spouse contributes
Answer: D
Explanation:
For 2025, non-covered spouses can deduct full IRA contributions if AGI < $218,000 (phaseout
begins). $100,000 is fully within range.

43. A 40-year-old has a nondeductible IRA worth $60,000. Basis is $20,000. If $30,000 is
withdrawn, what is taxable?
A. $0
B. $10,000
C. $15,000
D. $30,000

Answer: B
Explanation:
Pro-rata rule: (Basis ÷ IRA total) × withdrawal = tax-free portion
→ (20,000 / 60,000) × 30,000 = $10,000 tax-free → $20,000 taxable

44. The break-even point for delaying Social Security from age 67 to 70 is typically around:
A. Age 75
B. Age 77
C. Age 80
D. Age 85

Answer: C
Explanation:
Delaying boosts benefit ~24%. Break-even usually occurs around age 80 depending on exact
PIA.

45. Which of the following are included in the estate of a deceased individual?
A. Life insurance policy owned by spouse
B. Joint property with survivorship
C. Gifts given more than 3 years ago
D. Roth IRA owned by spouse
Answer: B
Explanation:
JTWROS property is included in the decedent’s estate proportionate to ownership, unless
proven otherwise.

46. Which one is NOT eligible for rollover treatment?

A. Required minimum distribution
B. Lump sum from a profit-sharing plan
C. Distribution due to plan termination
D. Direct transfer between IRAs

Answer: A
Explanation:
RMDs cannot be rolled over. All other listed items qualify for rollover if done properly.

47. A client owns a variable annuity with substantial gains. Which of the following best describes
the tax treatment of early withdrawals?
A. FIFO — principal comes out first
B. Tax-free until gains are withdrawn
C. LIFO — earnings taxed first
D. Exempt from early withdrawal penalty

Answer: C
Explanation:
Withdrawals from non-qualified annuities follow LIFO — gains come out first and are taxed
as ordinary income, with 10% penalty if under 59½.

48. Which distribution is exempt from the 10% early withdrawal penalty?
A. IRA withdrawal at age 50
B. 401(k) withdrawal after age 55 and separation
C. 403(b) withdrawal at 40
D. Inherited IRA withdrawn by a 30-year-old
Answer: B
Explanation:
401(k) withdrawals made after age 55 and separation from service are exempt from the 10%
penalty.

49. Which of the following correctly applies to Roth IRA distributions?

A. Contributions come out last
B. Early withdrawals are fully taxable
C. Qualified distributions are tax-free
D. Roths have mandatory RMDs

Answer: C
Explanation:
Qualified distributions (after age 59½ and 5-year rule) are 100% tax-free. Roths have no
RMDs during owner’s life.

50. What happens if you gift $25,000 to a child in 2025?

A. Entire gift is taxable
B. $8,000 taxable gift reported
C. $25,000 is added to income
D. You pay a gift tax immediately

Answer: B

Explanation:
The annual exclusion is $17,000 (2025), so $8,000 is reportable on Form 709 but not
necessarily taxable due to lifetime exemption.

51. Who can use “substantially equal periodic payments” (SEPP) to avoid penalty?
A. Age 35 withdrawing from 401(k) after job loss
B. 50-year-old accessing IRA early
C. 40-year-old accessing Roth IRA early
D. 62-year-old taking lump sum
Answer: B
Explanation:
SEPP allows penalty-free withdrawals from IRAs before 59½, provided they're based on life
expectancy and continue for 5 years or until 59½.

52. Which of the following is NOT subject to probate?

A. Assets in a revocable trust
B. Individually owned bank account
C. Real estate held in tenant in common
D. IRAs without a beneficiary

Answer: A
Explanation:
Assets titled in a revocable trust avoid probate. Assets without beneficiaries or held individually
go through probate.

53. A client has $360,000 in an IRA and turns 73. Uniform Table factor = 27.4. What is the
RMD?
A. $13,139
B. $14,500
C. $12,750
D. $15,200

Answer: A
Explanation:
RMD = $360,000 ÷ 27.4 = $13,139

54. What’s the biggest problem people have with a 4% safe withdrawal rate?
A. It’s too aggressive
B. It generates insufficient income
C. It is too conservative
D. It ignores inflation

Answer: B
Explanation:
At 4%, $1 million only produces $40,000/year, which many retirees find insufficient for their
desired lifestyle.

55. Which of the following annuity withdrawal strategies protects best against sequence of return
risk?
A. Lump sum
B. Bucketing strategy
C. Required minimum distributions
D. Random withdrawals

Answer: B

Explanation:
Bucket strategies help mitigate sequence of return risk by segregating short-, medium-, and
long-term needs.

56. Which is NOT a characteristic of a Qualified Longevity Annuity Contract (QLAC)?

A. Can delay income past RMD age
B. Suitable for those with long life expectancy
C. Maximum investment is limited by IRS
D. Withdrawals start at age 59½

Answer: D
Explanation:
QLACs typically defer withdrawals until age 80–85. 59½ is irrelevant to QLAC-specific
deferrals.

57. Which one of the following is NOT considered a form of co-ownership for married couples?
A. Tenancy by the entirety
B. Community property
C. Joint tenants with rights of survivorship
D. Tenancy in common

Answer: D
Explanation:
Tenancy in common is available to any co-owners, not exclusive to married couples. The rest
are marriage-based forms.

58. Which of the following property ownerships avoids probate AND gives full control to
surviving spouse?
A. Community property
B. Tenancy by the entirety
C. Joint tenancy with rights of survivorship
D. Tenancy in common

Answer: C
Explanation:
JTWROS avoids probate and gives full control to the surviving owner.

59. Who is considered an eligible designated beneficiary (EDB) under SECURE Act rules?
A. 45-year-old son of deceased
B. 28-year-old grandchild
C. Disabled sibling
D. Spouse’s niece

Answer: C
Explanation:
EDBs include surviving spouses, disabled individuals, chronically ill, and minor children of the
decedent (not grandchildren or nieces).

60. What is the maximum tax-free gain exclusion for a single person selling a primary
residence?
A. $100,000
B. $250,000
C. $500,000
D. $300,000

Answer: B
Explanation:
Section 121 allows $250,000 exclusion for singles if they lived in the home 2 of the last 5 years.

61. A client takes a distribution from a Traditional IRA before age 59½ due to total and
permanent disability. Is the 10% penalty applied?
A. Yes
B. No
C. Only if it's more than $10,000
D. Only if not used for medical expenses

Answer: B
Explanation:
Disability is an IRS-approved exception to the 10% early withdrawal penalty for IRAs.

62. Which of the following correctly describes the taxation of Social Security benefits?
A. 100% of benefits are tax-free
B. No more than 50% of benefits are taxable
C. Up to 85% of benefits may be taxable depending on provisional income
D. Taxation only applies if under full retirement age

Answer: C
Explanation:
Up to 85% of Social Security benefits are subject to taxation based on provisional income
thresholds.

63. A client owns a non-qualified variable annuity. What is the tax treatment of withdrawals?
A. FIFO – tax-free principal first
B. LIFO – earnings first, taxed as income
C. Taxed as long-term capital gains
D. Penalty-free if used for college tuition

Answer: B
Explanation:
Non-qualified annuities use LIFO (last-in, first-out). Earnings are withdrawn first and taxed
as ordinary income.

64. Which of the following statements is true about gifting appreciated securities to a qualified
charity?
A. Capital gains are triggered
B. Giver gets a deduction for fair market value
C. Only the original cost basis is deductible
D. Gift is taxable to the recipient

Answer: B
Explanation:
Donor avoids capital gains and may deduct the fair market value (if held >1 year and to a
qualified charity).

65. Which one of the following is considered a taxable gift?

A. Paying someone’s tuition directly to a university
B. Giving $15,000 to a child in 2025
C. Paying medical bills directly to a provider
D. Giving $25,000 to a niece

Answer: D
Explanation:
Only $17,000 per recipient is excluded in 2025. Giving $25,000 to a niece is partially taxable
($8,000 reportable).
66. Which annuity option provides income for the rest of the annuitant’s life but nothing after
death?
A. Life with period certain
B. Joint and survivor
C. Straight life
D. Refund annuity

Answer: C
Explanation:
Straight life annuity provides highest monthly income, but payments stop at death — no
survivor benefits.

67. A single taxpayer has long-term capital gains of $20,000 and taxable income of $35,000.
How is the gain taxed?
A. At 15%
B. At 0%
C. At 20%
D. At ordinary rates

Answer: B
Explanation:
For 2025, LT capital gains rate is 0% if taxable income is under $44,625 (single filer).

68. Which of the following allows funds to pass outside of probate?

A. Sole-owned checking account
B. IRA with no beneficiary
C. Brokerage account with TOD designation
D. Real estate in tenant-in-common

Answer: C
Explanation:
Transfer on Death (TOD) designation avoids probate — the asset passes directly to the named
beneficiary.
69. Which of the following statements is true about RMDs from a Roth IRA?
A. Required after age 73
B. Required at age 75
C. Not required during owner’s lifetime
D. Required regardless of age

Answer: C
Explanation:
Roth IRAs do not have RMDs during the original owner’s lifetime, making them powerful
estate planning tools.

70. Which of the following is a characteristic of a springing durable power of attorney?

A. Begins immediately
B. Ends at principal’s death
C. Remains active during mental capacity
D. Begins after principal is deemed incompetent

Answer: D
Explanation:
Springing powers become effective only when the principal becomes incapacitated, as
determined by a physician or legal process.

71. A 40-year-old wants penalty-free access to IRA funds for a first-time home purchase. What is
the max they can withdraw without penalty?
A. $5,000
B. $10,000
C. $15,000
D. Unlimited

Answer: B

Explanation:
The IRS allows up to $10,000 to be withdrawn penalty-free from an IRA for first-time
homebuyers (lifetime limit).
72. Which of the following clients is LEAST suitable for purchasing a QLAC?
A. 45-year-old engineer in excellent health
B. 68-year-old teacher with no pension and long family longevity
C. 70-year-old retiree with large savings and long life expectancy
D. 65-year-old with terminal illness

Answer: D
Explanation:
QLACs are not appropriate for clients in poor health or short life expectancy, as the delayed
income won’t be realized.

73. Which of the following would be an advantage of using a Roth IRA over a Traditional IRA?
A. Ability to deduct contributions
B. Mandatory distributions at age 73
C. Tax-free withdrawals in retirement
D. Income limitations for contributions

Answer: C
Explanation:
Roth IRAs grow tax-free, and qualified withdrawals (after 59½ + 5 years) are 100% tax-free.

74. Which estate planning tool allows you to transfer assets during life while retaining income?
A. Revocable trust
B. Charitable Remainder Trust (CRT)
C. QTIP trust
D. Bypass trust

Answer: B
Explanation:
A CRT allows the donor to receive income during life and transfer the remainder to charity
— gaining income tax and estate tax benefits.

75. A client’s income replacement ratio should be:

A. Higher for high-income individuals
B. Higher for low-income individuals
C. Fixed at 70%
D. The same for everyone

Answer: B
Explanation:
Low-income individuals rely more heavily on their entire pre-retirement income; hence, need
higher replacement percentages (up to 90%).

76. What is the tax treatment of a life insurance payout to a beneficiary?

A. Fully taxable
B. Partially taxable
C. Tax-free to the beneficiary
D. Taxed as capital gains

Answer: C
Explanation:
Life insurance death benefits are income tax-free to the beneficiary in most cases unless
policy is sold/transferred improperly.

77. A couple owns their home as tenants by the entirety. What does this mean?
A. Each spouse owns 50%, but can sell separately
B. Ownership ends upon divorce
C. Only one spouse can control the asset
D. Creditors of one spouse can seize the home

Answer: B
Explanation:
Tenancy by the entirety is for married couples and terminates upon divorce. It also protects
against individual creditor claims.

78. If a beneficiary inherits an IRA from someone who died in 2020 and is not an eligible
designated beneficiary, what are their options?
A. Take lifetime RMDs
B. 5-year rule applies
C. Distribute entire account within 10 years
D. No required distribution

Answer: C
Explanation:
Under the SECURE Act, non-eligible designated beneficiaries must empty the inherited IRA
within 10 years of the owner’s death.

79. Which of the following is true about Medicaid eligibility for long-term care?
A. Based on earned income
B. Available to anyone over 65
C. Based on income and asset limits
D. Only available through Medicare

Answer: C
Explanation:
Medicaid LTC eligibility is means-tested, based on income and asset thresholds set by state
law.

80. Which withdrawal strategy aims to avoid market downturns by holding 1-2 years of income
in cash equivalents?
A. RMD approach
B. Reverse mortgage income
C. Bucket strategy
D. 4% rule

Answer: C
Explanation:
The bucket approach protects short-term income needs by holding cash or liquid assets in the
first bucket, insulating from volatility
81. What is the primary benefit of a health savings account (HSA) in retirement planning?
A. Premium tax credits
B. Tax-free growth and withdrawals for qualified expenses
C. Higher Social Security benefits
D. Guaranteed investment returns

Answer: B
Explanation:
HSAs allow pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified
medical expenses — triple tax advantage.

82. Which withdrawal sequence is generally considered most tax-efficient in retirement?

A. Roth → taxable → Traditional
B. Traditional → taxable → Roth
C. Taxable → Traditional → Roth
D. Taxable → Roth → Traditional

Answer: C
Explanation:
Withdraw from taxable accounts first, then Traditional, and finally Roth to delay taxation
and maximize tax-free growth.

83. What is the main advantage of delaying Social Security past full retirement age?
A. Higher inflation adjustments
B. Reduced taxes
C. Delayed credits increase benefit 8% per year until 70
D. Elimination of Medicare premiums

Answer: C
Explanation:
Delaying Social Security past FRA earns 8% delayed retirement credits annually until age
70, increasing lifetime benefits.
84. What happens if a client converts $50,000 from a Traditional IRA to a Roth IRA in 2025?
A. Taxed over 2 years
B. Tax-free conversion
C. Added to 2025 taxable income
D. Excluded from MAGI

Answer: C
Explanation:
A Roth conversion is taxed as ordinary income in the year of conversion (2025 in this case).

85. Which of the following is a key advantage of owning dividend-paying stocks in a retirement
portfolio?
A. Fixed return guarantee
B. Lower risk
C. Ongoing income stream
D. Avoidance of RMDs

Answer: C
Explanation:
Dividend stocks can provide a reliable income stream during retirement, supplementing
withdrawals or reducing the need to sell shares.

86. Which of the following accurately describes a "step-up in basis" at death?

A. Assets are taxed as income
B. Assets are inherited with the original cost basis
C. Fair market value at death becomes the new basis
D. No taxation ever applies

Answer: C
Explanation:
A step-up in basis allows heirs to receive assets at their fair market value on the date of
death, minimizing capital gains if sold.
87. Which retirement product offers guaranteed income but no inflation protection?
A. Variable annuity with rider
B. Immediate fixed annuity
C. Treasury Inflation-Protected Securities (TIPS)
D. Deferred income annuity with COLA

Answer: B
Explanation:
Immediate fixed annuities offer guaranteed income, but payments remain level, offering no
inflation protection unless COLA is added.

88. A 67-year-old client wants to reduce RMDs and leave more to heirs. What’s a suitable
strategy?
A. Roth conversion
B. Immediate annuity
C. Increase stock allocation
D. Delay Social Security

Answer: A
Explanation:
Roth conversions reduce Traditional IRA balances, thus lowering future RMDs and creating
tax-free inheritance for heirs.

89. Which of the following best reduces longevity risk?

A. Short-term bond ladder
B. Roth IRA
C. Life annuity
D. Gifting strategy
Answer: C
Explanation:
A life annuity ensures payments for life, directly mitigating longevity risk (outliving assets).

90. Which of the following investment vehicles is most exposed to inflation risk?
A. TIPS
B. Fixed annuity
C. Common stock
D. Money market fund

Answer: B
Explanation:
Fixed annuities pay level amounts, which lose purchasing power over time due to inflation.

91. In retirement, what is the primary risk of withdrawing too much too early?
A. Capital gains tax
B. Liquidity risk
C. Sequence of return risk
D. Inflation shock

Answer: C
Explanation:
Sequence of return risk is the danger of early market losses combined with withdrawals,
which can deplete a portfolio prematurely.

92. Which is an advantage of using a bucket strategy in retirement?

A. High returns
B. Passive management
C. Protection during downturns
D. Guaranteed income

Answer: C
Explanation:
Bucket strategies segment assets by time horizon and allow safe access to short-term funds
without selling equities in a downturn.

93. Which retirement vehicle is subject to both income taxes and early withdrawal penalties on
earnings?
A. Roth IRA (qualified withdrawal)
B. HSA used for qualified expense
C. Traditional IRA
D. Roth IRA (non-qualified earnings withdrawal)

Answer: D
Explanation:
If Roth earnings are withdrawn before age 59½ or before meeting the 5-year rule, they’re
taxed and penalized.

94. Which of the following is a benefit of a spousal IRA?

A. Allows a working spouse to reduce RMDs
B. Lets a non-working spouse contribute using working spouse’s income
C. Increases Social Security benefit
D. Avoids income tax on distributions

Answer: B
Explanation:
Spousal IRAs allow non-working spouses to make IRA contributions if the other spouse has
earned income.

95. Which type of annuity includes a guaranteed lifetime withdrawal benefit (GLWB)?
A. Fixed annuity
B. SPIA
C. Variable annuity
D. TIPS

Answer: C
Explanation:
Many variable annuities offer optional GLWB riders that guarantee a minimum withdrawal
amount for life, regardless of investment performance.

96. Which of the following retirement plans is subject to ERISA rules?

A. Traditional IRA
B. Roth IRA
C. 401(k) plan
D. Non-qualified deferred compensation plan

Answer: C
Explanation:
Employer-sponsored retirement plans like 401(k)s are governed by ERISA, which protects
employee benefits.

97. What is the tax treatment for inherited Roth IRAs (non-spouse)?
A. Tax-free and no RMDs
B. Tax-free with RMDs under 10-year rule
C. Fully taxable income
D. Step-up in basis applies

Answer: B
Explanation:
Non-spouse heirs of a Roth IRA must empty the account within 10 years, but distributions
remain tax-free if the 5-year rule is met.

98. What is the benefit of using a Qualified Charitable Distribution (QCD)?

A. Counts as a deductible IRA contribution
B. Delays RMDs
C. Satisfies RMD and excludes income from tax
D. Reduces Roth conversion tax

Answer: C
Explanation:
QCDs from IRAs allow clients age 70½ or older to donate directly to charity, satisfy RMD,
and exclude amount from taxable income.

99. What type of trust is commonly used to bypass probate and manage assets during incapacity?
A. Testamentary trust
B. Irrevocable life insurance trust
C. Revocable living trust
D. Charitable lead trust

Answer: C
Explanation:
A revocable living trust allows asset management while alive, avoids probate, and can be
changed or revoked at any time.

100. Which retirement withdrawal rule suggests withdrawing no more than 4% annually from a
portfolio?
A. Safe withdrawal rule
B. Sequence rule
C. RMD rule
D. 10-year rule

Answer: A

Explanation:
The 4% safe withdrawal rule is a guideline for sustainable withdrawals over a 30-year
retirement period.